A customer loyalty program, sometimes known as a rewards program, gives your small business an easy way to reward your customers for doing what you want them to do: coming back and giving you repeat business. You already have a base of loyal customers, and creating a customer loyalty program helps you strengthen those relationships. For newer customers, or those who are still deciding how much they like you, a loyalty program can be just the right incentive to keep you front of mind and keep them coming back to your brick-and-mortar store.
Need convincing that customer loyalty is critical to your business? Try reading these posts on customer loyalty and the value of customer retention.
Elements of a Customer Loyalty Program
Implementing a customer loyalty program is a pretty simple matter. You need to make it easy for people to sign up, preferably in several ways: a short form to fill out when they’re shopping or checking out in the store, an easy form to fill out online via your Facebook page, blog, and/or website. (You can do it in conjunction with growing your e-mail list – we explain step by step how to do this here.) Once people sign up, you need to have a system for keeping track of those in your loyalty program; you want a single place with all the information on each customer who has opted in. That way, when you do special mailings or offers, you have your mailing list right there.
The third element of a successful customer loyalty program is the rewards that customers can “earn” by continuing to give you repeat business. Rewards programs can be simple, and are usually very low cost to the business, but they need to be measurable and tangible. Your customers need a tangible reason to opt in to the loyalty program, and you need a measurable way to see what you’re investing in the loyalty program and what kind of return you’re getting on it.
Types of Customer Loyalty Programs
Points system: this is what airlines and credit card companies use. In simplest terms, a point is awarded for every dollar spent, though the ratio may vary (1 point for every 1.50 dollars, for example). When a customer accrues a certain number of points, they can be redeemed for a product or service offered by the company or, often, by a partner company.
For small businesses: this system is simple in theory but can get a little complex to keep track of without an electronic system. Be sure you have an accurate way to track the points earned by your customers and to track when those points are used for rewards. You’ll also need to set up a rewards scale with specific prizes or options for certain amounts of points.
Discount system: many retail businesses use a discount system for loyalty programs. This works well for both retail shops and restaurants. For every purchase or for every dollar amount spent (could be $10 or $20 or whatever level you choose to set), the customer receives a credit. Once the customer has earned a certain number of credits, he gets a discount, perhaps a dollar amount or percent amount off on their next purchase.
For small businesses: this system is easy to implement and track. Generally, businesses use a punch card type system and customers simply show their card when it is full to receive their discount. Another bonus of this system is that the reward actually brings in even more business.
Freebie system: similar to the discount system, the freebie system is often used by cafes and coffee shops. When a customer makes a sufficient number of purchases or spends X amount of dollars, she gets a freebie. A coffee shop might offer one free coffee drink for every ten cups of coffee purchased, or a free pound of coffee for every ten pounds of coffee purchased.
For small businesses: this system is also easy to implement and track using a punch card set-up, and customers love the idea of getting something for free. It’s also easy for small businesses to track the amount of money they’ll invest for each customer, and it’s usually minimal. Retail shops can always offer freebies too, and it’s a good way to get rid of excess inventory.
Image by Easa Shamih.
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