I own and run a small neighborhood Ice Cream shop, Pesso’s Ices & Ice Cream, in Bayside Queens. From our first day open, on November 5th, 2004, we decided we wanted to have a Loyalty & Rewards Program in order to help keep our customers excited about coming back.
At the time, our only viable option was the classic paper punch card. The 14-year-old me mocked up a simple design on Word, we bought a print-your-own business card kit, a pack of perforated thick printer paper that easily pops out individual business cards, and we made our first punch cards. Once this method took off and we saw that our customers liked the program, we upgraded to getting our cards professionally printed, and we special ordered some unique hole punchers so that they would be harder to counterfeit.
Positives of Punch Cards
Our customers really loved this program from the moment we launched it. It was simple enough, customers received 1 Punch for every item that they purchased, no matter the size, and received a free Small Cup when they completed the card.
These paper punch cards were also very easy enough to use. It only took a few seconds to punch up a card, without the need to sign up for anything, or share or enter any personal or contact information. This speed and anonymity was a great feature that made everyone feel safe and comfortable with the system, and feel like getting rewards was not a burden.
And while this method worked really well for many years, there were some downsides and we started having major issues. And these problems with paper punch cards definitely outweigh the positives.
Problems with Punch Cards
First of all, because they’re paper and anonymous, your business doesn't end up with any data. You don’t know how many punch cards are out there, how many unique customers you have, how often they’re coming in, or anything else. The goal of a loyalty program is to keep people coming, but if you don’t have any data, then you can’t even tell if it’s actually working or not. This lack of data makes it really hard to tell if they’re just coming because of your product and service, or if your Loyalty Program is worth it and if it is contributing or not.
Another issue we had with our Paper Punch Card system was the constant designing and redesigning of our cards. We’re a very agile business, and we constantly make big changes to our business based on the data and sales trends of our customers that we get from using Square. Any time that we changed our product offerings to remove low performing and low profit product lines, we needed to change our rewards program to match it.
Over the years we increased the number of punches on a card, and changed the reward from a free Small to the Dollar Amount equivalent, so that our customers could redeem it for any item they wanted, and still get the same value.
With paper punch cards, this change took time to redesign the punch cards, order, and reprint them. Depending on when we made these changes, we also had to either finish up the cards that we had left, or to throw them out and lose money, before we could make a change to our product line.
The cost and effort of constantly ordering and printing new cards was also a factor. Because they were physical paper cards, they were easy to lose or to forget to bring in, or get ruined in the rain or laundry. Since we wanted as many customers as possible to use our program, we always offered every customer a new card if they didn’t have one with them, so we were constantly handing out more cards. We ended up printing at least 20,000 cards every single year, and the cost really added up.
The expensive custom hole punchers that we ordered were very effective at preventing counterfeiting, and were pretty high quality, but they still did break every couple of years, and the costs added up there too.
While the costs were an issue, the bigger issue was the integrity and lifespan of the program. By 2016, we started noticing that fewer and fewer people were bringing in their cards, and ever fewer wanted new ones. Because customers kept forgetting their cards, getting new ones, and ended up with piles and piles of cards, they were getting annoyed with the program.
While it was easy to combine cards, people were getting frustrated with having so many cards. On many occasions, we’ve had people coming in with 30 cards at one time to combine them. While we didn’t mind doing it, customers were getting tired of keeping track of their cards and stopped using them. This definitely took a toll on our customers and they didn’t even want new cards or to continue with the program. The cycle was ending.
A loyalty program that customers don’t use is a loyalty program that doesn't work. A rewards program only works if people use it, and people will only use it if they are excited to use it. And people aren’t excited to use it if it’s a hassle. So we decided that it was time to rethink our program in order to simplify and digitize it, and make it exciting for our customers again.
We looked at the many different options out there, and we noticed that Square, the system we use for our Point of Sale and all other business management, had just revamped their Loyalty system, and it finally had the key features that we needed.
So we took a leap and jumped onto the Square Loyalty Program. Setting up the program was incredibly easy. We were able to use the same program structure, as our paper punch cards, so the only thing that changed was going from paper to digital.
This change instantly had huge positive impacts, including giving us the data we needed, simplifying the use of the Loyalty Program for our customers and employees, and reenergizing our customers’ excitement about Rewards.
As soon as we switched over from our paper punch cards to the Square Loyalty program, we immediately started letting our customers know all about it. We made some signs to hang around the store and around our Registers, we updated our Website with details about the program and the link for customers to sign up and check their point status, and all of the fine print.
But the biggest and most effective way of educating our customers was talking to them. Already offered every customer a paper punch card, so we did the same with the new Square Loyalty Program. We write out scripts for our employees on how we want them to talk to customers, so we worked in some language about Square Loyalty. Our employees ask every single customer if they have Rewards Points with us, and walk them through the process to sign up.
Luckily right on time, the Square Register came out which was a perfect solution for Square Loyalty. With the removable Customer facing display, customers can enter in their own numbers privately and accurately, as well as redeeming their own reward. This tremendously simplified the process of using a Rewards Program, sped up our lines, and made a better customer and employee experience.
Because we had 15 years of Paper Punch cards out in the world, transitioning over was definitely a process. Rather than attempting to try and convert over all of the paper punch card to Digital, which would involve a lot of manual work, we took another approach.
We decided that anyone who brought in a Paper Punch card would keep using the Paper Card until it was completed, and that they could combine all of their paper punch cards to make that transition faster. But from that point on, we didn’t give out any new Paper Punch Cards, so anyone who didn’t have a Paper card with them, we would offer to have them start to use the Square Loyalty Program.
This approach really worked well in a couple of ways. First, it eliminated the manual work of transferring points over, which would have taken a lot of time and would surely lead to a lot of mistakes. We don’t give our employees access to our Customer Directory, because we want things to be as simple for our staff as possible. Because the whole point of adopting this automated Square Loyalty system is to simplify and reduce the manual work that our employees have to do, we didn’t want to add in the complications of training our employees how to adjust points manually again.
Second, it acted as a sort of staggered approach, where we started out with only a small number of customers using the new system. This gave us an opportunity to fully test out the program with much lower stakes. Instead of having all of our 10,000+ customers immediately trying to use the new system, it started out with only a few each day. It was a nice smooth transition, with all of us learning as we went, and getting more comfortable with the new program.
Third, even though we told customers that we were still accepting the old paper punch cards, our customers became really excited about the new Digital Loyalty program. In fact, many of them decided to not even bother using their paper punch cards anymore, and just jumped onto the new digital program.
Key Points & Summary
We started using Paper Punch Cards from our first day open, and while it worked well for many years, there were definite downsides. They were a pain to keep track of, didn’t work with our online orders, expensive to reorder, didn’t give us any data, customers kept losing them, and even worse they were getting disenchanted with our program and didn’t want to use it anymore. We started transitioning over to Square Loyalty, and have only had great experiences with it so far.
Overall, we absolutely love the experience of using Square Loyalty. It’s such a smooth and simple way to run a Rewards and Loyalty Program while using Square Point of Sale, and at this point it’s hard to even consider using anything else. Read my next article to do a deep dive into all of the benefits and downsides of each of the features of Square Loyalty.
What methods does your business use for Customer Loyalty & Rewards? Have you tried Square Loyalty? What works best for you?
See you soon,
@Pesso excellent write up! Thanks for sharing your experience. We're actually in the process of rolling out Square Loyalty right now to replace a successful but aging item-based punch card program. The punch card system was great for us but it definitely had/has its drawbacks as you mentioned. One of the main hurdles was the ability to reward customers for direct-online purchases after the full move to digital ordering last March due to the pandemic (and losing out on building a database of actionable insights). Not to mention going head-to-head with third-party marketplaces as a way to attract and convert new customers is heavy-lifting.
With the implementation of Square Loyalty, we're excited for the opportunity to offer our guests a streamlined rewards experience across each of our direct-ordering channels: Square Online, a new Mobile App (powered by Craver via Square), and of course in-store purchases. But, instead of eliminating the punch-card completely we're actually revamping it as a secondary earning component for our new program.
The primary earning component of our new program is spend-based ($x = xxx points) using Square Loyalty paired with a tiered rewards schedule that really allows us to open up the reward portfolio... and have fun with it. The secondary component is an updated punch card targeted at rewarding customers for each in-store visit with a purchase >$5. The reward for a fully stamped punch card is a free rotating monthly meal special. For us, the best part about a punch card program is the opportunity to send every customer home with a small branded piece of us in their wallet to serve as a reminder of their experience with us and to come back and visit again soon.
We are using a similar strategy for converting our old item-based punch card loyalty program members to the new visit-based punch card program by simply accepting all outstanding old punch cards and rounding up, and redeeming as full, any partially stamped cards being presented. We anticipate the generous redemption policy for the old cards will ease the customer transition to the new visit-based punch card program and serve as an entryway to engage and enroll a given customer into the new digital spend-based Square Loyalty component.
Needless to say, I'm really happy to learn Square Loyalty was a smooth roll out for you and am looking forward to implementing it for us this month too. As you may know, it's extremely challenging to win back, or convert new customers, from third-party marketplaces to ordering-direct. We're confident that implementing Square Loyalty will help to strengthen our competitive advantage towards achieving this goal. Thanks again, Pesso, for sharing your experience.
PS - Those two Square Register terminals look amazing on your front counter.
Thanks so much for sharing, @porktaco !
That's a really interesting idea to do the two different programs running at the same time - could be really cool!
I definitely get the desire to keep the paper cards in place as a physical reminder of your business in their pockets. We thought about keeping it from that perspective, but we found the benefits of not having paper outweighed it all.
Best of luck in the transition and rollout, and definitely let me know if you run into any issues or have any questions along the way!
Hey @Pesso, just checking in with an update. The Square Loyalty rollout was really smooth for us. Enabling the extra point offer to guests for completing their profile is proving to be an easy way to get "new" customers into the drip automations we have setup in Square Marketing.
However, I do have one question for you... do you know of a method to prevent employees from joining the Loyalty program and just applying their number to orders placed by a customer that may not wish to enroll? Or, a customer that just fails to claim the points on an order? I could see how having an option to disable loyalty program enrollment for active Square Team Member profiles may be helpful to prevent employee misuse of the program. Thanks for your help!
Hi @porktaco That's a great question! While we don't have explicit ways to prevent this, we did launch this Suspicious Activities feature a couple years ago to help monitor this. You can see the details in this announcement post. If you do have an employee who is doing this consistently, they should bubble up as they would have a lot more loyalty visits than your average customer. Hope that helps. Thanks!
@lornaz thanks for the suggestion. We've actually already had one instance with an employee that logged seven loyalty transactions in one two-hour period and it didn't trigger the Suspicious Activity feature (set to default of 5). We were only able to identify the issue because the individual's name appeared in the 'Top Customers' section. Had we not been hawking the reporting features after the first weekend of deployment it likely would've went unnoticed and then hidden with the monthly reset.
Needless to say it's been addressed with the individual but it would be helpful to have the ability to block phone numbers of employees, which are setup under Team Management, from the in-house loyalty program and just eliminate the temptation and/or need for a redirect from the start... especially when considering the challenge of managing the program across multiple locations where back-office team members may not know every front-line team member. Just a thought for improvement. Thanks again for your suggestion.
Great write-up! It's almost like reading about my own experience with the punch card system. My business is a bubble tea shop that has been in business since 2013. The stamp card works great if the menu is simple enough. If the menu is big and diverse in
prices, then the simplest way to reward a filled stamp card is by offering one item totally free (if under a certain $ amount) or a fixed $ off the entire order. However, my stamp card system can be a bit complicated for new employees because the menu has some items that are not stamp-eligible.
Due to getting an entirely new staff this year and having an online ordering website with Square/Weebly, I recently switched from the stamp card system to digital loyalty points to give customers who use my online ordering system a chance to earn rewards for their purchases. It's only been 4 days so far, but I'm not too impressed. While the digital point system gives me a peek into customers data, I don't know what to do with that information yet without disrupting my customers' privacy. I DO like that I don't have to worry about having my stamper stolen/duplicated or that my employees can give out extra stamps to their friends/family when they think I'm not looking. The transition is actually time-consuming for me because I want to switch all the customers to the digital points sooner rather than later. The process is a bit tedious. The customer brings in a stamp card with some stamps on it, makes their order, pays on the Square Register, chooses tips, presses "Sign Up" for the loyalty points, and then types in their phone number to get points for today's purchase. Right after the customer created their loyalty account, the main screen doesn't even show anything helpful such as their phone number or the option to edit information. As a consequence, the cashier has to ask the customer for their phone number so that I can convert stamps to digital points to put into their loyalty account at the end of the night or whenever there is down time. (I haven't figured out a quick way to do this under 10 seconds yet.) I did consider the staggered approach like yours, but I don't like the idea of making new employees learn two different point systems while one is being phased out.
If I didn't have an online store, I would still keep the paper stamp card system because it has more benefits than problems for me. First, paper stamp cards are cheaper. Last year (2020), I ordered and used more than 50,000 stamp cards (double-sided, 1 color, 1 black & white) for around $600 after tax and shipping. Square's Loyalty Program would have costed me $105/month x 12 months = $1,260. A stamp card also acts like an unobtrusive advert that reminds customers to revisit my business soon every time they open their wallet/purse. If a stamp card gets lost or completely damaged in the laundry, then my business benefits as if a small "debt" disappears.
My biggest complaint about the Square's Loyalty Program right now is its integration with the Online Store. ApplePay customers have to go through a few extra steps of hitting the "CHECKOUT" button, type in their email/phone number/name, then go back to the shopping card before they can pay with ApplePay. Many ApplePay users thought that they would be getting the loyalty points for their online purchase automatically because their ApplePay account already contains their email/phone number/name.
Let me know if you have a solution to this problem. Thanks for sharing your knowledge and experience!
I definitely agree that the old paper punch card system is more complicated than the automatic Square Loyalty that's integrated and does it all so employees don't have to learn and remember complicated rules.
The transition is definitely the hardest part. That's why we went for just finishing up the cards that are out in the world rather than trying to convert everyone. It's a lot easier to finish a card than it is to transfer to digital.
As for the Online Store Apple Pay thing, I do think that it's being worked on to streamline that process, so hopefully that happens soon!
I've been using the Square's Loyalty Program for years and am aware of the value of a working loyalty programs. When Square's Loyalty program works, it's value add. Unfortunately, it's a significant negative when the program and design defects surface. It's concerning that Square is comfortable raising the price for the loyalty program with so many defects and no additional features. A working loyalty program generates additional revenue. Raising the price is a money grab.
If you scroll to the bottom of your customer directory, you may see profiles with a Last Visit Date of Never (yes, Never). Some of these profiles have stars and multiple purchases allocated to them. Interesting that someone that has Never visited has purchases and earned stars. These profiles have been erroneously created and incorrectly allocated stars resulting in the real customer not receiving their earned stars. At last count I had 130+ of these defect profiles.
Another defect is that Loyalty identifying information isn't moved to the newly merged profile when 2 profiles are merged. The point of merging profiles is so that there is one profile with all of the customers information - not some of the customer 's information. The result of this defect is that the newly merged profile has the transaction and the old profile which shouldn't even exist after the merge has the earned stars.
Due to the merge functionality defect customers are frequently asked to re-enter their phone number because their credit card isn't recognized. It's not recognized because the credit info wasn't moved to the new master profile. It remains with the old profile that shouldn't exist after a merge. This defect opens the door to creating a second profile when the customer enters a different phone. The reason a customer enters a different phone number is because they can't remember which phone number they or their spouse used when joining the Loyalty program. An the cycle continues.
There are basic design defects. The only time the Loyalty program checks if the customer has an earned reward before processing the credit card is if the credit card is present. The software doesn't check for a reward if the card number if manually entered or even if the credit card is ON FILE for a loyalty member. The design defect is that if the card isn't present the store employee can look up if the customer has earned a reward or add the customer to the transaction. That's an excuse for a bad design and isn't good for relationship building with the customer if you have to ask them their name when they assume you know their name. I have 4,800+ profiles, or at least I think I have 4,800+ profiles. With the defects creating new profiles and not deleting merged profiles, I really don't know how many real profiles / customers I have on file. Regardless, I don't know every customer's name and I don't need my customers to know it. The software should work the same regardless of the payment method.
thanks for a great article @Pesso ! Very comprehensive and valuable info here. I recently started using Square's Loyalty and find it integrates seamlessly with our Square Register. Often before I can explain the program, my customer is already reading the prompt on the customer facing screen about "you've earned points...do you want to enroll?" It really is a quick and easy way to implement a digital punch card. I haven't had many return visits or redemptions yet, so I'm trying to figure out a way to get customers motivated to actually redeem their earned rewards. I'm considering either adding the Marketing plan or text messaging in order to reach them, but not sure if people would like to be contacted by text about a special promotion. And I'm also considering adding special bonus rewards that are only available for a limited time. Square has made it easy to add/change rewards right from my dashboard.
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Thanks so much @HC_Charlie !
That's so awesome that your customers are catching on so quickly and easily!
It definitely takes time for customers to start redeeming, but once they do, oh boy do they redeem!
The biggest thing for us was using the Customer Facing Display on Register, and having them Check In before payment, so they can see what rewards they have - and then if they have a reward, telling them that they can redeem it right on that screen.