Customer loyalty programs are a cornerstone of customer retention. Who can resist a special offer or discount? It’s why customers tend to be more loyal to businesses that give back.
Many businesses want to reward their customers for their purchases with amazing incentives to encourage them to come back. This isn’t just to say “thank you,” but also to promote loyalty.
We look at what small businesses can do to encourage repeat custom and talk through the benefits of customer loyalty programs for small businesses. We also look at what types of schemes are available.
What are customer loyalty programs?
Customer loyalty programs are marketing initiatives by businesses that want to keep their customers coming back.
Programs like this were created to reward customers with a range of incentives, such as:
- Special discounts
- Free points
- Free items
- Exclusive access to unreleased products
What are 4 types of reward systems for your customers
There are a few different types of loyalty programs:
This is probably the one that you’re most familiar with: Earning points as you shop, and then getting to spend those points on a future purchase. Some companies allow you to earn points and then take money off a purchase whenever you like, while some require you to save up your points for one full “free” purchase.
For instance, you may have saved up $5 on your points card, some businesses will let you take that $5 off a future $8 purchase, leaving you to pay $3. But others will require you to have the full $8 on your points card to complete the purchase.
Next up are tier programs. This is where a customer can receive different benefits depending on how much they spend at the store. The higher the customer is ranked on the rewards scale, the bigger their reward will be.
When customers buy and engage more with a brand, they can move up the scale. For instance, if a brand offers a subscription service for outbound auto dialer software, they may offer customers on the premium tier a free item on their third subscription month.
A paid loyalty program is when a customer pays a one-off or a recurring fee to then receive extra benefits from the business. It’s essentially like a loyalty membership, where customers pay a certain fee to get as much out of the program as possible.
For instance, a member of an exclusive hotel chain may pay a one-off fee, but then receive benefits such as amenities access and premium rooms.
A value loyalty program is when a business pledges to donate some of its profits to charity rather than offering the customer a reward. You may have seen such initiatives in supermarkets when you spend a certain amount and are given a token to then drop into a charity pot of your choice.
The reward for the customer is knowing that by buying from your business, they are also able to support charitable causes. More often than not these causes are local to their community.
How can customer loyalty programs benefit small businesses?
Better customer retention
Small businesses are sometimes more reliant on repeat customers. So, for them, creating a good loyalty program is very important. It can work alongside good customer service as a means of retaining these customers, as they want to add more points to their card, or stamps on their app!
When you offer loyalty programs, customers are often more likely to return to you. For instance, if you and your competitor sell the exact same product but you offer 10 points every time the customer makes a purchase, they’re likely to choose you as you are providing better value.
Increases customer engagement
Businesses aim to increase customer engagement whenever possible. And when it comes to loyalty programs for small businesses, it’s even more important. Customer loyalty programs for small businesses can indeed encourage customers to interact more with your company.
No matter whether you sell health insurance dialer software or organic food, people are more likely to interact with your brand when you offer them something in return, whether that’s through referrals, social media comments, or reviews.
Encourages word-of-mouth marketing
If your customers are satisfied with your business, they’re likely to recommend you to a friend. Especially if you’ve been offering great deals with your loyalty schemes. This can be particularly beneficial for smaller businesses that are reliant on word-of-mouth marketing as they have a limited advertising budget.
Loyal customers are more likely to become advocates for your brand, personally promoting your brand on their social channels because they are happy with your service and products.
Businesses can collect data
Data is a key asset for business, especially when you’re a small business or startup. When you have customer information you’re able to target them to encourage them to make more purchases, whatever they want to buy. No matter where they are from in the world, no matter whether they want to buy an ai domain or a .com domain, or to get their hands on hot dogs or hot properties, this data may be helpful for your business.
So if they sign up for your loyalty program, they will have to input personal information such as their names, email addresses, and sometimes other details such as age and birthday.
Businesses that are looking to boost revenue may turn to loyalty programs. This is because they can encourage higher spending from their existing customers, as they may want to earn their reward.
This increase in average transaction value and frequency of purchases can directly boost revenue.
Gives feedback and improvement
Lastly, loyalty programs can be beneficial in terms of hearing about what your customers think of your brand. You may offer customers a loyalty benefit in return for a review, for instance. They may let you know about a product they think should be improvedd such as better remote device connect possibilities, or about certain experiences they’ve had using your service.
8 innovative customer loyalty programs for small businesses
Here are 8 innovative customer loyalty programs for small businesses.
- Subscription-based programs
Subscription-based programs are great for small businesses because you know the customers are going to return. Customers simply pay a monthly fee to then receive their subscription, which can include benefits such as discount codes and free goodies. They’ll feel special as they can access premium information that non-subscribers won’t get to see.
There are many different subscription boxes available. Businesses such as Hello Fresh offer customers boxes each week/bi-week/month of produce for them to make meals. They typically offer the third box free as a thank you to their customers.
- Loyalty stamped cards
Loyalty cards are used by many businesses to encourage customer retention. Usually, when you complete a certain number of stamps you get a free reward at the end. You can switch it up and modernize loyalty stamped cards by moving it to an online app or using QR codes instead.
- Community programs
You have to think about what your customers have in common, the one thing you know for certain: it’s that they like your business. They may therefore have other things in common too! So why not make them feel part of a community?
You can create a loyalty program for your most dedicated customers to enjoy as a group. Encourage them to share their ideas about the product. You can reward them with a free item or special offer when they do.
- Geolocation rewards
You can use geolocation technology in your favor to offer special discounts or rewards when customers are physically near your store. All you have to do is leverage your customer data and send them an email or social media message to make them aware of the offer. This encourages foot traffic and immediate purchases. You can manage this through platforms like:
- Friend loyalty points
Encourage customers to refer a friend to receive money off. Popular food delivery company Deliveroo offers customers $10 off their next order when they refer a friend to the business. It means your business is receiving more customers simply by referral from friends.
- Exclusive deals
People love the idea of exclusivity. Accessing something that no one else can access. That’s why loyalty programs that focus on exclusivity are so in demand! Customers want cool offers that their peers can’t get their hands on. This can be anything from free shipping or early sales access, making them feel like a more special customer.
- Mission-driven loyalty programs
Not every loyalty program aims at rewarding customers. Some businesses want to offer mission-driven loyalty programs. Some businesses partner with non-profit charities, so they will match or donate on your behalf with every purchase made.
- Loyalty auctions
Another idea to implement could be a loyalty auction system. Some businesses such as Vodafone use this, where you can bid on prizes such as holidays or experiences. It’s fun and risk-free as it involves no actual cash. The items can be exclusive to that auction, which boosts the desirability factor.
Get started with a customer loyalty program for your small business
As we’ve learned, a loyalty program is a great way to encourage customers to return to your small business and help you offer good customer service. If you’re working with a small budget, it can be a particularly good way to boost revenue and ignite word-of-mouth promotion.
When it comes to customer loyalty programs for small businesses, ensure you’re choosing the right one, as every business is different. You can even look at your competitors and see what they’re doing to get inspiration on what might work for you. It’s not cheating. After all, all’s fair in love and loyalty.