When the Default is at Fault

Point of Sale (POS) systems are invaluable tools for businesses, streamlining order coordination, sales tracking, inventory management, shrinkage control, and even enhancing sales through cross-selling and upselling. These systems simplify the implementation of loyalty programs, which are crucial for local business success. An additional visit from a regular customer can boost their revenue contribution by 25% to 100%.

Loyalty programs typically operate on a system where customer spending is rewarded with points or similar incentives, making it easier for businesses to reward patrons. However, genuine loyalty isn’t just about total sales; it involves frequent visits or larger purchases per visit. Simply offering discounts provides only a temporary emotional benefit to customers without encouraging beneficial purchasing behaviors.

Many default loyalty programs in POS systems operate by enrolling customers at checkout, reminding them of their points during subsequent visits, and eventually offering a small discount. While this might make the customer momentarily happier, it doesn’t fundamentally alter their behavior and can lead to a disproportionate erosion of bottom line profits, as a minor reduction in top-line revenue from such discounts magnifies losses when considered against fixed costs and profit margins.

To avoid letting the default system diminish profits, businesses should ensure their loyalty rewards prompt desirable behaviors—increasing visit frequency or purchase amounts—that benefit both the customer and the business. This approach will drive more visits, larger transactions, and ultimately, increased profits.