In a competitive landscape, small business owners are all-too-familiar with the difficulties of maintaining visibility against an array of larger competitors. Findings in the City National Small Business Report show that roughly 32 percent of business owners consider competition their greatest challenge in pursuing growth.
Maintaining your existing client base while extending your market appeal to previously untapped client segments can help your business rise to that challenge, while also potentially driving revenue growth. Customer loyalty programs can help to achieve those dual goals - if you put them to the best possible use.
Using a Loyalty Program to Enable Your Business to Compete
Loyalty programs operate on a simple premise — rewarding customers for choosing your business instead of another. Sarah Baker, marketing coordinator at Penn Station East Coast Subs, a restaurant chain headquartered in Milford, Ohio, said loyalty programs create a win-win situation for the customer and the business.
"Loyalty programs not only reward loyal customers, but also often create increased visits to your business," Baker said.
If you own a restaurant, your reputation for excellent food and service may get customers in the door - and loyalty programs can help keep them coming back. That can increase revenues and create buzz around your business.
"Loyal customers not only dine more frequently, but they're also more prone to advocate for your brand," Baker said.
Loyalty programs aren't limited to a specific industry. After an initially slow start, Shawn Kunkler, a San Francisco-based real estate agent and Realtor®, said he was able to close $10 million in transactions during an 18-month period thanks largely to the loyalty program he developed.
"The No. 1 rule to remember about relationships is that they're a place to give, not take," Kunkler said. "If you're really trying to do right by your clients, they'll remember that."
Kunkler said people may not always recall the details of a specific transaction with your business, but they'll remember how you made them feel. Emphasizing relationships in your loyalty program can bond current clients to you, while attracting more referrals from those clients.
In developing a loyalty program for your business, there are three specific things you can do to maximize its potential.
Start With Your Target Audience
When shaping a loyalty program, ask what your current clients want and what motivates them to frequent your business.
Baker said one of the biggest potential pitfalls is not doing enough research on what's important to your customers. Without that insight, you may steer your program in a direction that doesn't fit what they need and expect.
In the case of Penn Station, Baker said the majority of the restaurant's customer base is driven by a craving for its products. The company designed its loyalty program to appeal to that drive, while also reaching their large audience of regular customers. Baker responded to these needs by including a rewards feature within the restaurant's mobile app so customers would always have easy access to it.
"Through the Penn Station app, we're able to give them reminders about special offers, monthly specials and double-points days," Baker said. "They earn rewards for food they love. And the more rewards, the more cravings we can cure."
Client needs and expectations are different for every business: For instance, Kunkler took a different approach when developing his loyalty program. Since his business focuses heavily on personal relationships, rather than reaching a mass audience, he designed his program to capitalize on fostering stronger relationships with his best clients.
He uses tactics such as a gifting program, regular "check-in" phone calls and handwritten notes to boost loyalty. Those efforts demonstrate to his clients that his primary goal is to help them - and they have paid off by generating a significant number of referrals to his real estate business.
"Zig when others zag," Kunkler said. "Approach things differently and share something of value."
Focus on Providing Value
Value is king in a customer loyalty program, and it's important to make that value as transparent as possible. Kunkler said this is where a personal touch is indispensable.
"Be personal and forget about selling them anything," he said. "People love to buy but hate to be sold," so your loyalty program should avoid an obvious sales pitch.
Rather than focusing on selling his services, Kunkler spends time gaining a deep understanding of his clients and their needs. By doing so, he is able to identify ways he can offer them better service.
"Speaking your client's language is the quickest way to knowing what they want, need and more importantly, what keeps them up at night," Kunkler said. "Solve that and the brand will generate good cheer and in turn, loyalty."
Your loyalty program's "user experience" — how difficult or easy it is to use — can determine how successful it will be. In creating her loyalty program, Baker paid particular attention to the functionality and ease of use of the feature within her restaurant's app.
"When it's time to build the platform, it's important to select a vendor that will be able to grow with your company as you expand the program or integrate other features," Baker said. "It must be easy to manage, track and grow - as well as user-friendly."
Her app made it possible for customers to easily figure out how to earn and use restaurant rewards, ensuring that the loyalty program was adapted by a majority of her customers. No successful loyalty program involves difficulty of use or becomes time-consuming for the client.
Create a System for Measuring Results
Once you have a loyalty program established, don't forget to track results. Tracking allows you to pinpoint opportunities to fine-tune your program to increase its efficiency and effectiveness.
Baker said Penn Station consistently tracks the dates when notifications are sent to loyalty program members, what the messages are and any corresponding spike in customer use. With established programs, she said it's important to regularly reevaluate whether you need to make any adjustments to your signup offers or the spending increments needed to earn rewards.
If your program isn't attracting new customers at the rate you anticipated, you may consider making your initial signup offer more enticing. Baker said you should also measure the drop-off rate over time from initial signup to regular use: "These are all factors that can show us the successes or learning areas to enhance our program."
Kunkler set daily, weekly and monthly goals for increasing client satisfaction and attracting referrals and then he monitored how his loyalty program contributed to achieving those goals.
Whether you're using technology to create an automated loyalty program like Penn Station, or you're developing a personalized strategy that fits your business, acknowledging your best customers by rewarding them for choosing your brand is likely to help improve customer retention. As their satisfaction grows through the loyalty program, they'll also be more likely to recommend your products and services to others, giving your company a competitive advantage distinct from other brands. These efforts can help your company maintain and attract customers even in a highly competitive market.