October 13, 2021 By SmartBiz Team

Customer loyalty programs for small business are an inexpensive way to increase sales and customer retention. A loyalty program also can prevent customers from visiting your competition while increasing the number of purchases your average customer makes each year. This means the time and monetary investment pay off significantly in the form of greater profits and fewer lost customers.

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You can develop a loyalty program that suits your company and budget. As a small business owner, you might not have the resources to create an app, but a basic system could be right up your alley. Here are six customer reward programs you can use to build a better relationship with your customers while improving your business sales.

Why is Customer Loyalty Important?

Customer loyalty matters because acquiring new customers can be 5 to 25 times more expensive than retaining current ones. Developing customer loyalty is thus a highly cost effective way of making more sales. That said, targeting potential customers rather than previous buyers matters too, but if you’re working on a tight budget, loyal customers are your best friend.

9 Customer Loyalty Programs for Small Businesses

You can develop a loyalty program that suits your company and budget. As a small business owner, you might not have the resources to create an app, but a basic system could be right up your alley. Here are nine customer reward programs you can use to build a better relationship with your customers while improving your business sales.

1. Make a Punch Card

One of the most basic loyalty program models is the punch card for businesses. This is effective in salons and restaurants to encourage customers to return a certain number of times. You determine if the reward is based on buying multiples of a single item or on the dollar amount spent during each visit. For example, the punch card might offer a free sub for every 10 sandwiches a customer buys or a $15 discount on total services at a nail spa.

This option is basic because you only need to print out the cards to launch and manage your customer loyalty program. There isn't any software to maintain, and you can always print more cards when you run out. Plus, it's up to your customers to keep track of their rewards cards, minimizing your work.

2. Create a Customized Mobile App

If you're looking for a more advanced loyalty program for a small business, consider investing in a customized mobile app. You might think that making an app for your business is an expensive undertaking that's beyond the scope of your budget. Fear not! There are many programs to help you make an app that looks as if you had it custom made for your business. Best of all is the fact that you don't have to have coding knowledge to make an app.

App makers use a template format that enables you to put in your own branding, artwork, and business-specific information. You enter the relevant information into the fields, arrange them as you like, and once you're satisfied with how it looks, the program turns everything into a working app for iOS and Android. You can put the app on the App Store and Google Play for your customers to download.

Another benefit to using a business app creator is the fact that you can add in a loyalty program that tracks your customer's purchases for future rewards. It simplifies your reward and loyalty programs by putting them into one app. You can see examples of this with brands like Starbucks or Chipotle. Customers can see their rewards points, opt for rewards that aren't monetary perks (such as merchandise or free items), and learn more about your business hours and services.

3. Offer Scannable Membership Cards

The third option to consider as part of your loyal customer program is the hybrid model, which combines customer cards with digital membership benefits. Loyalty or rewards cards give the customer a physical reminder that they're part of a rewards program at their favorite retail establishment. The cards work via scan or swipe and record purchase information through the point-of-sale system.

The card can also be linked to the customer's phone number, which enables them to use their card when they can't find it. It's a convenience for the customer and business alike because the cards generate information that's tracked in a database. Panera is an enterprise example of a company that uses this. You can submit your phone number or your Panera card when you make a purchase, and the cashier will let you know if you have any rewards available.

Panera also does a good job of using segmentation in its rewards. Customers that buy breakfast foods and pastries will typically earn coffee and pastry-based rewards. Meanwhile, customers that mostly buy lunch items will receive lunch perks. Customers are more likely to use these rewards because they are relevant to their interests.

4. Come Up With a “Members Only” Option

The whole purpose of customer loyalty programs for small businesses is to make customers feel special and encourage them to engage with your brand because you made them feel good. Customers like being part of an exclusive club. It makes them feel like they have an "in" with the business and get an advantage over people who aren't. This type of loyalty program is a little more refined than an email blast because you want to reward the people who signed up for the program with special discounts and incentives that aren't available through any other reward program.

You have the option to charge a fee or give away membership for free, but you need to be able to provide benefits that are commensurate with either option. Some members-only programs charge a fee that encourages customers to come in and shop to earn discounts. The idea is to encourage a customer to "get their money back" and enjoy the discounts after they've recovered their initial outlay. If the program is free, you can offer discounts that aren't put out into general circulation and are only given to those who made the effort to sign up.

If you are investing in customizable rewards, consider adding an advanced tier for different levels of customers. Start with tiers that reward customers you see each week or every day, giving them the most rewards. Then, you can reward secondary and tertiary customers you see monthly or a few times per year. This way different members get different perks.

5. Send Special Rewards via Email

It used to be that you would send out physical mailers with a coupon to a broad demographic of people and hope that you'd get a reasonable response rate. You could target people directly provided they gave you an address in the first place, but you still incurred an expense that may or may not have generated a rate of return. It's still a valid method of increasing footfall to your business, but it's best used when trying to increase your customer base instead of rewarding loyal customers.

Email makes a lot more sense and costs less than a physical mailer campaign when it comes to rewarding customers. Encourage customers to sign up for news and special offers passively and actively. Put out a sign-up sheet or book with a sign that tells people to leave an email address for special deals and have employees mention the program when they ring up a customer.

Be consistent with your rewards program as it encourages people to come in and use the special offer. Customers are less likely to hold onto an offer until just before it expires when they know there's another one around the corner. You can send exclusive rewards, such as birthday items and special sales, to customers within your loyalty email list. Email is another way to segment your customers and offer different rewards to different customer tiers. Plus, your customers just need to access their email accounts to use the rewards, making the system easy to use.

As your business grows, consider looking for more advanced email marketing options for your loyalty program. Some systems will auto-segment customers and send triggered emails based on behavior, making the process less hands-on and freeing up time for you and your marketing team.

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6. Present Customers With a Foursquare or Swarm Reward

If you don't want to build your own reward system, you can use companies that offer rewards for customers. Foursquare, Swarm, and Yelp all allow you to offer rewards for checking in. These can be as small as a taste of an item or as big as a discount on the whole purchase. Look into claiming your business on these apps and adding rewards for the people who use them.

One of the biggest challenges of using a third-party reward system is keeping up with which trends customers use. For example, Rakuten is doing a big push right now to get customers with its cashback model. Customers using this system could grow significantly in the next few months.

7. Offer Upgrades and Buy-One-Get-Ones

For B2B service providers, a major challenge can be getting clients to pay for your highest-price service tier. But what if clients who’ve spent a while with you could get temporary free upgrades for their loyalty? Surely, they’ll be more likely to try your more expensive platform and ultimately stick with it. That’s the power of offering upgrades as part of your loyalty program.

B2C product providers can also take inspiration from this rewards arrangement. When a first-time customer becomes a repeat buyer, give them a free item alongside their purchase. Ideally, this item will be one they aren’t currently buying. This way, they get to try something new they might not have otherwise considered. If they like it, their favorable view and their gratitude for your freebie might lead to them buying it from you in the future.

8. Give Gifts for Special Occasions

Everyone loves a birthday gift, and your customers are no exception. A week or so before current customers’ birthdays, send them discounts or freebies. With discounts in hand, loyal customers might be more likely to buy themselves a nice gift. Freebies work a bit differently: They can keep your name on customers’ minds for the next time they need to buy products like yours. The value is that they choose you over a competitor.

9. Partner With Other Businesses

Many customer loyalty programs give rewards that pertain solely to your business. That’s why rewards your customers can use at other businesses can be so exciting. Imagine going to your favorite grocery store and getting a coupon for a nearby restaurant you’ve never tried? That’s the power of business partnerships for customer loyalty.

To set up a loyalty partnership, contact other small business owners in your area or footprint. Ask whomever you contact whether they might be interested in cross-store discounts and promotions. Small business owners with customers similar to yours, whether geographically or otherwise, may often be responsive to the idea. You’ll both benefit, and so too will your customers.

Steps to Take Before Launching Customer Loyalty Programs

Before you roll out a customer rewards program, take the following steps:

  1. Determine the right loyalty management platform . Customer loyalty software apps such as Open Loyalty, Nextbee, and Augeo can help you identify and reward customers who regularly buy from you. They also let you offer discounts and other incentives to customers whose first time you hope won’t be their last.
  2. Figure out how your rewards will work . Punch cards and free items can affect customers differently and prove more or less fitting for certain companies. The former is great for a narrow or niche range of products or services that customers are likely to buy more than once. The latter can encourage customers to return to businesses with a wide variety of items. Giving away a free item with large enough customer purchases can lead repeat buyers to spend more as well.
  3. Know how you’ll promote your loyalty program . At your in-person point of sale, asking a customer if they want to sign up for your loyalty program is often easy. In e-commerce, though, these conversations don’t exist. You’ll have to make up for them with obvious discount program invites during the checkout process. Alternatively, you can collect email addresses at checkout and rely on email marketing to spread the word about your rewards. Whichever route you go, be sure to track customer engagement.

The Attributes of the Best Loyalty Programs

The most successful customer loyalty programs for small businesses are typically:

  • Customizable . Your customer base might comprise several different types of customers. In this case, a monolithic rewards program might excite some customers more than others. You can counter this concern with customer data. Send surveys to your customers asking about their interests, then create one reward for each of the most common groups of interests. Let your customers choose the rewards they’d like to earn.
  • Omni-channel . Your loyalty management software should accumulate rewards for your customers anytime they buy from you at any point of sale. That means online, in person, and anywhere else you might sell your products or services. You should be able to integrate your loyalty management software with your POS system to streamline this task.
  • Integratable . The above POS example shows the importance of creating customer loyalty programs using tools that integrate well with others. When your loyalty program integrates seamlessly across all your major business software, you make your work easier and increase customer engagement. The latter is true since, with more points through which customers can earn rewards, you’ll get more engagement.
  • User-friendly . Loyalty programs can stop being rewarding and become frustrating if they aren’t easy to use. For example, if your company’s mobile app is the key to your loyalty program but the app is super buggy, you’ll see less customer engagement with your program. Likewise, on your end, choosing a clunky loyalty management software might discourage you from managing your program.
  • Not based solely on money . Let’s say your customer earns a free item after paying for the item several times. To get that one free item, the customer has to, of course, actually pay for it many times. The result is that the free item doesn’t always feel as exciting or valuable. It can thus be smarter to remove cash from the rewards equation entirely. Offering members-only options and establishing partnerships with other businesses can lead to more unique rewards that customers more highly value.


You're in control when it comes to creating a customer loyalty program. The best loyalty program is the one that works for your business and inspires customers to return to your company. Be flexible, listen to customer feedback, and be willing to tailor the program as needed in order to keep it relevant to your business and customers. Consider the criteria, style, and tools mentioned throughout this article to guide your decisions.

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