Seems like everyone — from Starbucks to the local nursery — has a customer loyalty program. According to Colloquy.com, there are nearly 3 billion loyalty programs in the United States, and the average American household has signed up for a whopping 29 memberships. However, they actively use only 12 of them, typically at businesses where they were already regular customers.
Loyalty programs are so popular these days because businesses — both large and small — realize that in increasingly competitive retail environments, nurturing relationships with existing customers is absolutely essential. And, according to a Harvard Business School article, the greatest benefit of loyalty programs for retailers is improved customer retention.
Even though many large corporations spend millions of dollars creating, promoting, and managing customer loyalty programs, it’s possible for small businesses to create successful programs with minimal investment. Here are some tips and ideas:
Implement the right loyalty program
Loyalty programs come in all shapes and sizes, from the basic punch card to cash rewards to VIP plans that require up-front membership fees. If you have a retail or food business, rewards for purchases and discounts are good choices. If you’re a service provider, like a salon, VIP programs and special offers can work well. Offering concierge services for loyal customers can be a good approach for business-to-business organizations.
When creating your program, consider the difference between transactional and discount programs. Transactional programs reward customers when they make a purchase. For example, a business offers customers a $25 gift card when they accumulate purchases adding up to $500. These types of programs are simple, straightforward, and can be as low tech as a punch card.
Discount programs offer customers special savings just for being card-carrying members. These can be a little more complicated to manage on your own, but can be popular with customers who purchase the same products or services regularly.
Invest time in analyzing customer data to better understand how they engage with your business so you can create an appealing program for your customers. Also according to colloquy.com, the most successful loyalty programs are those designed to reward the customer for how they already interact with the business and reinforce the existing relationship.
Keep it simple
Make sure the program is easy for customers to understand and use. For example, points-based programs can be confusing for customers unless you can offer them a way to keep up with their points electronically, like an app.
Low-tech punch cards — or swiping cards depending on your computer system — are easy to understand and use. Giving members 15 percent off every Tuesday is also about as simple as it gets. Even VIP programs can be pared down and uncomplicated. For example, VIP members get 20 percent all services. This is much easier than VIP members get 10 percent off haircuts, 15 percent off color, and 20 percent off blowouts.
Simplify the joining process for your customers. For instance, invite customers to type in an email address or fill out a short electronic form on an iPad at the point of sale. You may hurt customer participation if you require them go home and register online. Again, you’re asking them to work.
Simple can also translate into affordable. Instead of rewarding with cash back, gift cards, or other items you have to purchase, offer them resources you already have, like free product or discounts.
Use social media
Social media can be an easy and affordable way to spread the word about your program and stay in touch with your customers. If you have the time to generate and post content yourself — instead of buying paid promotions — it can be very inexpensive. However, it can be very time consuming and difficult to determine the success of your efforts. You might want to consider investing in some paid social media promotions if your budget permits. Typically, becoming a paying advertiser will give you access to many tools and strategies that can help improve the effectiveness of your social media promotions.
If you want to go higher tech — and a bit more hands off — there are numerous companies that provide customer loyalty and rewards programs for businesses. Many of these are apps your customers can use to receive special offers. These programs typically come with a monthly fee, and some are very reasonable. However, the goal of a customer loyalty program is to build relationships with your customers, and a third-party provider might not be the most personal approach. But, again, what you choose depends on your company, your customers, and how much time you have to devote to the program.
Update your customer loyalty program regularly
Keep customers interested in and excited about the program by changing it regularly. You don’t have to make significant changes, just little tweaks to keep it fresh. Add in a game one month, have special bonus periods, factor in a referral component at some point. Be creative and make it fun — for your customers and your business.