Tips for improving customer retention through loyalty programs
September 05, 2013

Basic gift card programs and loyalty programs can go a long way toward increasing customer retention rates at small and medium-sized businesses. Frequent customers often appreciate being rewarded for their continued business. Similarly, companies are always looking for ways to encourage new customers to continue coming back.

As a result, a large number of businesses are starting to incorporate these retention strategies into their operations. A report from BIA/Kelsey, a market research firm, found 55.8 percent of small and medium-sized organizations surveyed claimed they utilize some form of gift card or loyalty program to encourage customers to make repeated visits. Implementing a quality retention and rewards program takes careful planning. Here are a few tips for maximizing retention rates in the long term:

Know your customer demographics
Almost everyone enjoys receiving rewards for being loyal to their favorite business. However, customers often have unique preferences about the rewards they'd like to receive. Business 2 Community said carefully considering client demographics is essential to allowing companies to create innovative and highly targeted loyalty programs.

Encourage referrals
Another effective way to promote long-term customer retention is to encourage customers to refer their friends and relatives. Discounts and other rewards for customers who successfully bring new clients to the table are one way to promote growth from both existing and potential sources, according to Buzz Time Business. A gift card program can also encourage current customers to spread the word about a business to the people close to them.

Turn it into a game
Inuit, a small-business resource, said gamification is another valuable tool in retaining clients. For example, creating a leader board at the store that lists the names of customers who have reached certain milestones in the loyalty program can make the process casually competitive and engaging for participants. People who aren't currently involved in the rewards program can also easily find out about it by seeing elements of it displayed publicly throughout the establishment.

Integrate digital technology
The U.S. Small Business Administration suggested companies can create smartphone apps and other digital platforms to increase the convenience and usability of their loyalty programs. Especially if a business already has the ability to accept mobile payments, directing customers toward interactive digital platforms is a smart way to increase the volume of payments coming in through additional channels. Rewards programs don't have to be limited to brick-and-mortar establishments.

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