Business Tips

How to create loyalty programs for small businesses

Building and maintaining customer relationships is critical for small business owners like you. One of the main things that keeps people coming back to a business is obviously great customer service. If you are looking for a way to take your customer service experience to the next level, you may want to start a customer loyalty or rewards program.

Why you need a loyalty program

Loyalty programs establish trust with customers and help build relationships. Customers are obviously the lifeblood of any business, especially critical are repeat customers. According to the book Marketing Metrics, existing customers convert 60% – 70% better than new prospects. Loyalty programs are great for small businesses because they can be a relatively cheap and easy-to-implement way to keep customers coming back to you. If you want to start a customer loyalty program for your small business, here are a few things to consider.

Types of loyalty programs for small businesses

There are many different types of loyalty programs out there, ranging from simple to complex, cheap to expensive. Here are some loyalty programs that are ideal for small businesses:

Email list

Let customers opt-in to receiving email notifications to periodically receive coupons, discount codes, or sale announcements from your business. One downside to an email-based loyalty program is that it might not feel as interactive as a card- or app-based program. Since people get so many emails each day, they might be less likely to act on the messages you send them.

Text list

If you have a relatively small list of customers who have agreed to receive information from your business, consider implementing a text-based loyalty or rewards program to send customers discount codes and information about sales. Text is a more personal communication medium, so sending promotions to an individual’s phone can help you build a closer relationship with that customer. You can create templated texts that can be saved as a note on your phone and then reused with minor edits throughout the year. If you want to keep all of your loyalty-related text conversations separate from your personal inbox, consider getting a 2nd number from Sideline that can be used exclusively for business texting. To make texting your customers even easier, we are building and beta testing a new generation of business communication tools that can automatically send loyalty program-related SMS messages to simplify the administration of whatever loyalty program you set up.

Punch or stamp rewards card

When customers buy X, they receive Y. This type of program is possibly the easiest you can use. It’s relatively cheap (just the cost of the cards and stamp or hole punch) and it’s easy to maintain and implement. Plus, nearly everyone is familiar with punch or stamp cards.

One of our users, Rebecca Warnock, who owns a tanning salon, employs a punch card loyalty program. “We have been using a loyalty card reward for over a year and have seen great results from it. The card, with our logo and information, reminds them of us every time they see it in their wallet and the reward encourages them to think of our services more frequently. Customers are excited to receive their free session on the 6th visit and we love celebrating with them!”

The card reminds them of us every time they see it in their wallet.

One downside to a punch card system is that you don’t necessarily need to collect customer information like email addresses or phone numbers to offer a customer a punch card.  This can make it difficult to track how many people are taking advantage of the program, and you have no means necessarily of reaching out to them when you want to let them know of a promotion you might be running.

Rewards software or app

If you don’t want to create and manage your own customer loyalty program, or if you want something a little more high-tech than a simple punch card, there are a number of software and apps including Belly, Fivestars, and Spendgo that can help. These programs do charge a monthly fee (about $150+), so if you have a tight budget, this might not be an expense you want to have.

How rewards are earned

If you decide to use a software or a punch/stamp card reward system, next you will have to decide how rewards are earned and how the program is structured. There are a few different options for this, but one of the easiest for small businesses to track is a point-based system. Here are some examples:

1 purchase = 1 point

$1 spent  = 1 point

1 visit = 1 point

You will have to decide how many points people need to accrue before they get a reward. Is it 10 points, 50 points, 100 points? You will also have to decide if customers receive a reward each time they get to a certain number of points. Or if they will be able to save up points for better rewards.

Types of rewards

Rewards are obviously the cornerstone of a rewards-based customer loyalty program. When you are trying to determine what rewards to offer, it’s important to strike the right balance; it should be enough to get customers excited, but not so much that it impacts your bottom line. Some common types of rewards include:

  • Free products or services
    Everyone loves free stuff. Reward your valuable customers with a free little-something, whether it’s a free cupcake from your bakery or a free shampoo with their next haircut.
  • Price discounts
    Offer customers in your loyalty program a specific dollar amount or percent off their total purchase or specific items or services.
  • Exclusive access
    Let your VIP customers be the first to know about new products, services, or events you are offering. You can also hold special sales or events that are only for loyalty program members.

No matter which customer loyalty program you choose, make sure it’s easy for you to implement and run, and for your customers to use. For more tips on building and maintaining your customer relationships, take a look at some of our other blogs.

Header Image: Thurtell via iStock

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