Can loyalty programmes work for small businesses?

by Harry Welby-Cooke from ActionCoach

loyalty programmes small business
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Many large companies in South Africa have implemented successful loyalty programmes – from Pick n Pay’s Smart Shopper Card to Discovery’s Vitality programme, airlines offering loyalty miles and credit card programmes like FNB’s e-Bucks. But can loyalty programmes work for small businesses?

My answer is yes, ensuring the business owner understands that the programme is only effective if it is easy-to-use, brings in more business or allows the business to harvest important customer data. It is important to know what a business wants, be it repeat business, referrals, a product testing mechanism or building a strategic alliance with another business.

For large companies, the true value of a loyalty programme lies in the potential to change customer behaviour. For example, Vitality members are incentivised by a sliding scale of discounts, increasing as they do tasks or meet goals set for them by the programme. In this way, members go out of their way to check all the boxes, incentivised by the bonuses they are promised by the programme.

For small businesses, unless they are planning on implementing some sort of customer relationship management (CRM) database, the main benefits of a loyalty programme is more likely to increase business and customer satisfaction. There’s nothing stopping a small organisation from data mining though, so if that’s your aim, make sure your programme is designed to collect the customer data you need.

Examples of effective small business strategies

A classic example of an effective small business loyalty programme is a carwash, where you get your 10th wash free. This is successful because it provides the customer with an incentive to do repeat business. It also does not give away important margins that could be spent elsewhere. It is also  easy to manage for both the business and the customer. When a loyalty programme becomes overly complicated, it not only puts the customer off, but also starts to cost your business administration time. It also opens you up to brand damage if the programme is poorly managed.

Another strategy that many small businesses use is to partner with another business – often a business that targets similar clients but isn’t a direct competitor. A good example would be a partnership between a dietician and a personal trainer. Customers who complete a certain number of sessions with one could be offered a free consultation with the other. The benefits are mutual, as each gets increased referrals, happier customers and even the option to share a database and marketing costs.

If you’re looking to test new products or services, a loyalty programme is also a good way to do this. For example, if your restaurant is testing a new menu, you could invite your top customers for a special tasting dinner. Your customers will feel valued and you will get the chance to capture their feedback, before going live with the new offerings.

Effective loyalty programmes get staff and customer buy-in

Loyalty programmes can fail if your staff don’t completely appreciate the programme, if they don’t roll it out effectively, or if your customers don’t understand or value the programme.

“Make sure you are offering your customers enough of a carrot to incentivise their engagement.”

I’ve personally given up on some retail loyalty programmes, because they just didn’t seem worth the effort. Or I got tired of trying to redeem rewards when customer-facing staff didn’t know exactly how they work. These are all important factors to consider when implementing a loyalty programme, otherwise you may risk negatively impacting your company’s image.

Ensure your programme is not one that makes the customer do the work. Train your staff well to ensure it becomes a core part of your business. Most importantly, make sure you are offering your customers enough of a carrot to incentivise their engagement.

* by Harry Welby-Cooke – leading business and executive coach and SA’s Master Licensee for global franchise company – ActionCOACH.

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