Research finds SMBs should adopt loyalty programs
August 20, 2013

To stay competitive in today's retail environment, small and medium-sized businesses need to offer value for their customers. Many SMBs choose to implement a loyalty and gift card program to provide consumers with daily deals and customized coupons, but there are companies that have yet to understand the significant advantages of having a loyalty program. According to a recent study, the majority of SMBs do not have a loyalty program in place but are planning to implement one within the next 12 months.

Programs boost customer spending and satisfaction
Conducted by research firm Ipsos for consulting services company BIA/Kelsey, the ongoing study, "Local Commerce Monitor," asked 568 SMBs in July about their advertising and promotional strategies. Only 38 percent reported they had a loyalty program. Of the SMBs without such an initiative, 21 percent said they plan to adopt a program within the next 12 months, similar to findings from the previous year.

Although consumers like to receive savings, the SMBs surveyed estimated only 17.7 percent of their business is driven by discount deals, coupons and similar offerings that may not be in line with the company's loyalty program. With customer retention and satisfaction based on shoppers' ability to find value in what they purchase, SMBs without a loyalty program may experience lower acquisition and retention rates compared to their counterparts.

Yet, of SMBs that understand the benefits of providing customers a loyalty program, 54 percent said they operate their own initiative with paper tracking methods, such as punch cards. With customers increasingly asking for more sophisticated payment methods and programs, such as with digital coupons or mobile offerings, it can be beneficial for SMBs to invest in a more dynamic program. Implementing a customized and more professional initiative can help SMBs increase their sales opportunities while still rewarding their most loyal customers.

Steve Marshall, director of research for BIA/Kelsey, said homemade loyalty initiatives will soon be a thing of the past as retailers move toward a more digital future.

"The data indicates solid interest and intentions in loyalty programs, which are becoming an increasingly important tool for customer retention," Marshall said. "Going forward, we believe the proportion of business generated from both loyalty programs and promotions will rise significantly, as SMBs increasingly tailor their offerings to frequent customers and specific customer segments."

Nexus: G-WEBCD5