Why Small Business Should Have A Loyalty Program?

FADO Go
4 min readApr 17, 2023
Why Small Business Should Have A Loyalty Program?

In the modern business world, small businesses contribute greatly to local economies and play a big role in creating new jobs and innovations. As a matter of fact, they also earn less annual revenue than big corporations due to their smaller numbers of customers. Considering effectiveness and increased cost, should small businesses run a loyalty program?

Are you considered a small business?

A small business, as defined by the United States Small Business Administration (SBA), is a privately owned and operated company with fewer employees and lower annual revenue than larger corporations. The definition of a small business varies depending on the industry, the number of employees, and the amount of revenue generated. Generally, it refers to a business that is independently owned and operated with fewer than 300 employees and generates annual revenue below a certain threshold.

What is a loyalty program?

A loyalty program is a marketing strategy designed to encourage customers to continue doing business with a company by offering rewards or benefits for repeat purchases or engagement. The program typically involves customers accumulating points, rewards, or discounts over time, which they can redeem for future purchases or other perks. The aim is to build customer loyalty, increase customer retention, and motivate customer advocacy and word-of-mouth referrals. Loyalty programs can be found in various industries, such as retail, service, etc.

Why should small businesses have a loyalty program?

Every company depends on its customers. As a result, it is easy for brands to draw in potential consumers, capture their attention, and motivate them to visit their businesses. The role of loyal customers must never be underestimated, even though attracting new ones will always be crucial.

Programs that reward loyal customers enhance the business experience. According to a study, over 70% of consumers who take part in loyalty programs say that their participation in the programs is an essential part of their interactions with companies.

Small businesses can greatly benefit from having a loyalty program, as it can help to increase customer retention and boost sales. By offering rewards and incentives for repeat business, a loyalty program can encourage customers to continue shopping with the business and help to create a sense of brand loyalty.

Here are the reasons why a loyalty program is worth it for small businesses:

Boosting customer engagement

When customers sign up for rewards programs, they consent to receive marketing emails and other content. It boosts participation and improves the connection between businesses and customers. When they can potentially receive rewards, they will interact with the content more.

Improving customer experience

From the first interaction, customers establish an impression of the brand. Small businesses can change their opinions by rewarding them with gifts, discounts, and other incentives. According to PwC, 65% of consumers said that a good brand experience has more impact than advertising.

Increasing customer retention

Rewards programs are a useful component of a customer retention plan for small businesses. People do not want to quit if they receive rewards and points for purchasing products.

Providing customer insights

A loyalty program is beneficial because it gathers customer information that enables brands to see how customers engage with the businesses. Customer data, for instance, reveals whether or not customers use coupons or rewards points to buy goods, as well as their level of satisfaction with the loyalty program.

Creating brand advocates

Customers who have loyalty cards will promote the brand. They increase the base of a brand’s audience by telling their stories to their friends and family. Referral marketing tools are not necessary in this case. When the customers are satisfied, they will aid in bringing in new ones and boost revenue.

Improving the edge

A loyalty program can also help small businesses compete with larger businesses that may have more resources and marketing power. It can help level the playing field by giving small businesses a way to reward their customers and build a loyal customer base.

To be specific, implementing a loyalty program can be a cost-effective way for small businesses to compete with larger businesses. It can provide a way to reward customers for their loyalty and keep them returning, which is essential for small businesses that may not have the same marketing budgets or resources as larger businesses. A well-designed loyalty program can create a sense of community around the brand, foster positive word-of-mouth, and ultimately drive more repeat business. Additionally, loyalty program data can be used to gather insights about customer behavior, preferences, and trends, which can help small businesses make informed decisions about marketing and product development, just like what other large businesses have been doing.

The Influence of rewards on customer spending behavior

Customer loyalty programs can influence customers to make more purchases. Small companies that run loyalty programs introduce incentives with a single goal in mind: to boost earnings and sales. Customers will return if they are offered incentives. According to research, repeat customers pay 67% more than new customers. It demonstrates the importance of maintaining relationships with existing clients.

Besides, loyalty programs also increase the regularity with which consumers make purchases. Reward points, discounts, and vouchers persuade them to purchase more frequently to take advantage of an incentive.

Of course, implementing a loyalty program requires some investment of time and resources, so small businesses should carefully evaluate whether it is worth it for their specific situation. However, for many small businesses, the benefits of a loyalty program can far outweigh the costs, making it a worthwhile investment.

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