Why Customer Loyalty Programs for Small Businesses Are Trending Up

The lasting effects of the pandemic will undoubtedly be seismic. The shift to online commerce in the face of lockdown measures has made nearly every consumer a digital-first shopper, and the competition to provide exceptional experiences for these customers is fierce. And while this new customer-centric age can present challenges, it can also present opportunities to build better business models.

Insights from the fifth edition of the Small and Medium Business Trends Report show that –

• 71% of SME leaders say their customers now expect online transactions.
• 31% have added e-commerce capabilities in the past year.

• 72% of SMEs have increased their online presence.

• 71% of growing SMEs say that they survived the pandemic because of digitisation.

The good news for SMEs is that an increased online presence means that legions of new customers are just a click away. The bad news is that their competitors are just a click away as well. In this hyper-connected world, keeping customers on the side is crucial.

Let’s take a look at one way that SMEs can build trust, turn customers into brand advocates and create long-lasting relationships: customer loyalty programs for small businesses.

What are customer loyalty programs for small businesses?

Customer loyalty programs for small businesses are a way for SMEs to offer incentives and rewards to their base. When deployed well, loyalty programs benefit both businesses and their customers.

Customers can benefit from personalised offers, member-only discounts and invites to special events. Businesses can benefit from increased customer retention and loyalty. It costs far more for businesses to acquire a new customer than to keep an existing one, and loyalty programs can be a cost-effective method to improve retention.

Five benefits of customer loyalty programs for small businesses

Customer retention is just one benefit of customer loyalty programs for small businesses. Here are five other ways that loyalty programs can lead to SME success.

1. Provide data-driven insights. Personalisation is becoming imperative in the new climate, as customers expect their favourite companies to understand their needs. By gathering more data, SMEs can reach out with relevant communications and offers.
2. Increase cross-selling and upselling opportunities. Ideally, customer loyalty programs for small businesses will drive revenue as well as loyalty. Insights into buyer behaviour can enable SMEs to better identify opportunities for cross-selling and upselling.
3. Build better relationships. Loyalty programs can help SMEs transcend transactional relationships to build more meaningful ones. Things like birthday offers, personalised shopping guides or special incentives will help build stronger bonds.
4. Lower churn rate and increase ROI. Research has shown that a 5% increase in customer retention can lead to a 25% increase in profit. This is because returning customers buy more over time, leading to lower costs of service and longer lifetime value.
5. Showcase a brand’s voice. At a base level, customer loyalty programs are incentive-oriented. But that doesn’t have to be the end of the conversation. SMEs can use their programs to highlight their voice, which is especially helpful at a time when a business’s ethos can be as important as its products or services. In fact, research shows that 80% of customers are more loyal to customers with good ethics.

In the age of connected customers, loyalty programs enable SMEs to easily add value to their customer experience. Even better, new digital toolkits make it easier than ever for SMEs to deploy loyalty programs. The Small and Medium Business Trends Report shows that 67% of growing SMEs have adopted CRM systems, so the move towards better relationships is well underway.

Types of customer loyalty programs

If you’ve decided to create a loyalty program, it’s time to get to the fun part: designing it. There are different types of loyalty programs for small businesses, so the type you choose will largely depend on your needs and customer base.

When designing it, you’ll want to make sure the customer is at the heart of your program. But don’t forget to also design it with your brand voice in mind. This process is a chance to unify customer data, meet new expectations for service and show how you fit in with your customer’s lifestyle.

Some types of loyalty programs to consider include:

• Points-based programs. Loyalty programs based on accruing points for rewards are the most common type of loyalty programs. For example: Accrue 500 points and get a £10 voucher.
• Subscription-based programs. Subscription systems are popular ways for SMEs to drive long-term loyalty. For instance, some cinemas and coffee chains now offer subscription programs, where a monthly payment entails the user to a certain number of tickets or coffees.
• Mission-driven programs. The trend towards conscientious consumerism is real, and many consumers seek out brands with values they respect. Offering mission-driven programs that benefit the community is a good way to create stronger bonds. For example, Tom donates a pair of shoes to a person in need for every pair purchased.

Some customer loyalty programs for small businesses will combine several of these strategies or use something completely different. But they all have the same objective in mind: building better long-term relationships.

The effects of the pandemic on customer loyalty

Customer-centricity was reshaping the business landscape before the pandemic hit, but there’s no doubt that SMEs have had to rapidly adapt to new expectations. And while that sudden shift has presented challenges for less digitally mature SMEs, it’s also led to positive changes.

The Small and Medium Business Trends Report reveals that 75% of SME leaders say that shifts to business operations over the past year will benefit their business long term. In other words, the old ways of doing business aren’t likely to return – and neither will old customer expectations and behaviour. Today’s customer expects more than ever, including seamless digital experiences, personalised communications and brands that fit into their lifestyles. They also want value and look for businesses with ethics they can respect. Many SMEs may experience some growing pains in this demanding climate, but making mistakes is okay, and can actually be an important part of creating a path to customer loyalty.

SMEs need to provide an experience, not just convenience

We’ve moved past the point where quick service stands out – it’s now expected. Salesforce’s State of the Connected Customer report reveals that 83% of customers expect to engage with someone immediately when contacting a company. It also shows that 73% of customers expect a company to understand their needs and expectations. But despite this, 52% of customers say that companies are generally impersonal.

So, while customers may be getting fast service, many are not getting the personal touch they want. To build customer loyalty that can be a differentiator, small and medium businesses need to create loyalty programs that don’t just offer convenience, but a personal experience as well.

To see more trends that are defining the new business landscape, check out the latest insights from 2500+ SME leaders in the Small and Medium Business Trends Report here.