A fresh look at cafe loyalty cards

Would you keep buying bad coffee just because of loyalty? Probably not. The same goes for food or clothing. Loyalty programs are tricky; it’s hard to tell if customers return because they love the coffee or just because there's a loyalty scheme.

In this article, we explore loyalty programs in cafes and how they might need a fresh approach.

What is a cafe Loyalty Program?

The simplest form is a card, either paper or digital, where customers get a free coffee after a certain number of purchases. Some cafes use point-based systems, where you earn points per dollar spent to redeem for free coffee.

A brief history

Stamp cards were initially introduced to keep customers coming back to the same cafe, especially as competition grew. They became a staple in Australian cafes, offering value and a fun way to earn free coffee.

Do customers really care about Loyalty Programs?

My LinkedIn survey (not scientific) revealed that about 1 in 4 customers care about loyalty cards, while the rest are indifferent. This shows that loyalty may not be as important to customers as we all assume it to be.

This is a complex issue. While some evidence shows that personalised loyalty schemes can boost customer loyalty, simply having a program isn't enough. Research suggests that loyalty programs might work better for medium to low-frequency buyers rather than high-frequency customers. Meaning they don’t change the behaviour of high-frequency customers (e.g. coffee drinkers). It's also essential to distinguish between habitual purchases and genuine loyalty. Byron Sharp, a leading marketing researcher, holds the view that emotional loyalty does not exist but only behavioural loyalty.

How much should cafes invest in Loyalty Programs?

Most industries spend around 1-2% on loyalty schemes, which are often data-rich, digital and integrated with marketing. In cafes, the loyalty discounts can be as high as 20% (1 in 5 coffees free). For cafes, it's crucial to balance spending on loyalty programs with investing in the overall experience—better coffee, food, service and ambience. Too much focus on loyalty discounts can detract from these essential elements.

Key questions to consider

• Are card-based loyalty programs still viable? While free from privacy concerns, they aren't sustainable (due to being paper based) or personalised, limiting the ability to know your customers better. A digital loyalty program might be better.

• Is the discount level in loyalty programs too high? It seems to be. Some larger brands might accept lower margins on coffee to attract customers who will spend on other items, but this strategy may not suit smaller cafes.

• Are point systems better? Not necessarily, but they are worth considering.

• Where is the innovation? Look at airline loyalty programs for inspiration. They offer tiers and privileges, which might be adapted to cafes, such as dedicated lanes.

• What about subscriptions? Another way is to offer subscriptions (prepaid for example) or memberships as a different way of giving rewards and discounts.

• Should you even have a loyalty program? If there’s no compelling reason or strategy behind it, it is worth reconsidering. Customers will ultimately come back if your coffee and overall experience are exceptional.

Conclusion

Cafe loyalty programs have remained largely unchanged for years, aside from some digital adaptations. As an industry, it's time to think not just better but differently. Rethink loyalty programs to ensure they serve a strategic purpose and align with your broader business goals.