Creating loyal, repeat customers is a goal every small business owner should have. After all, research shows that it’s five to 25 times more costly to gain a new customer than keep an existing one. 


Offering a loyalty program is an easy way for businesses to create more repeat business. But how do most effectively create a loyalty program for a local business?


First, know that loyalty programs aren’t just for stores and restaurants. Any type of business can create one, says Jenn McMillen, founder and chief executive at Incendio, a customer relationship management (CRM) and loyalty program provider. For example, a dental practice could provide a tooth-whitening kit as a reward for a referral to the practice or scheduling two cleanings in a calendar year. A temporary staffing company could offer discounted hourly rates for temporary workers based on a large volume of business.


Here are four tips for how to set up a successful customer loyalty program at your business:


  1. Create enticing rewards

The average U.S. consumer is a member of about 17 loyalty programs, according to Statista. So it may be hard convincing them of the value of signing up for one more. Your odds will be much better if you come up with something compelling they can’t get elsewhere.


It depends on your business, of course, but this could include a free popular product or service after they spend a certain amount at your business. Or it could be designed as more of a membership club, where members receive a range of different benefits, such as invitations to VIP events, extra products and services and other perks .


  1. Consider charging an enrollment fee

Some small businesses charge customers a fee to sign up for their loyalty program, and that can make sense if the rewards are generous and exciting enough. For example, if being a loyalty member means access to perks like free shipping or complimentary classes or other events, repeat customers may feel the price is worth it and value that special treatment.


A 2020 McKinsey survey found that customers who pay to join a loyalty program are 60% more likely to spend more at the business after joining, while free loyalty programs saw only a 30% boost. Moreover, paid loyalty programs increased purchase frequency, the number of items purchased and brand affinity.


  1. Make enrollment easy

A customer rewards program is only valuable if enough customers join it. So it’s critical to make signing up quick, easy and enticing. Some businesses give customers an immediate freebie—such as a free gift or service—as an incentive to sign up.


While it’s smart to collect some basic customer information—such as the customer’s name, email address and perhaps birthday (if you plan to use it)—don’t make any sign-up form too lengthy or cumbersome. Generally speaking, you should avoid asking for too many personal details—as customers may be reluctant to provide them.  


That said, a customer loyalty program enrollment can be a great chance to also sign up those customers for your e-newsletter or other email marketing campaigns. 


  1. Leverage technology 

Old-fashioned rewards programs where an employee punches a card every time the customer makes a purchase or spends a certain amount may seem the simplest route. That actually has many drawbacks, though. For one, your customers have to remember to bring their card every time they buy from you. 


Consider using software that allows you to more effectively engage and communicate with your loyalty program members, while also measuring its effectiveness. Apps such as Fivestars, RepeatRewards and TapMango offer a host of features designed to create, run and track small business loyalty programs at a relatively affordable price point.



You can also track your loyalty program usage in your CRM, McMillen says. This can help you identify your most loyal customers and make sure you’re continuing to provide them with the stellar service they expect.

Print this article