Loyalty programs: how they help your small business grow

The customer who comes in every morning for a loaf of bread, the one who has their eleven o'clock coffee at your counter, or the neighbor who gets her hair cut every five weeks keep your business going far more than any passing customer. A loyalty program helps make sure those visits keep happening, become a little more frequent and, along the way, get those people talking about you. In a neighborhood business, where almost everything depends on regulars, you'll see the difference in the till. Here's what the data says and how to make the most of it.

Why looking after the customers you already have pays off

Winning a new customer takes money and time: flyers, ads or welcome discounts. As the Harvard Business Review notes, depending on the study and the industry, acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. The same article cites research by Frederick Reichheld of Bain & Company showing that increasing customer retention by 5% raises profits by 25% to 95%.

The range is wide because it depends heavily on the type of business, but the underlying idea translates easily to your shop. Picture a café with 200 regulars who spend an average of €3 per visit. If you get each of them to come in just one more time a month, that's €600 more in monthly revenue without spending a cent on finding new people. And that regular customer is also the one most likely to recommend you.

What the data says about loyalty programs

In Spain, loyalty programs are part of everyday life for many people. A Capterra study of 1,010 people living in Spain found that 71% of consumers use loyalty programs and that 73% of those who use them have had a satisfying experience. In the first part of that same study, Capterra found that 49% of Spanish consumers would join the loyalty program of a brand they like.

That last figure matters to you: people sign up for the programs of places they already like. Your happy customers just need a reason to come back more often.

Another recent study, based on more than 700 customer surveys, points in the same direction: 87% of consumers say loyalty programs influence their loyalty. The same research notes that programs are shifting from something purely transactional (points and discounts) to something more emotional, built on trust and personalization. For a neighborhood business, where a personal touch is already your strength, that's good news.

As for spending, the Clover blog covers a study on a rewards program with two very useful takeaways. Customers who could redeem rewards right away spent 68% more over the following two weeks than those who couldn't. And over the long run, the biggest spenders were the ones saving up for larger rewards. Quick rewards to get people hooked, bigger goals to keep them coming: that's exactly the logic behind a well-designed stamp card.

What it looks like in a neighborhood business

A well-designed loyalty program improves three things in your business.

More visits

This is the most direct effect. If a customer at your greengrocer's is two stamps away from a reward and is torn between your shop and the supermarket on the corner, they now have a reason to choose you. In businesses with frequent purchases (bakeries, cafés, newsstands), you'll see the effect within weeks. If you run a bakery, this article walks you through examples of how loyalty works in your bakery.

A slightly bigger ticket

When stamps depend on how much is spent, customers tend to round up. A hair salon can give one stamp for every €20 and watch some clients add a treatment; a restaurant with a set lunch menu can stamp per menu and encourage people to bring company. Not everyone has to do it: if even some do, you'll notice it at the end of the month.

More reviews and a better spot on Google

A regular who has just redeemed their reward is at the perfect moment to leave a review. And reviews carry a lot of weight in how you show up when someone searches for "café near me". We explain it in depth in why Google reviews matter so much for your local business. One thing to keep in mind: the request should go to all customers equally and never in exchange for anything, because offering something for a review or asking only happy customers goes against Google's policies and the EU Omnibus Directive.

What makes a program work (and what sinks it)

Not every program delivers. These are the points that make the difference in a small business:

• An achievable reward. If it takes 30 coffees to get a free one, nobody gets there. Match the number of stamps to how often your customers actually come back.
• A reward people want. Something specific ("a free haircut", "a dozen churros") beats a generic discount nobody remembers.
• Zero friction. Paper cards get lost, get wet or end up in another wallet. If customers have to remember something, half the time they won't.
• Easy for your staff. If stamping takes more than a few seconds at rush hour, it'll stop happening.
• Reminders. A nudge that they're two stamps away or that their stamps are about to expire brings back people who had drifted off.
• Long-term goals. As the study covered by Clover suggests, a quick reward gets people hooked, but a bigger goal (moving up a tier, for example) keeps customers around for months.

How to tell if it's working

You don't need a degree in analytics. Just keep an eye on a few things each month:

1. How many customers sign up. If your regulars aren't joining, rethink the reward or how you offer it at the counter.
2. How many cards get completed. If hardly anyone reaches the reward, you're probably asking for too many stamps.
3. How often people come back. Compare how often customers with a card visit now with how often they came before.
4. How many new reviews you get. If you ask for reviews at the right moment, you should see a steady trickle.

How Befoo helps

With Befoo, everything above works in a neighborhood business without any hassle. Your business gets its own digital stamp card, with your logo and colors. Customers create a free account and, with their Befoo QR code (also available in Apple Wallet or Google Wallet), collect the cards of the businesses where they get stamps. Your staff stamp from their own phones by scanning that QR code, per ticket, per amount spent or per item, whichever suits your business. When the card is complete, the customer gets whatever reward you choose.

To bring them back, Befoo sends automatic notifications when customers receive a stamp, when they have a reward waiting or when their stamps are about to expire. You can launch promotions via push notification and email, feature offers on the Befoo map, and turn on automatic birthday or "we haven't seen you in a while" messages. If you want that long-term goal, the Premium plan includes card tiers (for example, Bronze, Silver and Gold), each with its own reward. Befoo also asks for Google reviews at the right moment (when a reward is redeemed or every so many stamps), to all your customers and without offering anything in return.

You can see all the details on our loyalty program for small businesses page and compare plans on pricing: there's a free plan with unlimited customers and one location, and paid plans start at €9.90/month. The best way to know whether it works for your business is to try it yourself: sign up for free here and start stamping today.