Does Your Small Business Need a Loyalty Program?
One of the most valuable assets a business can have is its base of existing customers. The probability of selling to someone who’s already made a purchase from you is 60-70%, while your likelihood of getting a new prospect to buy is just five percent to 20%, according to Small Business Trends.
Consider nurturing those existing relationships by creating a loyalty program for small business. According to a Bond Brand Loyalty report, loyalty program enrollments have increased 31% in the past four years, with the average consumer signed up for roughly 14 of them.
It appears the increase in interest coincides with customers’ demands for personalized attention from companies. According to Salesforce’s Connected Shoppers Report, 58% of respondents value personalized service when shopping in stores. Loyalty programs do just that by rewarding customers for their purchases. What’s more, technology has made loyalty programs easier and less expensive to implement, providing a cost-effective way to attract and retain business as well as increase sales.
Who Needs a Loyalty Program?
Any company can implement a loyalty program, but some might fare better than others. According to reward program software provider smile.io, businesses that sell “products with repeat purchasability,” such as clothing or consumables, are prime candidates for loyalty programs. When it comes to clothing, for example, styles and trends change with the season, so shoppers would see a benefit in buying several times a year.
In addition, businesses that have a profit margin above 10% are ideally suited to reward loyalty, netting a significant increase in customer lifetime value. And lastly, competition matters; small businesses with a lot of it in their market should consider adding a program to stand out from the crowd.
How Do I Design a Loyalty Program?
Choosing the right loyalty program for your business will depend on your budget. The easiest way to implement such a program is to issue a punch card. This is popular with coffee or ice cream shops that offer a free product after a set number of purchases. You can also use an app-based version, such as Social Spiral, SpotOn or Spendgo. In addition to making the program digital, each of these platforms provide statistics about your customers as well as a variety of marketing features, such as text or email campaigns.
A great example of a loyalty program is Sephora’s Beauty Insider, which is tiered and based on sales. The first level rewards customers with access to a private community, discounts and a free birthday gift, whereas the top tier provides perks such as free two-day shipping, exclusive events and a private hotline for beauty tips and advice. The company reports that 80% of sales come through its loyalty program, according to an interview with Forbes.
Once you select the loyalty vehicle, tailor the rewards to your clientele and product offerings. Some businesses allow customers to redeem points for free products. You can also offer discounts, special sales or events open only to members. Whatever system you choose, make sure it’s easy for customers to understand and that it keeps them interested.
What Are the Benefits of a Loyalty Program for Small Business?
The biggest benefit for creating a loyalty program for small business is increased sales. According to Bond Brand Loyalty’s study, 66% of consumers will adjust their spending to maximize their loyalty points. Small business owners will often find that building a committed customer base helps provide stability and a consistent revenue stream.
Loyalty programs can also provide business owners with a way to entice more people to join their subscriber lists. These can help the company stay in communication with customers, thereby generating interaction and sales.
In addition, loyalty programs give customers a reason to talk about your business, which increases word-of-mouth marketing about your products and services. And, promoting your customer loyalty programs on social media improves your brand visibility online. Your customers can share your loyalty rewards online, spreading your message to a broad range of prospective customers.
What’s the Takeaway?
When you create a loyalty program for small business, you demonstrate to your customers that you appreciate them. This low-cost marketing program can go a long way in stimulating sales while rewarding loyal shoppers for their patronage. It’s a win-win.