Customer Loyalty Programs: Making Them Work For Your Business

3 min read
in Blog, Marketing

Customer loyalty programs. As consumers, each of us probably belongs to at least a few of them. Afterall, who would turn away the opportunity to save a little money on routine purchases? Many of the giant retailers and restaurants have them–Kohl’s, CVS, AMC Theaters, Starbuck’s, and McDonald’s–to name just a few. But what about your small business? As the owner of a small, local restaurant or retail shop, how can you make a customer loyalty program work for you?

What Are the Benefits of Having a Customer Loyalty Program?

As a small business owner you have most likely spent the last few years competing with the large chains and big-box stores. You have probably spent a lot of effort trying to convince the people in your community to shop local.

However, as you are probably well aware, today’s consumers are not as loyal to local establishments as they once were. You need to find other ways to grab and keep their business. A customer loyalty program can help you do that.

In addition to increasing repeat purchases from your loyal customers, you can also use your program to up-sell or cross-sell. If one of your regular customers typically orders a bagel and cream cheese on her way to work, your program could be set up to offer her a discount to try your delicious, fresh-baked cinnamon roll. Who knows, maybe that will become her new morning favorite.

You can also use the purchase data you collect with your customer loyalty program to detect trends. Being aware of the shopping patterns of your customers can help you better plan your marketing and promotions. Having a better handle on your customers’ buying habits will also allow you to better manage your inventory levels and set appropriate prices on your products.

Your loyalty program can also serve as a direct line of communication to your customers. Rather than spending a lot of money on general advertising to the public, you could focus a good portion of your marketing budget on targeting your existing customers.

A customer loyalty program can also help your business by encouraging more activity from your more profitable customers. By segmenting your customers according to their purchase patterns you can offer more and better incentives to those customers who typically purchase items with greater profit margins. The number of high-value purchases should then increase, and your less-profitable customers will either change their purchasing behavior to become more profitable or drop to the point of having minimal impact on your bottom line.

Do I Need a Mobile App? Aren’t Those Expensive?

Although a mobile application would certainly make it easier for customers to sign up and use your customer loyalty program, having one is not required for an effective program. And yes, they can be expensive. In fact, a mobile app that allows users to sign-in, make in-app purchases, has a mediocre interface, and is available for both iPhone and Android phones can run $75,000 to $100,000. That is definitely an expense that falls outside of what many small business owners would consider spending.

However, there is a much less costly alternative: your website. Not only can you use your website as an outward-facing marketing tool, you can also use it to support a customer loyalty program.

Even if you don’t sell your products online, you can use a database connected to your website to store your inventory and customer purchase data. You can connect your in-store cash register system to your website’s database to either share or transfer data between the two systems. And you can set up an area of your website where customers can sign up for your loyalty program, track their purchases, and see their progress if you offer a loyalty point system.

When customers make a purchase in your store they can pull up their customer number on their phone–or give you their name–for you to enter into the cash register. Their purchase can then be recorded to their account, earning them more points and giving you the data you need for making decisions about marketing and incentives.

And when you are ready to be even more streamlined you can add QR codes to the customer user account pages and a QR code reader to the checkout register. This will allow the customer to pull up their code on the mobile version of your website for you to scan. Their purchase details will then be recorded into the database connected to your website.

You can then connect your website and customer data to an email marketing application like Mailchimp. Doing that will allow you to send information to your customers about general promotions or incentives based on their purchase history. This direct connection will keep your business in the forefront of their mind when trying to decide where to have lunch or buy a unique gift for their spouse.

So, while you may not be Starbucks with their popular Star Rewards program, you can certainly offer your loyal customers a way to earn incentives to keep coming back to your store or restaurant. And perhaps your program will be even more effective when your customers realize that they are also making a positive impact on their local economy.

Meet the Author

Melinda brings several years of experience to ThirdSide to help navigate the challenges of growth.

When not working to keep project tasks flowing, Melinda finds time to nurture her creative side (yes, even project managers have a creative side) by trying out new recipes on her husband and three daughters.

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