Customer Loyalty Rewards Your Bottom Line

Customer loyalty programs have been around for several decades, and today, airlines, hotels, car rental agencies, and most retailers have one.

(Photo credit: enriqueburgosgarcia)

Many business owners wonder just how valuable a rewards program is. Consider these findings from The Center for Retail Management at Northwestern University:

  • Only about 12% to 15% of consumers are loyal to one single retailer.
  • This small group of 12% to 15% of shoppers accounts on average for 55% to 70% of the company sales.

This number is even higher among food retailers, where as much as 95% of their sales are from customers that are a member of a loyalty program.

These numbers tell us a lot about the value of customer loyalty. Customers who shop at primarily one grocery store for example tend to cultivate a routine of going back week after week. After a while, they feel comfortable shopping there; they know where to find everything, they know how to find the coupons and weekly specials, and they love building up points on their rewards card.

A customer loyalty program can even help overcome a price disadvantage. Here is a quick case study of two grocery retailers in Minnesota; Cub Foods and Walmart. Walmart’s commercials claim to have lower prices on the same items, and show a consumer saving lots of money when shopping there. But what the commercial fails to mention are the weekly specials Cub runs, and its reward program, which gives shoppers a $.10 per gallon discount at a local gas station chain for every $50 spent.

When all these factors are considered, many regular Cub shoppers find the potential savings at Walmart inconsequential and not worth switching, mainly for two reasons; they know where everything is at Cub (in other words, they are comfortable there), and the rewards program is something that benefits everyone with a car, which makes up over 95% of those who shop there.

While over 80% of retailers have a customer rewards program in place, the percentage is far less in many other industries. Small businesses in particular find such programs logistically challenging and often fail to see the value of setting one up.

Clearly, loyalty programs in many businesses could not work the same way as a major retailer, but that does not mean you cannot find a way to reward a repeat customer or client. In small businesses, it may take a bit more creativity, but it can certainly be done. Here are some examples of ways to institute rewards in just a few different business categories:

  • Restaurants: Track the number of visits by having the customer enter their mobile phone through a mobile app or website. The initial cost of setup would be an investment, but now you would be able to automatically trigger rewards (for example a free meal after 10 visits), AND you would have their mobile number, so you can text them occasionally with special offers to keep them visiting more often. This method can be used for other small business retailers such as pizza parlors, hair salons, flower shops, auto mechanics, etc.
  • Professional Services (legal, accounting, insurance, real estate): Professional service businesses are built on deeper personal relationships with clients. For this reason, loyalty programs will need to be administered a bit differently. Instead of tracking money spent or number of visits, it may work better to set up a client referral reward program. Some insurance companies also offer safe driving and multi-line discounts, so naturally insurance agents will want to heavily promote what the company they represent has to offer.
  • Lawn Care/Landscaping: In the lawn care business, the package discount works best. For example, buy 4 lawn treatments, receive 1 free. It is also possible to offer rewards based on customer referrals, offering a discount on lawn mowing/treatment for each customer referred. This approach also works well for electricians, plumbers, and HVAC companies.

In today’s digital age, there are many ways to get creative with a loyalty program. Just something as simple as like us on Facebook and receive 15% off your next service can work for just about any small business. And once they have “liked” your Facebook page, you can keep in continual contact with them by providing useful information and making them aware of special offers.

The bottom line is that customer loyalty/retention programs are one of the best (and most overlooked) ways to grow a small business. The main reason is that retaining an existing customer is far less costly than acquiring a new one. This does not mean we stop trying to acquire new customers, but with today’s technology, virtually any business can easily implement something to keep more of their existing customers/clients coming back repeatedly. Contact us today and let one of our professionals help you find what would work best for your business.

Enhanced by Zemanta
Scroll to Top