How to Launch a Successful Loyalty Program For Your Small Business

From phone companies to cosmetics brands to donuts, the business world is swimming with loyalty programs. Why? Because customers love them. Between 2008 and 2012, the total number of loyalty memberships grew 10 percent each year, with the average household now holding 23 different memberships.

It makes sense to reward your loyal customers for sticking with you. But it’s important to take a step back before leaping into a new loyalty program because you don’t want to miss the trend, or because you want some quick revenue. Not all loyalty programs pay off for businesses — a McKinsey study looked at 55 large companies offering loyalty benefits, and found that the ones that spent more on loyalty or had more visible loyalty programs grew at about the same rate – or even slower – than those that spent less.

So as a small business owner, how do you create a loyalty program with the right incentives for your customers, as well as the right financial structure for your business? Here are ways of approaching loyalty that will ensure that you benefit from a growing trend without losing money.

Focus on where the pain points are — both for you, and your customers

Every business has gaps in its sales cycle that could be closed. If you’re a hair salon, you face an onslaught of customers on the weekends but empty chairs during the weekdays. For a bed and breakfast, you’re booked during the peak season but want to boost business during the off-season.

At the same time, your customers have their own pain points. They want to have more access to your services when they’re available, and they want financial incentives for sticking with you. The key is to consider both sets of needs, and create a loyalty program that is designed to address both sides. For example, if you offer a half-price haircut to loyal customers if they come during weekdays, they are incentivized to visit during their lunch break. They save money without sacrificing convenience, and you encourage people to visit your business when it would otherwise be slow.

Be sure your loyalty program addresses your best customers

For a while, it was very trendy for businesses to offer coupons incentivizing new customers and irregular customers. But as the fate of companies like Groupon has showed, these tactics are sometimes nothing more than a fad, and might not  pay off for small businesses. Your best customers are critical — they have the loyalty that you want to keep. So be sure that your loyalty program is as tailored to them as much as possible. One option is to create a separate, exclusive program only for your top customers, giving them greater discounts for spending more, or better perks when they do patronize your business.

Build your loyalty program into the full customer experience

Rather than simply offering a punch card to get free items or a card for discounts, consider offering a heightened shopping experience for your most loyal customers. For example, you could give them access codes for easier re-ordering, or offer them a private hotline to call to address an issue or solve a problem. Another option might be providing free expedited shipping for every loyalty program member. The goal is to make it as easy as possible for your best customers to continue purchasing from you. You might even make the customer service for this crew downright luxurious. Knowing how to do that for your customers is a key to your success as a small business owner.

Keep track of your most loyal customers, and target the next generation

In order to maintain a successful loyalty program, you have to know who your loyal customers are, as well as who has the potential to become a loyal customer. In order to gain this knowledge, you need a tracking service. If you don’t already have a data tracking service that offers insight into your customers’ behavior and buying trends, companies like Upserve or Salesforce, which are designed for businesses of all sizes, offer those services.

Don’t forget personalization, and surprise

Who doesn’t love a pleasant surprise now and then? This same rule applies to your loyal customers. Rather than handing them a punch card for free baked goods, consider offering them benefits throughout the customer journey, as rewards for their loyal patronage. When they place their 100th order, give them a nice discount. On their birthday, offer them a dozen bagels on the house. Delight them with a free-of-charge service; perhaps this occurs on their 10th visit, but they don’t have to know that they’ve “earned” this whimsical treat, and they might even feel more loyal if the gift comes as a complete surprise, rather than as a result of a completed punch card. These loyal customers are providing you with their business for a reason — you’ve gained their trust. A great way to maintain that is to continue to treat them with respect and care.

No matter how you structure a loyalty program, the most important thing to remember is that you have two goals: to make good customers into great ones who never leave you, and to increase revenue for your business. It can be a delicate line to walk between the desires of customers and the needs of a business, but with some ingenuity and research, you can create a loyalty program that keeps your best customers happy while also improving your bottom line.