Why Your Small Business Needs a Loyalty Program

When it comes to growing your business and building connections with your customers, a loyalty program (also known as a customer reward program) is key. Gone are the days of riffling through your wallet and holding up the line to find your tattered paper punch cards. Loyalty programs have had a major transformation.

Here’s what you need to know about loyalty programs:

Customer loyalty programs essentially reward your customers for making purchases and repeatedly frequenting your business.

These programs incentivize your customers to return for another visit. They are a type of marketing effort that’s mutually beneficial to your business and your customers.

Your loyalty members get special exclusive perks, and you get a more stable cash flow through repeat business and higher checkout amounts.

How to design a loyalty program

Depending on your business type, you can design a rewards system that’s the right fit for you and your customers.

Here are some loyalty program examples for small businesses:

● Reward your customers with points for every dollar they spend with your business. You get to decide what dollar value corresponds to your customers’ points (ie: 10 points for every $1 spent, and 500 points equals $5 off).

● Offer your customers a free item after a certain number of purchases. For example, coffee shops give their customers their 10th coffee for free. Rather than using paper punch cards, you can track this digitally with loyalty accounts tied to payment cards, phone numbers, or emails.

● Offer customers a free gift or discount when they reach a new rewards level tier. Try giving your customers VIP perks when they reach a higher-tiered annual spend.

What makes a good loyalty program?

Aside from tying your rewards to your customers’ spend and patronage, make sure you leverage all of the customer information that you’ve collected, including emails, purchase insights, and birthdays. This means sending out members-only promo emails and coupons, creating personalized offers based on your customer’s frequently purchased items, and offering your loyalty club special birthday perks.

Birthday rewards like a free dessert or a free entrée are especially effective to boost a restaurant’s revenue. If a customer chooses to come to your restaurant for their birthday dinner, it’s unlikely that they’ll come alone. Not only do larger parties introduce new people to your restaurant, but they also increase your ticket size.

Additionally, when you offer your loyalty members personalized promotions and discounts, make sure to include their names in their emails. If you personally address communications, you’re not just reinforcing transactional loyalty, you're building trust and a stronger relationship with your brand.

Do loyalty programs work for small businesses?

Yes! However, most small businesses aren’t taking advantage of loyalty programs just yet.

According to Visa’s Digital Transformation report, currently, only one in five small and medium-sized businesses currently offer their customers a loyalty program.

But there are a few facts from Visa’s report that you’ll want to consider:

● 80% of businesses with loyalty programs have found that loyalty programs increase their customers’ average ticket size, the number of repeat customers, and their overall revenue.

● 78% of customers are more likely to choose to shop at a business with a loyalty program compared to one without.

● 90% of customers prefer digital loyalty programs to traditional card and paper ones. I mean who really wants 13 punch cards cluttering their wallet? Plus, digitizing your loyalty program gives you all those great insights into your customer’s purchase behaviour and reduces the risk of loyalty fraud.

Keep in mind that most customers like supporting small and local businesses. It’s typically a more ethical and environmentally sustainable option, and it’s a great way to support one’s local economy and community. If you can, why not implement a loyalty program to offer your customers something special to thank them?

How to set up a rewards program

When it comes time to set up your loyalty program, there are a few things that you should keep in mind.

● Make sure your team is trained to properly promote your loyalty program. If your employees can’t convey the ease and value of your program, why would your customers sign up?

● Make the sign-up process quick and simple. Your customers should be able to easily register themselves or your employees should be able to set them up in a minute or two. You won’t want to hold up your line with a slow and tedious registration process.

● Your perks should be valuable. Make sure that you’re offering your loyal customers something that they actually care about. If the rewards don’t resonate with them, they’re unlikely to bother signing up or using their perks.

● The reward levels should be realistic and attainable. Make sure that your customers will be able to cash in their rewards a few times per year. If it takes years to collect enough points to get the smallest benefit, chances are your customers will get frustrated.

Learn more about the importance of customer loyalty and the 80/20 rule.