Reward programs are making a comeback. While many are yet to see their benefits or are still skeptical, more and more small businesses are investing in them. With the rise of social media and big data, a reward program has become an essential tool for small businesses to stay relevant. A 2021 report by Clarus Commerce places reward programs above lower prices as 9 out of 10 consumers indicated that they would purchase from a retailer that offers the former!
Since we love small businesses, we have developed some great solutions to maximize customer retention. Offering a loyalty program is a great way for businesses to show customers that they are valued. Reward programs come in a variety of shapes and sizes, but most deliver discounts or rewards.
This blog will look at ten reasons why reward programs are an excellent opportunity for SMEs.
The ‘Why’ and ‘How’ of Reward Programs
One of the most challenging conundrums that we, as small business owners, face is achieving business growth and increased profitability on limited resources and budgets. That is we have to retain as many customers as possible.
And one of the best strategies to achieve that is reward and loyalty programs. But how do they work?
Reward programs are premised on two facts:
- It is more economical to engage existing customers and prompt them to re-avail services rather than to spend on courting new customers.
- A business’ most loyal customers are also its most profitable.
Small businesses that offer reward programs have a great ROI because it shifts the emphasis from the brand to curating customer experiences that resonate and leave a mark – thus, making it more desirable for people to join, engage and even, promote the business’ brand!
Importance and Benefits of Reward Programs
Encouraging Repeat Business and Boosting Revenue
Studies show that the likelihood of selling to an existing customer is 60-70%, whereas a new prospect buying a product or availing a service from our business is barely 5% to 20%. In other words, the small business would be 40% more likely to convince an existing customer to make more purchases than a prospective customer.
With exciting reward programs in bonuses, discounts, and previews, customers would be encouraged to do more business and boost revenue!
Establishes a Loyal Customer Base
A loyal client base provides a small business with stability and ongoing revenue even during snags in sales, allowing it to grow and prosper. Implementing a loyalty or rewards program at the point of sale will establish a loyal repeat client base and improve customer retention.
Boosts Customer Lifetime Value
Studies estimate that a 5% increase in the customer retention rate can have profound business implications, with at least 25% up to 95% increase in profitability being recorded!
This means two things in terms of metrics:
- Decreased customer churn rate.
- Enhanced customer lifetime value (LTV).
These metrics relate to lifecycle management, which concerns aligning a company’s marketing approach with the business goals of enhancing LTV and boosting sales!
Increasing Customer Lifetime Value
According to research, customers that have an emotional connection to the business’s brand have a better lifetime value than the ordinary customer.
The reasoning is quite simple: these clients already spend more money on the brand and must be compensated for it. This is where reward programs come in handy for fostering consumer loyalty!
Reward programs incentivize customers who already believe in the brand and purchase products to spend more while being rewarded for it!
Improves Customer Relations
The most crucial factor that influences brand sustainability, in the long run, is customer engagement. Brands that fail to connect with the target audience have a low recall value and fail to establish a trustworthy brand image.
Fosters Brand Advocacy
Reward programs in refer-a-friend or free perks upon referrals are perhaps the most effective reward program plan. This is because they hinge upon “trust” by turning current customers into marketers. This is because 90% of people trust brand recommendations from friends, family, and peers over all other sources.
Differentiate from Competitors
Customer reward programs are now emerging as a must-have for businesses at the point of sale. Studies show that customers are 40% more likely to buy from brands that offer some form of rewards/loyalty program!
In this way, small businesses can gain a competitive edge over competitors who don’t!
Studies show that 9 out of 10 rely on word-of-mouth referrals from family and friends over other sources. Moreover, by rewarding the current community to recommend friends to the particular brand or product, marketing costs would be reduced while also boosting outreach!
Additionally, reward programs that rely on feedback also prove to be successful organically growing a customer base.
Revenue, Profitability, and More!
Bond Brand Loyalty’s The Loyalty Report found that 66% of customers change their expenditure to optimize loyalty point accumulation and thus, increases the average order value. In this way, reward programs help grow a business’ transaction volumes and boost revenue.
Builds Brand Awareness
A reward program is akin to the persistent promotion and helps keep the business relevant.
Small businesses open up new avenues for targeted email marketing and other marketing content to the most loyal customers with reward programs. This enables a sophisticated client interaction and helps strengthen the brand’s link with the customer.
More than 50% of customers do not even return to buy from stores after the first visit. Now imagine the revenue that could be generated if customers loved coming back to buy. That is what Octopos is here for!
Curating a rewards program is not just for big corporations but also small businesses. It helps build a strong relationship with customers and boost sales and revenue for small to medium businesses. With Octopos’s Point of Sale and built-in reward feature, customers have all the more reasons to prefer stores that have Octopos POS over other competitors! Once a customer, always a customer!
Building the right kind of reward program that matches business goals will help businesses reap its benefits without the need for heavily discounted sales.