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How Small Businesses Can Benefit from Loyalty Programs

The benefits of loyalty programs for small businesses

It’s interesting to note that some of the busiest gas stations in town aren’t operated by energy companies at all. Instead they are outlets of large grocery and retail chains that reward their customer’s other business by offering discounts at the pump. While some of these supermarkets aren’t that competitive or distinctive from their competition in other ways, their shopping rewards help them retain their customer’s loyalty. While not all small business owners can open their own fuel pumps, they can still improve customer retention with loyalty programs.

How loyalty programs benefit small businesses

Loyalty programs can take a number of different forms. They reward customers with some sort of advantages for joining the program and continuing to patronize the business. For instance, some may offer discounts, member-only offers or points that can be accumulated for free items. Some offer shortcuts in lines, priority scheduling and other benefits that offer convenience but not discounts. The right rewards really depend on the business.

These are the basic advantages of loyalty programs for small companies:

Customer incentives of reward programs

Since most of these programs have been structured to reward customers for shopping more, they provide an incentive to consumers to favor the business that offers rewards. Businesses may have to invest in their program. At the same time, they structure their bonuses to help them enjoy more profits from extra revenues and an increase in brand loyalty.

Small businesses might tailor their own type of program to their own business:

  • An ice cream or yogurt shop might offer a free cone after ten visits.
  • A salon might send special discount offers and provide priority scheduling for members.
  • A clothing shop might offer an additional discount and open sales a day or two early to people who join the rewards program.
  • A movie theater might have a VIP line for tickets and snacks.

In any case, customers have to get some value out of signing up. That value has to be enough to get them engaged. Loyalty programs can be simple or complex, and there are many different ways to run them. Some small businesses may simply offer simple punch cards for walk-in guests, but other small businesses have done very well by running their rewards program via a downloadable mobile app.

Business advantages to reward programs

Almost all companies find that they have to spend less money to keep customers than they have to spend to attract new people through the door or to their shopping website. Some companies may access small business loans for their initial investment. They understand that they can benefit from this investment because it provides them with an efficient way to market. The extra profits will allow them to pay the loan back and keep more for themselves.

This kind of marketing may help companies save more money and generate more revenue in a few different ways:

  • The company has to spend less money on marketing because retention is usually cheaper than bringing in new customers. Good rewards programs can be a very effective use of marketing money.
  • Loyal customers also tend to tell their friends about their favorite businesses, so the company can benefit from more word-of-mouth marketing both offline and online. Some reward programs also offer rewards for current customers who refer new members.
  • Truly engaged customers may find value in spending more than they would have otherwise. Who hasn’t entered a store for a sale and then ended up buying more things before they leave?
  • The rewards program also gives companies a valuable offer to get more people to join their email, phone or text subscriber list. These lists can help the company stay in communication with customers better too.

Why should small business owners consider loyalty programs?

The obvious reason to consider a loyalty program is suggested by the name of these programs. They are meant to help develop brand loyalty. However, they can also be used to help improve communication, increase average sales and even generate some extra word-of-mouth referrals. Since these programs can begin very simply and then expand as the business grows, they are an efficient and effective way to market that most small business owners should consider.

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