How to Launch Loyalty Rewards Programs for a Small Business

Friday, February 20, 2015

Loyalty reward programs offer faithful customers incentives to continue to make purchases from your business. In fact, 52.3% of loyal customers will join a rewards program, and 39.4% will spend more on a product even if there are cheaper options elsewhere.

Loyalty reward programs for small businesses can ensure steady cash flow from customers that return regularly to collect points, awards, or discounts. Plus, those same customers are more likely to spread the word about your business. 60% of customers will tell their friends and family about a brand they are loyal to. Plus, those same customers are more likely to spread the word about your business.

Impact of loyalty rewards programs

  1. Drive increased revenue: Loyalty program leaders grow revenues roughly 2.5x as fast as other companies in their industries.
  2. Create brand awareness and Affinity: A well-executed loyalty rewards program is an effective way to build brand affinity, and that in turn creates ambassadors for your business who use social media and word-of-mouth to share their loyalty with others.
  3. Provide a competitive advantage: A well-executed rewards program can be a significant competitive advantage, especially for smaller businesses. The cost of retaining customers is as little as one-fifth the cost of acquiring new customers.
  4. Data provides insights: The rich customer data collected in a loyalty program can help you find better and more cost-effective ways to meet the needs of your market.

Where to start with a small business rewards program

 

A critical step in building a successful rewards program is understanding what makes your customers happy. At the outset of planning your program — before you even begin to consider offers, processing, or marketing — you must take a holistic look at your business and your customers. Specifically, seek deeper insight into their current behaviors, needs, and wants.


Past behavior is usually the best predictor for future behavior, so use whatever customer data is available to you (common purchases, frequency, order/ticket size, etc.). 

 

Leverage your existing customer data

  • Use reporting and analytics to define customer segments
  • Registered accounts over store lifetimeAccount visit/frequency detailsTotal active accounts
  • Customer demographics of registered users by age, gender

 

Don’t have enough customer data?

Small business owners often worry they don’t have the data to start a loyalty rewards program. Your company almost certainly has a little data on customers, such as how much your best customers spend on average and how often they use your services. Use this to identify your most loyal customers — the top 10% by frequency or profit — and start there.

 

In addition to using your customer data, there is a wealth of regional and national sources for trends data on who’s buying what, where, and why. Do your best to leverage the latest trends and market insights.

 

Remember, you don’t have to go it alone. There are others with a vested interest in seeing you succeed. Ask your vendors and providers for information. Your payment processor, in particular, should be able to provide a wealth of insight, not only into consumer trends but also how similar businesses are building rewards programs.

 

Make use of your customer research. This will help you determine what drives your customers — some may be driven by value while others are drawn to sophisticated experiences. Knowing your market determines which relationships you want to foster.

How to reward your customers

While there are variables within each model, you can commonly reward customer behavior via:

  • A discount card: Customers use a card at checkout that records transactions and qualifies them for future discounts on products or services. The traditional punch card fits here, but technology has made it easier to follow spending habits and offers targeted discounts based on habits. An example is a grocery chain rewards program.
  • Reward points: This option is also transactional and may include a card. The difference is that the customer accumulates points based on their purchases (commonly determined by dollar value) that they may use to buy products and services. This model is growing in popularity thanks to its ubiquitous use in the travel industry.
  • Experiential awards: The previous two rewards models are transactional-based. This model uses event-based rewards. Research shows that experiences — rather than purchases — create lasting memories and affinity. Things like a backstage pass to a concert or a VIP upgrade are popular ways to reward loyal customers.
  • Or a combination of models: Many national and regional businesses are combining elements of these various models, offering discounts as well as rewards or targeted experiences to a particular customer audience.

Your type of business should help determine which option is best. Points make sense for services with high credit card transactions. A free appetizer or instant discount may be a better option for restaurants that may only see a patron once a month.

 

Make joining your rewards program a no-brainer

First, determine how customers sign up and what information you’ll collect. Make this process as seamless and straightforward as possible. Do not charge a fee for joining your rewards program.

Limit the time and amount of personal information required to sign up. Requiring customers to fill out a long form will only lower adoption. Consider making it as easy as providing just an email address or phone number. That’s enough to start your marketing efforts. Encourage people to complete their profile on your website, if possible.

The benefit of capturing more information is that it allows you to personalize communications using customer name, birthday, and sign-up anniversary. Consider offering a gift or starter points when your customers sign in to their profile to collect all this personal information.

Continually mine your customer data

Despite the best intentions and planning, your rewards program will need to be updated now and then. “Set it and forget it” doesn’t work when it comes to building loyal customer relationships. Your program strategy should include a clear outline of how you will evaluate and evolve your program to always resonate with customers.

Just like it did in pre-rollout, customer actions and data should be at the heart of any decisions about how to change your rewards program. Examine the data as soon as possible, but give the program time to gain traction before making sweeping changes.

Change it up as needed

Don’t be afraid to change directions with your rewards program. Your customer data, along with your broader research, will quickly reveal whether your program is not doing enough to engage customers.

There is no perfect answer, so be ready to experiment and test your options. You can use your email lists to try out offers or use a small slice of your membership to test new rewards options. If these experiments work, consider implementing them at the program level.

If you are considering implementing a rewards program but are concerned you don’t have the expertise to build the right model, seek out the assistance of a specialist.

An expert can help you:

  • Build the right program based on realistic goals and business objectives
  • Communicate a clear value and message across many channelsDeliver the right message at the point of purchase through well-trained staff
  • Optimize your program based on customer actions and data-driven decisions

Remember, a rewards program is not just about revenue. It’s about relationships. Everything you do should focus on building the customer relationships you want for your brand and your business.

 


Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.