Customer rewards and incentive programs have become big business for many brands and retailers. Grocery store chains, online stores, airlines, restaurants, and even your local car wash all have loyalty programs to keep customers coming back.
And you know what? It works!
A customer is 60% to 70% more likely to buy from a company they’ve already done business with. Likewise, they are only 5% to 20% likely to do business with a company they’ve never done business with. A whopping 65% of a company’s business comes from customers they’ve done business with in the past.
Do customers love loyalty programs? You bet they do! The more elite, the better, too.
These programs influence where a consumer shops and even how they shop. 90% of consumers said that when it came down to deciding whether to do business with a company with a premium loyalty membership and a company that offered a lower price, they would choose the one with the premium loyalty membership.
Loyalty programs are pretty powerful when done correctly, but are they right for your pool and spa business? Read on to find out.
What Makes a Good Incentive Program?
The definition of a “good” incentive program depends on who you ask.
A good customer loyalty program offers some type of gain to the customer. In one survey, 57.4% of consumers said that their reason for joining a loyalty program was to save money, while 37.5% said it was to receive rewards.
Ask a business, and they will say that a good incentive program helps solve the number one most significant challenge that plagues 61% of retailers — customer retention.
How does that happen? Take a look at these features used by some of the most successful loyalty programs in the world:
- They have great rewards – Cashback, deep discounts on products, exclusive deals, custom products, and other money-saving strategies.
- They have an app – Digital optimization is vital in today’s digital world, so an app is pretty much essential in this day and age.
- They forge an emotional connection – Customers want to feel valued, understood, special, and like they belong. That caring extends to their families, communities, and the world.
- They encourage engagement beyond the wallet – Customers can earn rewards by writing product reviews, posting on social media using a unique hashtag, sharing products on social media, referring friends, or checking in when they visit the physical store.
A great loyalty program will help you retain your existing customers and attract new ones, but they can also draw inactive customers back in and gently nudge all customers to spend more. When you look at some of the best customer loyalty programs, you can see that they have all the components necessary to accomplish those goals — and you can pick up a few pointers in the process.
Benefits of Incentive Programs for Small Retailers
A well-constructed customer incentive program can provide great rewards for the small retailer. Some of the most important or relevant include:
- Increases customer retention
- Helps attract new customers
- Builds brand affinity (gives customers a feeling that the brand is like them)
- Builds brand loyalty
- Reduces customer attrition rate
- Increases the customer’s lifetime value
- Improves customer engagement
- Reduces unprofitable customers
- Enhances the customer experience
- Boosts revenue and sales
- Encourages brand advocates
- Provides insight into customer behaviors trends
- Provides insight to relevant customer data
You may find other benefits with your program depending on your type of business and customer base. Different industries have different needs and outcomes for programs, so you have to look at the potential within your industry and business while weighing critical components like your budget and ability to implement the loyalty program you want.
Challenges of Incentive Programs for Small Retailers
Of course, any incentive program is not without its challenges. You may find some areas more difficult than others, but you can overcome them with a bit of creativity and out-of-the-box thinking.
- You can’t always calculate loyalty behavior. However, suppose you incorporate marketing techniques like customer referrals, social media shares, writing reviews, and other similar activities into your rewards program. In that case, you will get a better picture of loyalty behavior.
- The profitability can be inconsistent because customers’ lives change. They retire, start families, move, get new jobs, experience a change in income — the list is endless. You can combat this by keeping your program updated and current to attract new customers and retain existing customers. In other words, as a customer moves out of the program for whatever reason, other customers will be coming in. Your loyalty program should never be static.
- It can negatively impact your bottom line (if you aren’t careful). Cost is why it is crucial to keep your program growing and evolving. Make sure it is fairly priced and that the terms keep it practical.
- It does not show overall consumer behavior. But that’s OK. One way to combat this is to offer incentives to complete a purchase behavior survey or similar activity. Participation would be optional, so customers who aren’t comfortable sharing information don’t have to.
- The market is saturated. Everyone has a loyalty program, and many look exactly alike. So how do you get around that? You create one that is unique and stands apart from the rest. Create a program that people will talk about and share on social media. The key is to assess your customer base and create rewards that work for them.
Loyalty programs are an excellent way for small businesses to get new customers and increase profits. It can also help to propel your pool and spa business by creating a grassroots type of marketing activity. It’s another way to get people talking about your business — and coming to see what all the buzz is about.