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5 ways local businesses can use rewards programs to boost profits

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Did you know that acquiring new customers costs a whopping five times more than retaining your existing customers?

Think about it… loyal customers are less costly to serve, they buy more often, and they may even bring in new customers through referrals.

Repeat customers are vital to any business, and increasing your customer retention rate through a reward or loyalty program is a great value way to increase your sales.

Think of a rewards program as an enhanced version of (although certainly not a replacement for!) the kind of traditional, personalized service that local businesses have always excelled at: knowing their customers by name, remembering their product preferences, and even occasionally giving them something on the house.

Set up one of the rewards programmes described in this guide, and enjoy increased loyalty from your customers, and higher profits!

1. Stamp cards

Stamp cards are one of the simplest, most low-tech ways to implement a rewards program for your local business. Every time your customers buy something, they get a stamp. And then, when they’ve collected a certain number of stamps, they get something for free. This works best when your products are all of a similar value, for example hot drinks in a café. But they can work in any situation if you give stamps based on the amount spent, rather than per product bought – for example, you could give customers a stamp for every $10 they spend.

2. App-based points system

This is a higher-tech, more sophisticated version of the stamp card program. Your customers sign up for your rewards program by downloading an app, which you scan at the checkout. They earn reward points every time they spend at your store, and then they spend their points on your products.

This one has some obvious benefits over the stamp card: you can track the items your customers are buying, and you can get their consent to receive your newsletter when they sign up. The downside is that it’s obviously a bit more effort to set-up. Nevertheless, there are plenty of business app templates available, so you don’t necessarily need to be an expert coder to go this route.

3. Paid membership programme

With a paid membership programme, for a monthly, quarterly or annual fee, your customers get access to a discount every time they shop. For example, for $30/year, they get 15% off every time they shop.

Programmes like this work best when you’re selling something your customers want to buy regularly – for example groceries or other consumable goods. They are excellent at keeping your customers loyal, as they’ll want to get their money’s worth, but to make a program like this successful, you do have make it worth their while – probably by giving a slightly higher discount than you want to.

When considering the economics of a paid membership programme, you need to bear in mind that your customer needs to save quite a bit more money than the cost of the membership. The benefit to you is the overall sales growth from your members consistently choosing your store over your competitors.

4. Perks for sign up

Offering perks is a low-investment way of increasing your customer loyalty in exchange for modest rewards. For example, you could offer your newsletter subscribers early access to your sales, or a birthday discount. This way you’re keeping your business in your customers’ minds, and making them feel valued, without a large financial outlay.

This kind of loyalty program is most suitable for local businesses that sell products that customers regard as a treat, and may buy only every few months, rather than daily or weekly, for example clothing or homeware.

5. Community access

Depending on the type of business you have, you might be able to set up a rewards programme based around becoming part of a community, rather than on accessing discounts. In this case, customers who join your community get access to members-only events. You have the choice of whether allow anyone to sign up, or to restrict membership to those who spend over a certain amount in your store per year.

This obviously works best when your business is in the kind of sector which naturally lends itself to community building – for example, a book shop could host exclusive book signings, or organise a book club, or a sportswear store could set up a running club. The value here is in making your store a community hub, where customers want to spend time and, inevitably, money.

Rewards programmes are a great way to increase repeat sales by making customers loyal to your business. And for extra benefits, combine two or more of the programs described in our guide. For example, your paid membership programme could also offer access to community events, or your app-based points system could also offer your customers perks on their birthday. Mix and match to find a winning combination for your local business!

Nodat drives new and repeat customers using Hot Offers.

Get customers to come back to your business with timed “Hot Offers” that expire when the clock runs out.

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