A new customer is good for business, but it is repeat customers who make the business a success. Once a client has purchased your product, what strategies do you have in place to promote customer retention? One strategy to consider is a customer loyalty program to reward returning customers every time they make a purchase.
Many small business owners wonder if a loyalty program is worth the financial and time investment; however, it costs companies seven times more to acquire a new customer than to retain an existing one. In fact, 51 percent of the top 100 retailers in the US have a type of customer loyalty program. The retailers who offered rewards programs earned two to three times as much annually as the retailers who didn’t have a loyalty program in place. Based on the research, loyalty programs are highly effective.
Types of Loyalty Programs
There are different ways to create a loyalty program, and the one that’s right for you depends on your specific industry.
A points system is the most common type of customer loyalty program. Credit card companies are famous for offering reward points to customers, but many other businesses do so as well, such as Bloomingdale’s, Walgreens, Gilt, Best Buy, and more. This is done by offering repeat customers points for money spent. The main caveat to this type of loyalty program is not to make the conversion difficult or hard to understand, which many companies inadvertently do, or place strict limits on point redemptions, such as blackout dates. A simple and efficient program would offer 1 point for every $1 spent.
It can be advantageous to offer points not just for purchases, but also to encourage customers to market your business. You can reward clients who share your site’s link, write a review on a social media site, bring in new customers or check into your business online.
Member Only Cards
Another way to promote customer retention is to utilize member only cards that give access to exclusive discounts and promotions. CVS offers a free ExtraCare card that tracks customers’ purchases to suggest items based on their shopping history, as well as offer store coupons and other membership rewards.
Customers need to provide contact information to receive a member only card, which allows the brand to communicate with them via coupons, announcements and sales, thereby actively encouraging customer retention.
A disadvantage is that some individuals may forget or lose their card or coupons, which is why many retailers have created apps for members. By setting up an account on a store’s app, customers can access exclusive coupons and promotions on their phone without having to keep track of a physical card.
Punch cards are good options for businesses that offer inexpensive products or services that are needed often. A customer is rewarded with a free item or another perk after receiving all the punches on the card. Businesses that can benefit from punch cards are carwashes, hair salons, fast food restaurants, children’s indoor playgrounds, etc.
The problem with punch cards is that they are small and made out of paper, so they often get lost or damaged. Instead of giving out punch cards, consider keeping track of your customers’ purchases on your end by creating a digital punch card through a customer retention management (CRM) system. This software allows business owners to enter and track clients’ information and alert them about their transactions and points through text messages.
There are many ways business owners can increase customer retention with loyalty programs. However, setting up and advertising these rewards is a financial investment not many small business owners can afford. A small business loan from IOU Financial can help in purchasing the required software and other materials to increase sales with a loyalty program.