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How Loyalty Rewards Programs May Benefit Small Businesses

It's often less expensive to keep a customer than find a new one. A loyalty rewards program encourages repeat purchases from an existing customer base.

Many savvy consumers have amassed a large collection of credit-card-sized rewards cards offering discounts and freebies at their favorite retailers and restaurants. Before stuffing a customer's wallet with one more card, small businesses should think strategically and devise a loyalty program that truly rewards their customers.

The Value of Rewards Programs

Gaining customer loyalty takes time, but it's effort well spent. According to a SCORE survey, 82 percent of small businesses owners believe that loyal customers are a key factor for growth. Plus, the cost of establishing a rewards program is often much less than spending marketing dollars to find new customers. Of course, some loyalty programs are more effective than others, and a period of trial and error may be required to find what works best. For this reason, small businesses shouldn't be afraid to switch up their loyalty programs as long as changes are communicated effectively to customers.

What Are Customers Looking For?

Basically, a loyalty program rewards customers for repeat business. The reward must be something that customers truly want to encourage them to return to a business for repeat purchases. Possibly a 10 percent discount on a future purchase is enough to bring a customer back to a specialty retailer. At restaurants, a free appetizer or dessert may work. Even something as low-tech and easy as punch cards used to validate a series of purchases that result in a larger reward may be highly effective.

Technology Encourages Loyalty

For small businesses lacking the infrastructure to create a loyalty rewards program in-house, many apps are available to offer assistance. Reward programs can be managed via apps combining purchases from other local small businesses to allow shoppers to amass rewards points. Marketing through social media is another budget-friendly way to administer rewards programs. Twitter followers and Facebook friends can be rewarded with discount codes just by following a small business.

Loyalty Programs Help Establish Marketing Lists

To gain marketing efficiency, small businesses may wish to establish some sort of distribution list to contact frequent customers. To encourage sign-ups for loyalty programs, retailers may offer coupons for future purchases. Customer communication is important and advance notice of sales and other special purchases can encourage repeat visits.

Tracking the Cost of Loyalty Programs

To determine the benefits of loyalty programs, associated costs of administration should be tracked and analyzed in comparison to profitability growth. An online accounting system can assist with identifying expenses related to loyalty programs. Sales discounts related to rewards can also be tracked as an offset to sales revenue. Finally overall profitability growth and sales per customer are key metrics that will help measure the effectiveness of loyalty programs.

Expressing appreciation for repeat business generates loyalty among customers. To set a company apart from peers, create a rewards program that's easy for customers to manage and reward them with something they truly want.


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