In many markets around the world, loyalty programs are a tried and tested method to retain old customers and give new customers an added incentive to consider your business. In the Indian market, however, they are yet to take hold as a standard, or widely pursued, practice.
This presents an instant opportunity for savvy small business operators to set themselves apart from the competition. Let’s consider just what makes a loyalty program potentially such a great initiative to take, for small businesses.
What is a loyalty program?
A loyalty program is a program you have adopted, as a standard and ongoing practice, which rewards customers for preferring you to your competition. It takes note of customers that repeatedly chose your business and offers them special deal and terms that continue to become more favourable to the customer in direct proportion to the frequency and size of the business they bring to you.
Benefits of a loyalty program
• You may let your customers know in so many words that you value their business. You could have well trained, polite staff that always take the time to make your customers feel like they come first, but nothing makes a customer feel as appreciated and valued as a special offer or perk that is specifically taking into account their continued patronage of your business.
• In this day and age, there is both widespread consumer awareness and many different avenues for your competition to try and woo your customers. It pays to have something beyond mere words to influence your clients to bring their business back to you. Creating value for your customers, that recognises their loyalty, is a great way to retain their business.
• Loyalty program members have a greater sense of connection with your business, because of the tangible ways you are showing your appreciation, and the feeling of being singled out for special benefits. They are much more likely than usual to be supportive of customer satisfaction surveys and other initiatives to gather feedback.
• The program, being incentive based, is likely to be a great promotional tool for your business.
Things to consider when putting a loyalty program together
• There a two ways in which loyalty programs have often been operated. One by seeking to involve the largest number of customers and the other by keeping the loyalty program selective and for an elite clientele. Both approaches have benefits and it is up to you to reflect on what would suit your business type.
If you chose to target a large number of customers, don’t get tempted by trying to woo them too aggressively. There’s a fine line between bringing a benefit to your customer’s notice and being over bearing. If you chose to keep your loyalty program more exclusive, extend invites to the chosen few and make it clear that they are being approached because you value your relationship with them.
• Many loyalty programs issue membership cards. While reinforcing the feeling of being treated preferentially, these cards also serve as a reminder to the customer that with a few more purchases they become eligible for another level of offer. This can be a strong motivation for the customer to direct more of their business to your firm.
• Regular communications through emails or physical mailouts can remind the customer that they are part of an elite group. Take care, however, that these communications contain useful information that benefits the customer. You would be greatly reducing the benefit of such a program to your business if you came across as being too eager or aggressive about seeking their business.
Some ideas on structuring the rewards offered
• Offering customers a free purchase of a certain value after a set number or volume of purchases is a tried and tested offer. This can range from a free business shirt with every suit purchased to a free cup of coffee for every six purchased. You will need to do a cost benefit analysis suited to your particular business as well as considering if the offer you come up with sounds tempting, if you put yourself in the customer’s shoes.
• Discounts are another option. You could offer a percentage discount on additional purchases once the customer has exceeded a predetermined expenditure limit. This is a strong motivation for many customers to reach the limit you have set and also to try products that they may not have considered your business for in the past.
• Reinforce the feeling of being a privileged few among the customers who are part of the program. You can achieve this by having regular raffles, discounts and other surprises for the members of the program. It’s also a great idea to reinforce this feeling of exclusivity on each individual purchase. Members of your loyalty program could perhaps enjoy quicker and more streamlined payment options, a consolidated and discounted bill etc. All these measures serve to remind the customer of the benefit of bringing their business to you.