Customer loyalty and rewards programmes for SMBs

For small and medium-sized businesses (SMBs), loyalty and rewards programmes offer an affordable and highly effective way to attract and keep customers. By rewarding repeat purchases and customer engagement, these programmes encourage brand loyalty. 

In this article, we’ll go over the basics of loyalty programmes, their benefits, and provide examples of 4 different types of rewards programmes that are well-suited for SMBs.  

What are customer reward programmes?  

Customer reward programmes, also known as loyalty programmes, are marketing strategies that are structured to bring in repeat business by rewards to customers for repeat purchases and loyalty.  

These programmes typically reward customers with points, discounts, or exclusive offers in exchange for purchases or other brand-related activities, such as referrals or social media engagement. 

What are the benefits of a loyalty scheme for a business?  

Loyalty programmes can be a win-win proposition for both customers and businesses. Customers’ overall experience is improved, and by getting rewards like discounts, exclusive offers, or free items, customers develop a sense that they are getting more value for their money.  

In turn, businesses get more purchases, better word of mouth, and potentially turn their customers into loyal brand ambassadors.  

When customers see consistent value through a rewards programme, they are more likely to develop a long-term relationship with the business. By offering tangible rewards, such as discounts, free products, or exclusive access to promotions, businesses can show appreciation for their customers’ loyalty.  

The sense of loyalty that this fosters reduces the chances of customers switching to a competitor.  

Improved customer loyalty boosts your customer retention metrics, which is vital as keeping customers is always more cost-efficient than trying to obtain new ones.  

How does a loyalty programme work? 

The basic function of a loyalty programme is to offer your customers rewards in exchange for specific behaviours, most often repeat purchases from your business. Most follow a simple customer journey: 

1. Initial enrolment

Customers typically join a loyalty programme by signing up, either in-store, online, or through a mobile app. They might be prompted to do so after completing a purchase or booking a service. The customer might need to fill out some basic information to enrol.

2. Customer earns points

Once enrolled, customers build up points for each qualifying activity. Depending on the setup of the loyalty programme, customers might get more points based on factors like amount spent per purchase, frequency of visits, or specific promotional activities such as referring a friend or following social media.

3. Progress is tracked

Most loyalty programmes have a system in place that allows customers to track their rewards progress. This could be via a physical punch card, an online account, or a mobile app. Being able to see how close they are to earning rewards often encourages repeat engagement.

4. Customer redeems their rewards

Once customers have earned enough points or met certain criteria, they can redeem their rewards. This might include discounts on future purchases, free products, exclusive offers, or special perks like priority service or early access to sales. 

5. Ongoing engagement

To keep customers engaged, many loyalty programmes offer tiered rewards, where customers can unlock higher levels of benefits the more they interact with the business. This encourages continued patronage and deeper brand loyalty over time. 

Through this cycle of earning, tracking, and redeeming, loyalty programmes motivate customers to return for more purchases and support a long-term relationship with the business. 

Loyalty programmes come in many forms, but the key to success is choosing a structure that aligns with your business model and customer base. For small businesses, the simplicity and flexibility of the programme are crucial, as it needs to be easy to manage and cost-effective while offering real value to customers.  

Whether you’re a local café, boutique, or service provider, the right loyalty programme can help you foster stronger customer relationships without requiring a large financial investment.  

By understanding the different types of loyalty programmes available, you can choose the one that best fits your business goals and customer expectations, ensuring maximum engagement and retention.  

That’s why in the next section, we will look at three different types of rewards programmes that are particularly well-suited for small- and medium-sized businesses.   

4 types of customer rewards programmes that suit a small business 

There are many ways to set up loyalty and rewards programmes. Here we will outline 4 types of programmes that can work for SMBs both from a cost and effectiveness perspective. 

Points-based reward programme

A points-based reward programme lets customers earn points for every purchase they make. These points can be accumulated and later redeemed for discounts, free products, or exclusive offers. For example, a coffee shop may offer one point per dollar spent, and once a customer reaches 50 points, they earn a free drink. 

This type of programme creates a clear incentive for repeat purchases and allows customers to see their progress toward a reward, which gives a sense of achievement. It’s flexible enough to fit many types of small businesses and can be as simple or complex as needed, whether through paper receipts, punch cards, or a digital system. 

Referral programmes

Referral programmes encourage existing customers to bring in new business by offering them rewards for successful referrals.  

In exchange for recommending your business to friends or family, customers can earn discounts, cashback, or free products once the referred person makes a purchase. For example, a hair salon might offer a 10% discount on the next visit for every new customer a regular client brings in.  

Referral programmes are particularly effective for small businesses because they use word-of-mouth marketing, which is often more trusted and impactful than traditional advertising. In some cases, these programmes can be expanded to include affiliate content, where customers share referral links online or via social media, further widening the programme’s reach. 

Punch cards

Punch cards are a classic, low-tech loyalty programme that works well for small businesses with frequent repeat customers, such as cafes, bakeries, or car washes. Every time a customer makes a purchase, they receive a punch or stamp on their card. Once they reach a certain number of purchases, they receive a free product or discount. 

Though simple, punch cards are highly effective at driving repeat visits because they offer a clear, tangible reward for loyalty. They’re easy to implement and require minimal technology, making them a budget-friendly choice for small businesses.  

While punch cards aren’t quite the same as having customers build up their points, the concept is similar in that it lets customers work toward earning something valuable over time. 

VIP or early access programmes

VIP or early access programmes reward your most loyal customers by offering them special privileges, such as early access to new products, exclusive sales, or invitations to events. This type of programme makes customers feel like they’re part of an elite group, enhancing their connection to the brand. 

For example, a boutique might offer VIP customers a preview sale before a seasonal launch, or an online store might give early access to limited-edition items. VIP programmes are especially effective for businesses that often release new products or hold special events, as they provide loyal customers with exclusive benefits that make them feel valued and appreciated. 

Each of these programmes offers a unique way for small businesses to connect with their customers and encourage loyalty, all while staying manageable and cost-effective. The key is to choose the model that aligns best with your business goals and customer behaviours. 

Ways to implement your customer reward programme 

Once you’ve decided on the type of loyalty programme that fits your small business, the next step is to implement it in a way that is visible and encourages participation. A well-designed programme will only succeed if customers know about it and are motivated to join.  

Here are some effective ways to promote and integrate your loyalty programme into your marketing strategy. 

Use social media  

Sharing information about your new programme on your social media channels helps make your programme visible to customers. Share posts that highlight the benefits of joining your loyalty programme, including how to sign up, how it works, and what rewards customers can expect. Use eye-catching visuals and customer testimonials to showcase the value of the programme. 

You can even make social media campaigns part of your rewards programme! Perhaps you can run a campaign where your followers can earn bonus points by sharing your posts or tagging their friends. This can boost programme sign-ups while increasing your social media reach and brand awareness.  

You might also consider using paid ads to draw in your target audience. Social media platforms allow you to run highly targeted campaigns that can help attract new customers. 

Talk about it in your newsletters 

Email newsletters are a direct and highly effective way to keep your customers informed about your loyalty program. Your subscribers are already engaged with your business, so they are prime candidates for joining. Here are a few tips: 

• Feature the programme: Dedicate a section of your newsletter to explaining your loyalty programme. Highlight the key benefits and include a clear CTA with a sign-up link. 

• Provide regular updates: Send out regular updates about the programme, including new rewards, exclusive offers, or bonus point opportunities. This keeps your programme top-of-mind and encourages ongoing participation. 

• Highlight testimonials: Include stories from satisfied customers who have benefited from the loyalty programme. This adds a layer of social proof and shows potential members how they can gain value by joining. 

Promote in-store  

If your business runs a physical location or service-based business, promoting your loyalty programme in-store is essential. Use signage, flyers, or displays near the checkout counter to inform customers about your loyalty programme.  

Don’t forget to train your staff to mention the programme to every customer, offering them the opportunity to sign up on the spot.  

By using multiple channels, you boost awareness of your loyalty programme and drive customer engagement from all angles. The key is to communicate the value clearly and make it easy for customers to join and start reaping the benefits. 

Reward customers and reap the benefits 

By offering rewards in exchange for continued patronage, businesses can boost customer satisfaction, create lasting loyalty, and increase long-term profitability. Whether you choose a points-based system, referral programme, punch cards, or VIP access, the right loyalty programme can be tailored to fit your unique business and customer needs. 

Setting up and implementing a loyalty programme doesn’t have to be complicated or costly, and by making your customers feel valued, you improve retention and turn satisfied customers into loyal advocates for your brand.