How to Decide Which Customer Loyalty Program Is Right for Your Small Business

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Customer loyalty programs used to be extremely expensive for small business owners to operate – they simply couldn’t afford the advanced software, POS systems, and other infrastructure required to run effective loyalty programs.

However, modern technology has changed everything. There are now dozens of companies focusing on providing customer loyalty programs to small businesses, and more are appearing every year. Their costs are quite low, and easy-to-use software makes customer loyalty systems simple to integrate into your small business.

But what’s the best kind of customer loyalty program for your small business? We’ll break down the most basic types of customer rewards and loyalty programs, allowing you to get a better idea of which type may be appropriate for your small business.

Cash Back or Rebate Programs

These programs allow customers to earn a percentage of money back from previous purchases in a set period of time and gives them the opportunity to redeem this money or store credit after a set period of time.

The advantages of such as system are:

  • Simple and easy for customers to understand
  • Gift certificates and store credit drives customers back to your business
  • Customers feel as if they’re “buying in” to your business, making them more likely to return

Some disadvantages include:

  • Lack of “instant gratification”
  • Can be expensive to implement
  • Infrequent shoppers might not be drawn by this program

Discount Programs and Points Programs

Discount programs offer a certain percentage or dollar amount off of select in-store items, or entire purchases. These programs apply directly during checkout.

Most points programs are quite similar – the customer may spend “points” earned by shopping.

Advantages of these two programs include:

  • Easy to understand
  • Avoids price discounting except for loyal customers

The chief disadvantages are:

  • Lack of instant gratification
  • Customers must be reminded of their status in the program at checkout – and if they forget and are not reminded before purchase, they may be upset

Punch Card Programs

Punch card programs are probably the oldest form of small business loyalty programs. Usually implemented at restaurants, these programs involve printing off cards, and stamping or punching each one when a customer purchases a meal at your restaurant. Usually, after 10 or 11 purchases, the card can be redeemed for a free meal.

The advantages of such a program are:

  • Extremely low operating cost - no special hardware or software is required
  • Very easy for customers to understand
  • Strongly encourages customer loyalty

The primary disadvantages of these programs are:

  • Customer must remember their card each time
  • Fraud can be hard to prevent
  • No captured information about a customer
  • No way to analyze customer spending habits

These programs can be digitized with software to avoid some problems such as fraud and customers forgetting their cards, though you’ll lose your “low-tech” advantage.

What Is the Best Option for My Small Business?

It depends on your industry, your individual business operations, and your competitors.

However, the most common loyalty programs by far are discount programs and points programs – they allow you to reward your customers, but you don’t give them any cash back, just an ability to purchase your products in the future at a discounted rate.

Whichever program you choose to implement; you should use a professional loyalty software package. These software packages allow you to track consumer spending habits and better understand your customers, and they offer great loyalty programs that are easy to manage.

And if the price of a loyalty program is putting you off, don’t let it. These programs are powerful. According to Access Development:

  • 75% of all consumers say that loyalty programs are important aspects of their relationship with their favorite brands.
  • 81% of consumers are more willing to keep doing business with a brand that has a loyalty program.

Implementing a customer loyalty program allows you to gain more repeat customers, gather information about buying habits, and get a better idea of your primary consumer base, all while encouraging brand engagement. If that’s not a win-win for everyone, we don’t know what is.