How to Create a customer Loyalty Program
According to Forbes magazine, “Attracting new customers will cost your company five times more than keeping an existing customer.” Because it is so costly to acquire new customers, small businesses should make it a priority to retain their current ones.
One way that small businesses can satisfy current customers is to utilize a loyalty program. Entrepreneur magazine noted, “Loyalty program members constitute the best and most profitable customers.” Such programs have several great benefits. First, they increase sales among your most faithful customers. For example, Starbucks stated that their loyalty program played a pivotal role in boosting profit by 26 percent and total revenue by 11 percent in 2013. Creating specials and promotions for existing customers encourages them to shop at your business more consistently.
Starbucks says that their loyalty program boosted profit by 26 percent!
Next, loyalty programs help businesses develop stronger relationships with their existing customers. Businesses can send texts and emails with special deals to customers on their mailing list. They can also send customized deals to individuals based on their specific purchase history. Shoppers who feel valued and appreciated are more likely to promote the company with word of mouth advertising.
Finally, loyalty programs can track useful information about customer habits. Intuit stated, “You can collect information from the members of your loyalty program to learn more about your customer base. For example, some programs offer you the opportunity to track customer spending habits with your customer management software and gather data on demographics.” Knowing key information about your core customers will enable you to market more effectively to the same demographic.
Because there are over 2 billion loyalty programs in America, though, it’s important to find a way to make yours stand out.
First, think about what you want your loyalty program to achieve. Do you want to give your customers the occasional free product so that they will be motivated to keep coming back? Panera employs this technique by giving occasional free pastries and other items to those using their MyPanera card. Do you want to give them a sizable discount that will encourage them to shop primarily with you? Target encourages customer loyalty by offering five percent off every purchase made with the Target REDcard. Or, do you want customers to refer your company to their family and friends? Lyft encourages this by giving away free and reduced-price rides to customers who make referrals.
Thanks to the advent of digital rewards programs, small businesses can easily offer customers valuable incentives.
Many small businesses don’t have customer loyalty programs because they worry that they can’t compete with large corporations. Thanks to the advent of digital rewards programs, though, small businesses can easily offer customers valuable incentives. Current technology makes it simpler for small businesses to keep track of customer data and loyalty incentives. Businesses can create an affordable loyalty strategy by offering manageable deals and customer perks. Companies don’t need to break the bank in order to incentivize customers; they just have to provide something on par or better than their competitors’ plan. And since loyalty programs drive revenue, most businesses actually end up making money because of their program.
Start by researching what your customers would value the most. Is it free products or services? Is it reduced prices? Is it the chance to be entered in contests and giveaways? Determine the items that would be most valuable to your demographic.
Next, create a loyalty program that customers have to sign up for. This creates a sense of exclusivity and value among your customers. Some companies give out physical cards, while others offer email discounts or smartphone apps. Many companies create a tier system so that the most faithful customers receive the best deals.
Once you’ve decided on the type of loyalty program, have your employees ask each new customer if they want to sign up in order to spread awareness. A good social media strategy can also go a long way to boosting enrollment.
A good customer loyalty program will increase revenue, encourage word-of-mouth referrals, and retain current customers. Loyalty programs not only encourage your customers to come back frequently; they also track buyer behaviors and help you connect with customers through personalized communication.
Keith Cawley is the media relations manager at TechnologyAdvice. He covers a variety of business technology topics, including gamification, business intelligence, and healthcare IT.