Small Business Tips

Create a Rewards Program for Your Small Business

Brian Van Buren

How do you create a customer loyalty program?

No matter where you shop these days, you’ll find businesses taking advantage of customer loyalty programs. Whether it’s a punch card at a food truck, a membership card at a grocery store, or a mobile app for a large ecommerce website, loyalty rewards programs are a proven way to increase customer loyalty and drive repeat purchases.

What is a loyalty program?

A loyalty program, also known as a rewards program, is a program that rewards customers for making repeated purchases from a business. Often, customers are rewarded with free items after a certain number of purchases, or discounts on certain items. Customer loyalty programs trace their origins as far back as the 17th century, when customers were given copper coins with each visit, which could be redeemed for free items at a future date. In the late 1900s, one of the most well-known types of rewards programs was launched; the frequent flyer program. The popularity of this program led to the loyalty cards and mobile apps you see today.

In the modern era of ecommerce and digital payments, rewards programs are more widespread than ever. Often, loyalty rewards programs will collect some form of customer data, which can include personal data, and can also track customer behaviour. The best rewards programs are easy to use, reward repeat business, and improve customer retention.

What benefits does a customer loyalty program have?

There are several benefits to having loyalty programs for small businesses. Loyalty programs improve your customer retention – working towards a reward or having an inherent discount on items will keep customers coming back again and again. And customers who are part of these programs will spend more than those who aren’t.

Customer referrals also increase with these programs. Rewards program members are more likely to refer a small business to friends and family, and customers referred by rewards program members have a higher retention rate.

Also, when programs are connected to an account, it is possible to track customer data such as purchase patterns. This can help businesses directly target consumers, giving discounts on items purchased most often. While this can be very beneficial for businesses, in the current environment of concern over data safety customers may be wary to share too much information.

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I want a loyalty program – where do I start?

The first thing you need to decide is what sort of loyalty program you want. Do you want a program that simply tallies purchases or one that records customer data? Depending on the type of small business you own, certain systems have more value than others. If you are running a food truck and want to reward customers with a free food item after a certain number of purchases, you probably don’t need a mobile app; a punch card system will do. But if you want your customers to be able to order from their phones, a mobile app is the way to go.

There are several different companies, such as Punchcard and Spendgo that can help you set up rewards programs. Some use directed e-mail marketing or mobile apps and can let you collect customer data as well. Having customer data not only gives you contact information but can also let you track purchase types, dates of purchase, frequency of visits, and other data.

There are several different options small businesses can use for their rewards programs.

  • Punch Cards: Punch cards are a tried and tested, inexpensive way to track customer rewards. Coffee shops have used this method for years, and while punchcards build customer loyalty, no data is collected.
  • Membership Cards: Membership cards are popular and are usually tied to a customer account. While this is more expensive to set up and run, it makes it easy to collect customer information, and there are companies that will administrate the rewards program for a fee.
  • PIN Codes: PIN codes can be used by themselves, or with membership cards. Sometimes customer phone numbers are used as PIN codes. A PIN code system can be handled in the same way as a membership card, with similar costs.
  • Mobile App: Mobile apps can have many additional features, such as notifications and instant coupons, and have the added benefit of being on the customer’s smartphone. They are the most expensive option and may not be realistic on a small business budget.

Rewards programs can also offer different kinds of incentives for customers. Whether it is tallied by the number of purchases or a points system, the incentive must be worth the effort.

  • Free Merchandise: This coffee shop classic is very popular, and has been adopted by large brands like Starbucks and Subway. The challenge is deciding how many purchases needed to trigger the reward; too few and it won’t be worth the lost revenue, too many and customers won’t bother with it.
  • Price Discounts: Grocery store chains love this reward. Businesses can decide which products receive price discounts, this may change customer purchase behaviour. Discounts on store brands or on overstocked items can cause higher sales compared to name brands.
  • Advanced Access: Giving early access to items or sales is another way to reward customers. This works well with limited-access items that are likely to sell out, or for sales which begin on specific dates and times.

Some Final Thoughts

Loyalty rewards programs for small businesses are popular for many reasons, but mainly because they are effective. Loyalty programs do increase customer loyalty, which drives repeat purchases and customer references. Small businesses have been using them for years, but thanks to rewards program companies, a business of any size can create a program that best benefits it. Thank you for reading, and if you are a small business owner, I hope this helps you decide if a small business rewards program is right for you!

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