Editor’s Note: This article was originally published by Web Marketing Today. Practical Ecommerce acquired Web Marketing Today in 2012. In 2016, we merged the two sites, leaving Practical Ecommerce as the successor.
Customer loyalty programs operate based on the well-founded notion that it is less expensive to keep a current customer than to find a new one. Providing rewards in the form of points, cash back, and discounts on merchandise can help achieve that goal.
The use of loyalty programs — long the purview of retail chains, credit card companies, and airlines — is now well within the reach of small businesses.
In this article, I discuss the benefits of using digitally-based loyalty programs, share tips on getting started, and list some small business loyalty program providers.
Customer Loyalty Program Benefits
There are several reasons why small businesses should consider implementing a loyalty rewards program.
Increases repeat customers. Loyalty programs can lead to an increase in repeat customers, which could boost revenue. A study by BIA/Kelsey and Manta found that a repeat customer spends 67 percent more than a new one.
Puts you ahead of the competition. A loyalty program can give your business an edge over competitors who fail to offer similar incentives.
Loyalty programs are cost-effective. Many loyalty programs geared to small businesses cost very little. Companies like Belly and Punchcard (discussed below) have subscription fees that start at less than $100.00 per month.
Established marketing tactic. Loyalty programs have been around for decades, and the advantages are well known. Remember S&H Green Stamps? Once the largest loyalty program in history, it still exists in the form of S&H Greenpoints, a digital reincarnation of the original.
Digital programs track customer data. Digital loyalty systems automatically track and store customer purchase activity in a database, making it much easier to determine the program’s effectiveness than when using old-fashioned, paper-based schemes (e.g., punch cards or stamps), which can be difficult to monitor.
Loyalty Program Tips
With these benefits in mind, perhaps it’s time for you to consider putting a loyalty program into action. Here are five tips to help you get started.
Begin with the end goal in mind. Define the goal you want to achieve with a loyalty program. That could be things like improved percentage of repeat customers versus new customers, decreased customer churn, or increased average order size.
Determine the target audience. Will everyone be eligible to participate, or only your most loyal customers? While it may seem logical to open the program to everyone, offering it exclusively to your best customers — those that generate the most profit — may motivate others to join.
Make the program ROI-positive. Years ago, Groupon-type deals were popular with small businesses — but there was a downside. Often, deals were so deeply discounted that they cost the merchant money rather than the other way around. It soon became apparent that shoppers were more loyal to the deal than to the business. Without a retention plan in place, few saw repeat customers.
Offer programs that customers already use. A study by Points Business Solutions, a loyalty currency management company, revealed that shoppers prefer to do business at a store that offers reward points in a program in which they already participate over a merchant that has its own, proprietary program.
Promote the program. Just because you have a loyalty program does not mean it will succeed. You need to keep it at the forefront of your customers’ minds. Here are three ways:
- Email marketing. Email marketing is a proven way to generate business, so create campaigns built around promoting your loyalty program, both to stimulate interest and to remind customers to use it.
- Social media. Social media may not be a sales driver, but engagement with fans and followers on Facebook and Twitter can build awareness.
- Mobile technology. Creating loyalty programs that use apps and text messaging is a way to take advantage of the steady rise in mobile device use.
Loyalty Program Providers
The following companies supply digital customer loyalty solutions targeted to small business.
Five Stars, a national loyalty program, has a mobile app that awards points for purchases, which customers can redeem for prizes. The company also runs email, SMS, and push notification promotions on behalf of participating businesses.
Belly offers a multifaceted platform that helps increase customer frequency and retention, collects customer data, manages email and social media channels, monitors online reputation, and drives customer acquisition through product and service sampling.
Front Flip uses a mobile app that acts like a digital scratch card, which customers play to win prizes, such as free meals and discounts at restaurants, bars, shops, and other local businesses.
SpotOn requires the use of hardware in the form of a tablet, located on the merchant’s counter. Customers scan SpotOn’s mobile app on the tablet to earn points when they make a purchase. The company also lets businesses send special offers to the customer’s mobile phone or email address, and post offers to Facebook and Twitter.
Punchcard provides a digital version of the paper punch card, used by retailers for years. Customers take a photo of their receipt using the Punchcard mobile app to start a “punch card” for the business, where they earn rewards based on purchase activity.