Loyalty programs are nothing new to the large, recognized brands of the world, but lately small firms are discovering the wide range of benefits that result from providing their customers with a rewards system.
While many small companies remain more focused on growing their customer base than improving services to their existing clients, there are 5 important reasons why a well-structured loyalty program is a key small business strategy, now more than ever.
1. It’s Easier to Retain Existing Customers Than it is to Find New Ones
Keeping existing customers is exponentially easier, less expensive and more advantageous than finding new ones. In fact, increasing retention rates by 5 percent has been shown to increase profits anywhere from 25 to 95 percent. Furthermore, a recent study from Simon Fraser University clearly concluded that attracting a new customer costs 5 times more than keeping existing ones.
2. Repeat Customers Spend More Money
A recent survey of 1,000 small businesses in Canada reveals that 61 percent receive half of their annual revenues from repeat customers, and that those loyal customers spend 67 percent more than new ones. As a result, small business owners should be shifting their focus away from customer acquisition and towards customer retention.
3. Competition is Fierce
Retaining customers is a tough feat for any small or medium-sized business owner in today’s environment, especially for those competing with brands that have more locations, resources and money to spend on marketing. In order for small firms to compete at their level it is vital they at least remain on par, if not exceed the “perks” offered by their competition. One of the simplest ways for small businesses to do so is through a rewards program.
4. Canadians Love Reward Programs
As of 2015, the average Canadian has 6.4 loyalty rewards cards in their wallet, and 63 percent say they are more likely to engage with a brand that has a loyalty program. Furthermore, a vast majority of Canadians will shop strategically to earn points.
5. Loyalty Programs Don’t Need to Be Expensive
Loyalty rewards programs, especially those designed with the small business owner in mind, tend to be much more affordable and effective than other marketing strategies. Though punch cards are common for small companies, many consumers prefer a mobile-based solution to wasting more of their precious wallet space. Fortunately there are a wide variety of cheap, digital solutions that can increase customer retention while providing valuable customer insights for a low monthly cost. In fact, many small business loyalty programs offer a 30-day free trial.
Need to free up capital to invest in a loyalty program? A proven method for small businesses to save on health and dental expenses is a Health Spending Account.