Build a loyalty program that actually works for your small businesses
Customer retention is important for nearly every business in every industry.
In fact, acquiring a new customer can cost anywhere from 5 to 25 times more than retaining existing customers. Building a base of repeat customers is particularly important for small businesses. A study by BIA Kelsey and Manta.com found that 61% of small business owners surveyed said that more than half of their revenue came from repeat customers.
Furthermore, a 5% increase in customer retention can result in a 25% or more increase in profits. This is because repeat customers spend more than new customers – a study found that repeat customers spend 67% more than new customers.
How can you retain customers? One way is to implement a customer loyalty program. When you think of a customer loyalty program, you might think of huge corporations like Starbucks and Amazon. But customer loyalty programs aren’t unattainable for small businesses – below are some ways to make customer loyalty programs work for you and your customers.
Choose which behaviors are most important
Before deciding how you will reward customers, you need to determine which customer behaviors you want to reward. Though the most obvious choice is rewarding based on transactions, you can also reward non-transactional behaviors.
These other loyalty behaviors could be:
- leaving a review on Google or Yelp
- liking your Facebook page
- following you on Twitter
- subscribing to email updates
- sharing product reviews on their social media pages
- referring friends, family members or colleagues
- attending customer events
What is the best way to measure loyalty for your business? What are the most valuable customer behaviors for your business?
Customers are willing to change their behavior to participate in loyalty programs. Research shows that 69% of customers will break their normal habits to take advantage of loyalty programs that offer real value. This leads us to our next tip in building a customer loyalty program…
Add real value
If your customer loyalty program doesn’t offer real value, or is too confusing to navigate, people won’t use it. For example, 32% of consumers surveyed about tiered loyalty systems said they didn’t even know what tier they qualified for.
Choosing valuable rewards that aren’t going to end up losing you money is a delicate balance. Giant corporations like Amazon can afford to take a loss on their Prime loyalty program, but small businesses don’t have that luxury.
Rewards for customers should be:
- specific and well-defined so customers can easily understand the benefits of participating in your loyalty program
- useful or valuable
- easy to redeem
A great example of a simple customer loyalty program is a punch card you might get at a restaurant – buy 10 sandwiches and the next one is free.
Third-party companies are making it easy for small businesses to build more sophisticated loyalty programs that can even be tracked by a mobile application on the customer’s phone.
The only way to see if your loyalty program is actually working is to put tracking in place to measure results.
Some of the metrics that you could measure are:
- number of purchases
- total amount spent
- frequency of purchases (once per week, once every two months, etc.)
- average transaction amount
- sales via referrals
- positive online reviews
- website traffic
- social media engagement (likes, retweets, etc.)
- lifetime customer value
Tracking these metrics will help you see if your customer loyalty program is really driving customer loyalty. If these metrics aren’t improving, rethink how you’re capturing and rewarding customer loyalty behaviors.
Becoming a member of the Chamber is like joining a giant customer loyalty program. We offer benefits for every kind of business in the Nashville area – click here to learn more about membership.