Where would you as a small business get extra cash? We suggest “borrowing” from customers!

Lack of funds for development and growth, as well as impossibility to immediately withdraw the money from the daily operations, are among the most significant problems of small and medium businesses. Businesspeople have two options for solving them: save on something or find funds somewhere. In this article, we will describe how inCust solves these problems with customer participation.

The first thing we recommend to do is look at the existing elements of the loyalty program for customers and immediately cut your costs. It has been figured out by many that discounts do not motivate customers. On the contrary, discounts do a disservice to the business, not allowing it to achieve the long-term goals: return a customer to the store and build a communication channel with this customer.

In fact, the solution exists, and it is straightforward: discard the discounts and switch to other customer loyalty mechanisms, which are focused on returning customers to the point of sale.

One of the most effective instruments is bonus points. From our experience, they act as a magnet which helps to return customers to the store and allow you to build a quality database of customer information.

There exist two types of bonus points: game points, for which one can receive gifts, and actual bonus points, which are a delayed discount (cashback). The latter is the best option to start building the community of loyal customers since bonus points are easy to understand to an average customer and they are the basis for building honest relationships. Their essence is clear: the customer receives money to the account, which he can spend only during the next visit.

Let’s look at the economic difference between discounts and bonus points.

By providing discounts, a business loses 10% of the price. And if we consider that goods and services cost something too, the actual loss can reach 50% or even more of the profit. 

What happens in case of switching to the bonus system?

According to research data, 30% of customers (the average number from various business areas) collect bonus points but never use them. So, you can reduce the loss by 30%.

The second, more important component — when you give bonus points, you promise to make a discount if the customer returns. You do not spend money on the loyalty program „here and now.“ You are actually paying for the loyalty program with a customer’s credit money.

To spend their bonus points, the customer will have to come back to you several times. For example, to collect the sum of their average receipt in bonus points, if an amount of bonus points is 10% of the receipt, the customer will have to get back to you at least ten times. This way, the customer sets long-term goals. 

Data from another research show that a large percentage of customers prefer not to spend bonus points, but to save them for a rainy day. And after we analyzed the data, we found out that this “rainy day“ comes no more frequently than once every six months.

To form a complete picture, we note that there exist pitfalls as well: the transition of the company from discounts to bonus points requires expenses since the company needs to provide a single processing hub for all bonus points. That is especially true if the business has several points of sale. You will need to refine the accounting system and secure the process of debiting funds from the customer account.

These tasks are complex and hard to deal with, especially for small and medium businesses with constrained budgets. Fortunately, inCust offers a platform with all the necessary algorithms, tools, and mechanisms already included. InCust clients can have cloud-based processing of bonus point programs, the customer identification system, and the  mechanisms for analytics and control on a turnkey basis. So, your saving of money from the loyalty program begins literally at the moment of its launch.

Another way to find cash for growth is to optimize the loyalty program and increase the average sum of purchase.

Let’s suppose that a certain company urgently needs extra funds. If the company has a database of loyal customers, then it has extra options for raising funds from these customers. E.g.: “Dear John Doe! Only until the end of this month, you get 5% in bonus points for purchases up to $100, 10% for purchases between $100 to $500, and 20% for purchases over $500.” Another example: „When you refuel more than 10 gallons (40 liters), in addition to the base discount, N bonus points will be credited to your account.“ By doing this, you will instantly increase the average sum of the purchase.

The second option is to sell goods that remain in stock or a product with the highest marginality. To do this, you need to analyze your customer base and after creating an automatic customer filter, send targeted offers to selected customers in order to incentivize them to purchase certain goods or services.

This way, small and medium businesses can quite quickly find extra cash.

The above functionality motivates customers to pay more when they are at the point of sale already. Besides this, there exist other mechanisms for raising funds from customers: subscription service schemes and prepaid schemes. InCust allows you to sell goods and services in advance and track the use of them using the customer accounts mechanism. This approach lets you arrange new methods of serving customers.

With these mechanisms, new ways of interacting with customers become possible. For example, a customer may pay for future services in the amount of $1,000 and get a credit of $1,200 on his or her customer account. In this case, a customer understands that he or she pays in advance, but receives services cheaper.

Another option is to sell a gift certificate of $1,000 in goods for $950. This is a win-win situation: a customer solves the problem of choosing a gift and saves money, and you get extra cash for your business.

There also exist subscription schemes: you offer to pay a yearly fee in advance with the 20%  discount. Or, you can offer your customers to purchase e.g. gas from you using the mobile app. They would pay in advance, and when visiting your gas station later, you will charge the needed volume of gas from the prepaid goods account of the customer. 

What do you get from the inCust platform? First, it is the payment processing mechanism which doesn’t involve banks upon each transaction.  Next, it is the help, offered in setting up the business schemes and mechanisms, related to interaction with customers.

You are welcome to contact us – we are ready to help you tune up the inCust platform and its features for your business needs.