Building up a loyal customer base is so important, especially for a small- or medium-sized business (SMB). In fact, research shows that the cost of acquiring a new customer can be 5x higher than the cost of retaining an existing one.
So how do you keep them coming back? One proven way is to create an enticing loyalty program. You can launch a program with little upfront investment and the benefits can be huge.
In this post, we’ll cover:
Let’s start with the basics.
What is a loyalty program and why is it important for an SMB?
A loyalty program, or rewards program, is any program that rewards customers for purchasing from your brand or performing other desired actions such as following your brand’s social media accounts. One rewards program many people are familiar with is Starbucks Rewards. In this particular program, customers earn “Stars” on every purchase that they can save up for free food and drink items or branded merchandise.
Rewards programs are especially important for any SMB because they help with things like referrals and marketing efforts.
Benefits of customer loyalty programs
First and foremost, loyalty programs are a practical part of a retention strategy. One report found that 40% of customers are likely to make repeat purchases from brands that reward loyalty. And that’s only the beginning of how they can benefit your business overall.
Here are some of the key benefits we’ve identified.
Increases customer spend
It’s true. Research from Accenture found that members of customer loyalty programs spend an average of 12% to 18% more than other customers. That’s a substantial amount.
Delivers a positive brand experience
Brand experience is the combination of all the feelings your customers get when they interact with your company, whether that be excitement, comfort, nostalgia, or any other emotional response. When a customer gets rewarded just for making a purchase, following your social channels, or for simply having a birthday, it adds good feelings into the mix and boosts their overall impression of you. And that is something that can make you stand out in the market. Because who doesn’t want to feel good when they shop?
Makes customers more likely to refer a friend
You’ve probably experienced this in your own personal life. When you feel like you’re getting great rewards shopping with a particular brand, you want to share that with others. Research backs this up. According to one report, 70% of consumers are more likely to recommend a brand with a good loyalty program. And the more referrals you get, the less customer acquisition costs you’ll incur.
You might even want to consider building a referral incentive into your program to make customers that much more eager to tell their friends about your brand.
Increases customer touch points
A loyalty program gives you so many opportunities to communicate with your customers. You’ll want to let them know when they’ve accumulated enough points for a special offer, reached a new tier, or reached any other milestone in the program.
This gives your customers a reason to opt into marketing communications and helps you build robust lists. You’ll even be able to better target your marketing efforts based on data you receive from loyalty members’ purchase history and spending habits.
Collects valuable customer data
When a customer becomes a loyalty member, your business will gain insight into how they shop, their favorite products, and more. You can use this information in so many ways, from figuring out what products to stock up on to creating personalized offers to knowing the best time of day for sending out marketing emails.
Of course, you will need to take all the necessary steps around letting customers know what type of information you will be collecting and how it will be used, as well as implementing proper protocols to protect their data. If you’re unsure of any part of this process, this guide can help.
Looking at all the benefits, there’s no doubt a loyalty program can be beneficial to your business. But how do you get started? Well, there are a few different types of loyalty programs, and different tools and platforms to help you run them.
Let’s look at some information to help you compare them to see which is right for your business and customer base.
Types of loyalty programs
You likely have your own personal experience using a loyalty or rewards program, as 90% of businesses have some form of loyalty program. But you may not have thought too deeply about how they work.
Here’s a rundown of the four main types.
Points, points, points
Points-based programs are some of the most common types you’ll encounter in the market. This could be because they’re easy for customers to understand and they’re effective at enticing them to keep spending.
While they are easy to run once all the parameters are in place, there are a few things to consider with this type of program.
You’ll want to:
- Create your points to dollars equation. Decide how much a point will be worth so your program works for your business financially.
- Decide what the rewards will be. Maybe it’s free products. That gives customers a chance to try out products they wouldn’t normally buy and see if they like them enough to repurchase. Or maybe you opt to partner with organizations that align with your brand’s mission to offer exclusive experiences. The North Face’s XPLR Pass is a great example of this, offering access to sponsored adventure events.
- Make redemption attainable. If you make the threshold too high for anyone to actually cash in for your rewards, people will either give up or at the very least have a frustrating experience.
- Decide if you’ll allow instant redemption or have customers wait to redeem. At Quill, we definitely have a point of view on this. We allow every customer to redeem their points as soon as their very first order. If you want to save them up, that’s totally fine too. But we believe that choice should be up to you. Afterall, they’re your points.
If you haven’t checked out Quill Rewards yet, it’s a great place to start looking for inspiration on your own loyalty program. And while you’re there, why not start earning rewards on your own business supply orders?
Digital punch cards
The paper punch card might be the original loyalty program. Think the card you’d hand to a cashier to hole punch, usually at a sandwich or coffee shop. It’s a simple idea, but it works. However, relying on customers to carry around a physical card is hardly the best system. Today, there are companies like StampME and Loopy Loyalty that make the tried and true punch card program digital, which is a much more feasible alternative.
You’ll just want to ask yourself:
- How many until it’s free? 5? 9? Do the math on what makes sense based on your price point and margins.
- Are punch cards the right approach for my product or service? If you’re selling something customers only buy once in a while – like, say, a mattress – a punch card is probably not the best approach.
For retail businesses of all types, but especially restaurants, convenience shops, and other industries where customers could be purchasing several times a week, this might be just the thing to boost your retention and repeat sales.
Let customers level up with a tiered loyalty program
People love games. Give your customers the opportunity to unlock new levels of your program.
A few things you’ll want to decide:
- The levels and how to reach them. The easiest way to determine the levels is by dollars spent, but there are other actions you could factor in to give customers more ways to move up. The makeup brand e.l.f. calls their program Beauty Squad and moves members up through the tiers “Fan,” “Pro,” and “Icon” as they earn more points. How do they earn points? Shopping, of course, but also through engaging with the brand’s social channels in desired ways.
- What top tier members get. Exclusive pricing and discounts will encourage customers to keep moving up to that next level for sure. But this can also be an opportunity to offer beta versions of new services, new products you’re testing, and more.
However you handle the details, the key is to make higher-level members feel special, like they’re in an exclusive club.
Subscription or fee-based loyalty programs
Speaking of being in a club, the final type of loyalty program we want to look at is a fee-based program: the subscription model. Subscriptions have become very popular in recent years, and not just in the streaming world.
Example: Quill membership program
Retail subscriptions offer customers special added benefits every time they shop with you and encourage them to use your company as their one-stop-shop. At Quill, we offer a membership program that gives customers many exclusive benefits. Along with being a good example for your own loyalty program, it might also be a great option for your business to join. Contact us to learn more and get started.
A few key considerations for creating a subscription model for your company:
- Make sure the benefits outweigh the fees. If your customers are paying to be a part of the program, they need to know they’re getting enough in return for their monthly or annual cost. Think through what you can offer that makes it worth it for them.
- Customer education will go a long way. You can have an amazing subscription plan, but if your customers don’t know about it or don’t understand it, it won’t do you any good. Decide how you will educate customers on the program once you launch it in simple terms they can understand.
Subscriptions are a great way to bring in monthly recurring revenue for you and can be a big selling point for your customers.
Supporting and growing your business
Whatever type of loyalty program you land on, we believe it will positively impact your customer retention. As you build your business, Quill is here to support you. Count on us for all of your office and business supplies, delivered fast and free. And if you haven’t already explored it, be sure to check out our Rewards Center.