Risk in Store
Customer Loyalty Programs: Yes or No?

Intuit reports that 75 percent of consumers have at least one customer loyalty card in their wallets. With so many consumers buying in to these strategies, are customer loyalty programs something your business should consider?

That's a tough question to answer because it largely depends on a retailer's business model. These programs are right for some retailers, but not all.

With that said, loyalty programs can offer some major benefits to small-business owners. Programs can…

  • Encourage repeat customers.
  • Engage your clientele.
  • Identify spending habits.

Let's take a deeper look at how these programs work, what you'll need to set one up, and how your business can benefit.

6 Benefits of Customer Loyalty Programs for Retailers

As a small-business owner and retailer, you're always looking for an edge over the store down the street or competitors online. When done right, customer loyalty programs can give your business a boost. Here are six benefits customer loyalty programs offer retailers:

Benefit #1

Sometimes it's easier to grow your business with existing customers.

While all businesses need to attract new customers to survive, you shouldn't forget about your existing customers. Selling more to your current clientele is a great way to increase your revenue without having to spend much effort.

Benefit #2

You can keep up with the competition.

A BIA/Kelsey study found that small businesses have increasingly offered these programs, with 38 percent now offering one. You may need to offer a program simply to stay competitive.

Benefit #3

Customer loyalty programs are good marketing.

Customers like knowing that you appreciate their business and will reward them for their loyalty. Having your rewards card in their wallet is great marketing: your customers are literally carrying your logo with them wherever they go.

Benefit #4

It's a great way to get data about your customers.

With mobile apps, modern POS systems, and other new technology, it's easier for storeowners to collect data about their customers' purchases. A customer loyalty program can give you more information about what items bring customers back to your store.

Benefit #5

They encourage more spending.

By offering a buy "10 get one free" or "spend $100 and get 10 percent off" deal, your store's loyalty program can encourage customers to spend more money. Customers love to feel like they're getting a great deal. Paradoxically, they are willing to spend more if they know it means they're getting a discount. (Check out our article "A New Retailer's Guide to Markdowns, Sales, and Discounts" for more sales tips.)

Benefit #6

New customers might be more likely to stick with you.

Say your run a flower shop. Your business ebbs and flows with the holidays, but if you offer a loyalty program you'll encourage a new customer who buys a dozen Valentine's Day roses to return when it comes time for Mother's Day, birthdays, and other occasions. New customers may be more likely to stick with you if they know you reward repeat business.

The Costs and Benefits of Running a Customer Loyalty Program

ZDNet shares a list of customer loyalty apps that can help small businesses retain customers and track their spending habits. Many small businesses rely on punch cards to track customer loyalty programs, but technology is getting cheaper and more cost-effective.

How much will a digital customer loyalty program cost? Small Biz Trends reports on the mobile app Huzzah that aims to help small businesses with fewer than 10 employees set up a modern customer loyalty program. Huzzah's service costs around $70 to $140 a month, so while it isn't cheap, it isn't too costly for a small-business owner.

Research shows that these reward programs can pay off. A joint BIA/Kelsey and Manta study also found that more than 60 percent of small-business owners generate the majority of their annual revenue from repeat customers rather than new ones. It's these customers that can help small-business owners stay profitable, even as larger chains and online retailers continue to grow.

While customer loyalty programs aren't right for every business, they can represent a great return on investment as they help grow your customer base.

Customer Rating 4.9 out of 5
Read Customer Reviews

Grab-n-Go Information

Retail Risk eBook
Data Breaches & Retail: A Guide for Small-Business Owners
Browse eBook
Sample certificates
See a sample Certificate of Liability Insurance, the proof of coverage you need for most contracts.
View Sample
Sample Quotes & Cost Estimates
See what insurance really costs: actual quotes by policy & specialty.
Get Estimates
Ask A Question
Submit your questions about small business insurance and get answers from our experts.
Read Answers