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How Loyalty Programs Can Help Small Businesses Retain Customers
More and more businesses are using loyalty programs as they are an effective way of improving customer retention. After all, selling to your existing customers is much easier than attracting new ones. Here are some tips on how you can use loyalty programs to benefit your business.
What is a loyalty program?
A loyalty program are rewards offered by a company to customers who frequently make purchases. These rewards may be free merchandise, money-off vouchers, discounts or even VIP experiences. Examples of popular loyalty card schemes are Tesco Club Card and Nectar card.
Did you know that the average U.S. household has memberships in 29 loyalty programs?
How can I use loyalty programs to help sales?
The simplest loyalty program is a point based system. Frequent customers earn points when they make purchases which translate into a reward, whether that be money-off vouchers or freebies. For example, if a customer spends £20 with your business and they get 1 point for every pound spent, this would translate into 20 points. You can set up a tier of rewards for points, so if a customer gets 200 points they get a £5 gift voucher. However, it is important not to make the point system too complex because if a customer can’t understand how the reward system works then they are unlikely to use your loyalty card.
Another loyalty scheme businesses can use is referral schemes. These schemes reward customers for getting their friends or family to sign up to a service, usually with gift cards for major retailers. Consumers are typically loyal to brands their families and friends do business with.
Consumers are also loyal to brands that present them with new experiences, products or services. By creating special experiences for customers such as VIP sales or early access to new products you can increase your customer loyalty.
How can I implement loyalty schemes?
You might be thinking that to start your own loyalty scheme you need to create plastic loyalty cards to be sent out to customers, which can seem impractical and expensive, but there are several apps on the market that allow you to create your own digital loyalty card that can be accessed on smartphones. The advantage of ‘digital’ loyalty cards are that you can send email reminders to customers that they have points on their card so repeat purchasing is encouraged.
Remember, you should regularly measure the effectiveness of your loyalty programs. You can do this by looking at your customer retention rate (an indication of how long customers stay with you). If you’re running a successful loyalty program, this number should increase over time as the number of loyalty program members grows.