Customer loyalty is immensely important to small businesses that are building their brand. Acquiring new customers is more costly than retaining old ones, and having insight into what your regular customers like about your business is one of the keys to scaling. 

One way to encourage customer loyalty is to build a robust customer loyalty program. These days, loyalty programs are often built in to point of sale (POS) systems and customer relationship management software, making them more technologically savvy. As a result, they deliver tons of data that you can use to make crucial decisions about your business. 

There are lots of options on the market for a good loyalty program. How do you decide which makes sense for you? Review the following attributes of good (and bad) loyalty programs to decide the best loyalty program for your business. 

What kind of customer loyalty programs are there? 

There are a couple of ways to think about this question. One is, how will customers actually access your rewards program? Will they carry a rewards card with them that they present every time they shop with you, or will you enter their information into a digital database that you can access across all your channels? The other consideration is how you’ll actually reward your customers for their loyalty. 

Essentially, you need to consider both the front-end of your loyalty program (how it appears to customers) and the back-end (how you’ll disburse their rewards).

Let’s start with the front-end side of the equation, as what you’ll choose will depend on the kind of investment you’re willing to make. Your options include:

Punch cards

This was the standard for a long time—you give a card to customers, and punch it, stamp it, or otherwise mark it each time they make a purchase. It’s an outdated method for a few reasons, one of which is that it gives you zero insight into that customer’s purchase history (not to mention, it’s a hassle for your customers). 

Scannable membership cards

You know these types of cards from the grocery store or pharmacy: Little keyring tags with a barcode tied to a unique customer profile. This is a step up from punch cards as there is two-way visibility into the customer’s habits; as a physical item that people need to carry with them, it still smacks of the old-school. 

Email

This is one way to include your customers in a rewards program without asking them to carry a card in their wallet or tag on their keys: Take their email in order to build a profile, and you keep track of their purchase history as well as send them additional updates about opportunities, like sales or new items in stock, through email marketing. 

Mobile apps

A customized mobile app that you create with the help of a third party, or access through your POS system (such as Square) allows you to collect and organize customer data so both sides have access to the customer’s history and reward status. 

From here, it’s up to you to structure your loyalty program so it makes the most sense for your business. 

• Points: Whether you consider one hole punch one point, or dole out different points for different purchase amounts, this is a straightforward reward system that is easy for customers to understand. It encourages them to make lots of smaller purchases in a short time frame. 
• Tiers: Maybe you don’t want to reward every customer the same way, and instead want to push people to spend more in order to get more. A tiered system provides rewards and benefits at different “levels” of spending, so those who spend big, save big. 
• Fee-based: If a customer is willing to pay a certain amount of money—a yearly or monthly membership fee—just to be included in your program, you know you have an engaged customer that will respond well to marketing efforts.   

Most small businesses will want a points- or tiers-based program, which don’t have barriers to entry. More and more are gravitating towards email or mobile app formats, as these integrate with their existing customer service solutions and require minimal effort from the customer to continue or maintain. 

Now that we know generally what we want out of a loyalty program, let’s examine what attributes we do—and don’t—want in the program we choose.  

The attributes of the best loyalty programs

With so many customer loyalty programs now on the market, it’s important that you select one that not only meets your needs, but can grow with you. Don’t settle for loyalty programs that can’t offer most, if not all, of the following: 

Customizable rewards

You don’t want a one-size fits all program that rewards everyone the same way. Some programs let customers pick the rewards that they want, trading in a few points for a small reward now or saving up to redeem something larger later. 

Omni-channel experience

Your program should work across all channels, particularly if you sell both in-store and online. A customer that shops with you often on your ecommerce site and then visits your brick-and-mortar location shouldn’t miss out on rewards just because they’re interacting with you in a different setting. 

Segmentation

Once you have a database of loyal customers, your program should allow you to group them into different categories (known as segmenting). This will help you promote to each segment more effectively. For example, a group of VIP customers should receive more frequent communications on promotions and sales than those who visit occasionally. 

Integration with existing tools

You don’t want a program that can’t pull information from or push information to your existing customer relationship solutions. Otherwise, all of your information will be siloed and essentially useless in some situations. Look into whether your existing CRM has a customer loyalty program—or, if you’re interested in an all-new system, look into which ones allow you to combine loyalty with email marketing, point of sale, and other software. 

Easy to use

Younger generations may shun the punch cards and key tags of the past, while older generations may not feel comfortable sharing their information or using an app every time they’re making a purchase. Since the future is leaning towards the latter option, it’s important not just to encourage customers with a reward just for signing up (i.e., 10% off their purchase for joining) but to use a program that makes the process as easy as possible. 

Offers rewards beyond monetary perks

Great loyalty programs help you build an emotional bond with your customers by giving them rewards that go beyond “a discount on your next purchase.” 

Whether it’s the ability to donate points to a favorite cause, give gifts on anniversaries or birthdays, provide updates on new items in stock, or offer proactive customer service that seeks to address any issues with past orders, customer loyalty programs help align the business with the values of the customer. It does so with automated personalized interactions, which take place without you, the business owner, lifting a finger. 

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The days of handing a customer a business card, marking off each time they order a coffee, and calling that a “rewards program” are largely over. There are simply too many savvy third-party loyalty programs that offer advanced capabilities for you to waste your time with outdated tactics any longer. A punch card may seem simple to implement, but it won’t offer the same opportunities to grow your business. 

Whether you’re looking to increase retention, personalize your marketing efforts, and/or build a bond with your best customers, a customer loyalty program is an all-in-one solution that is usually worth the investment. Start your search for one that fits your budget and needs today.