The benefits of a loyalty program for small business

by | Customer Loyalty

Loyalty programs can be a very valuable asset to small businesses. 

In this article, Stacey Lyons, Loyalty Director of Loyalty & Reward Co, explains what a loyalty program is, why people like being part of loyalty programs and the core benefits loyalty programs can bring to small businesses.

What is a loyalty program?

A loyalty program essentially recognises and rewards members for repeat transactions and commitment or loyalty to your business.

Generally, customers will join a loyalty program and accumulate value over time, which enables them to unlock desirable rewards and benefits which are not available to non-members.

There are so many different types of loyalty program models and rewards out there.
For example, a loyalty program might involve:

  • collecting stamps to unlock a free coffee
  • collecting frequent flyer points to unlock a free flight
  • collecting supermarket points to get $10 off your shop
  • receiving cashback, vouchers, coupons or discounts on every purchase made

Why do people like loyalty programs?

There are two key reasons why customers join and engage with loyalty programs:

Value

Customers join loyalty programs because of the value they stand to access from them. That is, the rewards and benefits offered by the program are desirable and relevant to them. 

Enjoyment

Customers enjoy interacting with businesses when they feel recognised and appropriately rewarded. They also enjoy feeling as though they ‘belong’, and are part of an exclusive group. These are all elements which a loyalty program delivers.

How can a loyalty program benefit small business?

Most loyalty programs seen as a ‘cost’ to the business, however if designed and modelled effectively, a loyalty program can deliver a number of core benefits to small business including:

Motivate higher spend and more frequent purchases

Loyalty programs can encourage members to spend more, more often, by making the engagement process more rewarding. Loyalty programs also work to encourage members to concentrate their spend within your business to maximise their rewards value. In addition, rewards create barriers to exit, giving members a reason not to move to a competitor and therefore directly contributing to the business’s bottom line.

Better understand members

Loyalty programs can play a useful role in better understanding members as individuals and tailoring communications, offers, products and services to more accurately meet their needs. 

Drive advocacy

Loyalty programs can help turn your best customers into your promoters by delighting and rewarding them above their expectations.

Build a marketing database

Loyalty programs are the best way for you to build a customer database, which in the age of digital marketing (and with cookies being banned by Google Chrome from 2022) is one of the most valuable assets a small business can possess, as it increases marketing effectiveness while reducing advertising costs.

Loyalty programs can help differentiate you from your competitors and ensure your best customers concentrate spend with your business in order to maximise the value they get from your program – this often becomes a game to them!

Loyalty programs can deliver a number of core benefits to small businesses by creating longterm customers and overall increase how much money people spend in each transaction.

If you weren’t seriously considering a loyalty program before, we hope you are now.

If you need help with the design, technology or communications approach, we recommend reading the book Loyalty Programs: The Complete Guide as a next step. This is the most comprehensive book on loyalty available and uses real-world case studies from loyalty programs operating around the world to help explain the concepts detailed throughout.

Up Next: Stacey gets specific about what loyalty means to your business and how you can go about creating a loyalty program.


Stacey is an expert loyalty consultant with experience in loyalty, digital marketing, eCommerce, social media and customer service.
Her role as the Loyalty Director of Loyalty & Reward Co involves designing, implementing and operating best-practice loyalty programs for clients. This includes exploring loyalty frameworks, applying loyalty psychology, developing and optimising member lifecycle communications approaches and sourcing the right platform vendors to suit each client’s needs.

Stacey co-created the book Loyalty Programs: The Complete Guide, the most comprehensive book on loyalty program theory and practice available.
Currently, her personal favourite loyalty program is Mecca Beauty Loop.
Connect with Stacey via LinkedIn.

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