06/ 24/ 2005
Once only accessible to airlines, hotels and large grocery stores, customer loyalty programs are now in reach for even the smallest business. Customer loyalty programs are an increasingly popular way to boost customer retention while simultaneously providing you with a wealth of information about your customers and their purchasing patterns.
"The goal is to reduce customer loss and increase sales," says Brent Harms, founder and CEO of Tecmark (www.loyaltymarketing.com), a St. Paul, Minn.-based loyalty marketing firm. "If you can learn more about your customers, you can serve them better—and reward them better."
In general, customer loyalty programs offer discounts to members (often coupled with a nominal upfront cost) or they offer points for each transaction made. At the end of the year, for example, customers will receive rewards based on the amount of points they accrued over the year.
Customer loyalty programs are also a great way to compete with your big-box competitors.
"If you're up against a big business, price point is a very hard thing to compete on," Harms says. "So if you can get a customer to really value the special services or the special recognition through rewards, it will get their eye off the price and on customer experience and service."
So how do you know if a customer loyalty program is right for you? Do your homework, says Harms. Before starting an incentives program, make sure you know that your customers would be receptive to it. "What we found is that the programs that work the best are truly unique to the business' customer situation and industry," says Harms.
Harms also recommends talking to your customers and employees, or even setting up a focus group. "As people brainstorm, the concept comes into light," Harms says. "That works a lot better than saying, 'Here's $1,000, come back to me with a customer loyalty program.'"
Once you've set up a customer loyalty program, evaluate the performance of the program about every six months. That way you can make sure it's helping your business more than hurting your bottom line. With new customers, Tecmark sits down with new clients and sets benchmarks for the program, including return on investment, average number of times customers make a purchase and average amount they spend. While setting benchmarks and evaluating the program may seem like a pain, it's worth it, says Harms. "It's good for business—I'm a big believer that you have to evolve over time to keep things fresh and interesting for the customer. Plus, it's very easy to evaluate the results of a loyalty program."
If you're an NFIB member, setting up a customer loyalty program couldn't be easier. Through your membership in NFIB, you have access to a customer loyalty program through Solveras Payment Systems.
