In order to attract new customers and keep them coming back, entrepreneurs and small business owners in the retail industry should consider implementing a rewards system. According to the 2013 COLLOQUY Loyalty Census, the number of loyalty-program memberships in the United States jumped to 2.65 billion in 2012 from 2.09 billion in 2010, a 26.7 percent increase, and the average number of loyalty programs per U.S. household has grown to 21.9. Retail businesses—from bookstores to apparel shops— dominated in loyalty program participation at 39 percent.
Most programs focus on offering frequent customers the chance to earn member discounts and cash-off rewards for future purchases. While some small businesses worry about the expense of offering rewards like discounts and free products, an infographic by payment solutions company Merchant Warehouse shows that loyalty programs can increase a brand’s market share by 20 percent and increase customer acquisition by 10 percent. Also, according to Merchant Warehouse, repeat visits by customers increase revenue for small businesses because returning customers spend an average of 67 percent more than first-time customers, and it costs a business six to seven times more to acquire a new customer than retain an existing one.
Here is a look at some popular rewards system options that may work for your retail business:
· Punch Cards: Traditional paper punch cards encourage customers to frequent the business in order to earn a free or discounted item, such as buy 10 get one free, for example. They are an inexpensive way for businesses to entice customers to return, but this method doesn’t allow businesses to gather as much useful information on their customers.
· Points for Purchase: With a points-for-purchase program, customers earn points based on how much they spend each visit. These points can then be applied as credit for future purchases. This type of program is also an inexpensive way to keep customers coming back, and promotions can be targeted in a number of ways, but it also doesn’t allow businesses to gather much customer information.
· Direct Mailers: When a customer signs up for a special event-related loyalty program, personal information is required that allows the business to reach out using direct mail, email or SMS text message with a discount or incentive based on an important life event. Popular events to target include birthdays, anniversaries, the birth of a child or a move to a new town. Direct mailers can be expensive, as postage costs continue to rise, but they allow businesses to obtain a lot of useful personal information about their customers.
· Card-Linked Offers: Credit card-linked offers can offer many benefits to both customers and the business. With this type of reward program, businesses partner with a credit card company and customers can receive discounts or coupons simply by using that particular credit card to pay for their purchases. Businesses can better understand their customers through their transaction history, but credit card companies often charge merchants a fee for the relationship.
· Referral Discounts: Some retailers and small businesses offer customers the opportunity to receive discounts on future purchases every time they refer someone new to the business, which helps attract new customers who might not have otherwise visited the business. The cost of this loyalty reward depends on the incentive offered, but the hope is that the new customer will make a purchase and continue to visit the store, therefore, making the one-time discount worthwhile.
· Digital programs: Digital loyalty platforms, like Belly and SpotOn allow customers to check-in every time they enter a business on an in-store tablet and earn points, which can then be redeemed for rewards at participating establishments. These platforms are convenient for tech-savvy customers and easy for businesses to track customers, but it can be more costly than traditional loyalty program methods, like punch cards.
There are numerous loyalty reward options available today, and given the obvious consumer interest in these programs, offering a rewards system is smart decision. It’s a great way to build a solid relationship with customers, and a loyal clientele can be the most valuable reward of all for a small business.