What Kind of Loyalty and Rewards Systems Work for Small Businesses?

If you run a small online (or even a physical retail) shop, you’ve most definitely heard the expression “it’s easier to get a repeat customer than to get a new one”. Well, the next question you might have is “how do I turn a one-time customer into a repeat customer?” Good question. Well, one of the best ways to turn someone into a loyal customer is by using a loyalty programme. Today, we’ll look at what kind of programmes are out there, and what else to keep in mind for a successful loyalty program.

What kinds of loyalty and rewards programmes are there for a small business?

Loyalty plans have become pretty popular in the last years and some great innovations have been made. Let’s take a look at what options exist out there.

Point Systems

We’ll start off with the original loyalty programme – the points system. The concept should be quite familiar to you. The basic idea is that the more you spend per purchase, the more points you get. The beauty of this is that it not only inspires customers to come back to your shop, but it might even inspire them to spend more in one purchase than they would have otherwise.

For example, let’s say your rewards programme gives 1,000 points for every £20 the user spends, but 2,000 points for every £30 spent. In other words, they’ll get 100% more points for spending 50% more money. This might just inspire them to throw another product or two into the shopping cart in order to reach whatever point-threshold they’ve got their eye on.

Tier/Gaming systems

Gaming systems have become quite popular in the last few years. Education apps use it to motivate their students and retailers use it to reward and motivate their customers to buy more.

The concept is simple. The more a customer spends, the higher the tier they get placed in. With higher tiers come better rewards and perhaps some exclusive access (e.g. early buying options for new products, etc.)

By showing the customer their trophies, milestones, and progress (how close they are to “levelling up”), you’ll be inspiring them to buy more, especially once they get closer and closer to entering the next level where more rewards await them.

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By rewarding your customers with different awards and levels, you will motivate them to spend more in order to save more in the future. 

Value-based system

This “reward” system is a bit special because you’re not actually rewarding your customers. Value-based reward systems are quite simple. Depending on how much money your customers spend, you will donate a certain amount of money to a charity or cause that is important to them. Naturally, depending on your company and your target customer, this reward programme can be just as appealing to them as one of the classical reward programmes.

For example, if you sell products made out of 100% recycled materials, you might want to donate to a charity helping to rebuild the rain forests. If you sell pet products, you can donate to local animal shelters. You get the idea. Basically, this programme is made for companies whose target audience is socially conscious people.

Partner / Coalition system

Teaming up with other businesses could be a great way to get some more exposure for your small business while offering your customers more rewards as well, which they will definitely appreciate.

In fact, an American Express survey revealed that 72% of Americans prefer a rewards program that allows them to shop at many stores rather than just from a single brand. Coalition programmes are perfect for offering this kind of flexibility.

If you own a physical retail store, you might want to have a chat with some of your other local businesses. If you’re strictly an online shop, there are other options as well.

Referral system

Rewarding your customers for bringing in new customers might also be a way to go. If your business doesn’t rely heavily on repeat business throughout the year (like a mechanic or tax services), then this might be a rewards system for you. Therefore, you can give these customers discounts for next year if they bring you new clients.

What should you consider in your loyalty programmes?

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When creating your loyalty programme, you’ll have a few things to consider. Obviously, you’ll have to choose which kind of scheme you want to set up for your customers (and which one makes the most sense).

However, keep in mind that these loyalty schemes are not only there to keep your customers happy. As a business owner, you can get great insights into the purchasing habits of your customers. For example, if customers need to reach a certain basket value to claim a reward, it might be interesting for you to know which products are those “add-on” items that help customers reach that threshold. Knowing this might be helpful for inventory management as well as figuring out which products to include in future promotions.

How do you want to promote this rewards programme? In other words, how will you motivate people to sign up for this. Perhaps, offering them a £5 discount just for signing up will encourage them to create an account.

Although, this might sound like a lot to small business owners when added up, take a moment to consider the outcome: the customer is likely to make a purchase AND now they have an account with you, meaning the checkout process will go a lot faster for them in the future - a great tactic to help improve your conversion rates (the faster the checkout, the more likely they are to complete the purchase).

Having them set up an account with you also means you can send them e-mail marketing campaigns, what might seem “old-fashioned”, but is probably the best marketing tactic out there in terms of R.O.I.

If you’re running any kind of loyalty or rewards programme, you might want to consider giving away extra points to them for certain events. Although this might work best in a points-based system, it’s never a bad idea to give a little gift to your customers on their birthday. It’s a great way to put your company in their minds. Not only that, but you can also build a stronger emotional connection to the customer this way.

Finally, make sure you invest some time in creating an “Explainer page”. By clearly stating the rules of the programme, you can make sure there is no confusion about how the programme works. You can also inspire them and give them tips to help motivate them to spend a little more.

Conclusion

Clearly, creating a loyalty programme or rewards scheme can be beneficial for both you and your customers. Make sure it makes sense for both you and your customers.  In the end, you can build a stronger relationship with you clients, thus making them more loyal to your brand. The days of punch-cards are over, but with that come greater insights and marketing strategies for business owners. Now, if you’ll excuse me, I’ve got a free cappuccino to claim!

Bonus content: Check out our whitepaper on how to build loyalty through customer engagement. Just click below!