Customer Loyalty Strategies for Small Businesses

Having customer loyalty programmes is profitable for small businesses in the long run as it increases a loyal customer base and gives more repeat business.


Customer Loyalty Strategies for Small Businesses and Startups

Quite famous by the name ‘The Coffee Theory’, Rohit’s café quickly rose to become people’s favourite. Usually, the cafés are known to be a hangout point for youngsters, but this café has branded itself to attract individuals who are young not by just age but the heart. The elderly people who are planning to meet someone in the second innings of their life chose to meet always at ‘The Coffee Theory’. For acquiring more customers, Rohit’s marketing spends increased with every passing month. Generally, expensive dishes like Lasagne, three-cheese pizza, and baked macaroni pasta were available at slashed prices in his café to defend the competitors. He also gave a waiver in food bills to those couples who proposed to each other in his café. One day, a look at the accounts book raised his eyebrows, when the budget to buy raw materials to introduce a new range of Blueberry and fruit muffins fell short. He realized that he needs to lower his marketing spends and focus more on customer loyalty, and bolster the revenue pipeline. 

Like Rohit, many small businesses in a feat to achieve maximum reach and customer acquisition forget to create a programme on customer loyalty. 

Small ventures to stay in this competitive environment indeed need new customers to acquire but business owners are so obsessed with the acquisition that they forget to make efforts to retain the old customers. As per the Harvard Business Review, acquiring a new customer is five to twenty-five times more expensive, since first time customers are not easy to convince. Successful businesses are built around a robust customer strategy. In a dynamic business environment, the barrier for new entrants to do business has reduced, adding to more competition. Loyalty programmes help to strengthen customer relationships for a lifetime and give repeat business. 

What customer loyalty brings to the table? 

Once businesses have reached a stable number of customers, it is time to shift the focus from marketing to build profits and provide better products and services. Customer loyalty brings certain benefits to the business like: 

More repeat business

Rohit would have had enough budget to introduce the new muffin range had he lowered his marketing budget. As per Gartner Group, 20 percent of the loyal customers generate 80 per cent profit. Nowadays, customers buying decisions are not dependent on the best price but the emotional connection they share with a company product/service. Loyalty programmes should go beyond the point of purchase to build deeper connections and provide more value to customers keeping them satisfied in the hope of more purchases and store visits.

Less pressure from competitors

When we try to lure customers from competitors, we tend to lower the prices or give frequent discounts on the products or services, since customers are usually price-conscious. But this strategy is not sustainable in the long run for running operations. As we lower the prices, we decrease the profits affecting the revenue. But with a loyal customer base, there is no need for the businesses to keep the price low to attract customers. Despite the competition around, owners will still have the confidence that sales will be recurring. If customers are satisfied and trust your business offerings they will not be easily lured by the competitors even if they offer low prices.

Word of mouth marketing and recommendation

Loyal customers are your biggest brand advocates. Human beings tend to listen and believe what their elders or friends say. When your loyal customer base communicates about your business and offering with their social groups and acquaintances, it influences the listeners to try out the products or services from what they have heard rather than listening to advertising or sponsored messages.

Customer loyalty has evolved over the years

Online businesses have long held on to the characteristics of Indian consumers being ‘Price Conscious’, and have exploited this trait by designing customer loyalty programmes around predatory pricing and massive discounts. With increasing incomes and aspiring to live better there has been a shift among Indian customers from being price conscious to feel more valued, more recognition, more convenience, and more privileges and perks, etc. 

While designing a customer loyalty programme, apart from giving plain vanilla discounts, there should be a balance of emotional loyalty as well. The customer should be able to experience the benefits in exchange for loyalty served to your business. For instance, flooding your customer’s email inbox with daily promotions with offers like – ‘BUY 2, WE WILL PAY FOR THE 3RD ONE ‘or an end-of-season sale is not fostering an emotional connection between the customer and the business. Mouth-watering deals or discount coupons are time-bound, and may not suffice for a business to retain loyalty for a long time. Customers will get swayed as soon as some other company provides better discount options and gift options. Small businesses should not keep their rewards program for a few months or weeks. It is because the customer at any point might exceed the date to redeem the points or discount coupons resulting in dissatisfaction despite being loyal to the business. Instead, design the program in a way that the customer eligible for rewards will be able to enjoy its benefits on any day of the year. 

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As per Gartner Group, 20 percent of the loyal customers generate 80 per cent profit.

Strategies for customer loyalty programmes 

Live chats

Efficiently solving customer grievances is the prime driver of customer loyalty. As said buyers nowadays seek convenience, an efficient customer service system in place will make your company appear friendly, helpful, and trustworthy to the customers. Good customer service ensures repeat business as the customers know that if faced with any problem, their dedicated team will solve our problems. Live chat features are an excellent way to be interactive with their customers.

Customer analytics

The customers of the digital era are well-informed with the abundance of information available hence are engaged and have an active interaction with the business.Customer analytics-driven with artificial intelligence can provide a 360-degree view about customers buying behaviour for example- when and how they make a purchase, what are the frequently bought items or services, the average ticket size of buying, whether they have closed a purchase or not, etc. It is linked with the core functions of the business towards customers – acquisition, engagement, retention, and revenue generation. The data received from analytics is structured and relevant to giving insights and help in crafting more personalized rewards giving customers a better experience of associating with your brand. Customer analytics helps increase response rates and decrease customer attrition by predicting customers who are mostly to leave and recommend the right proactive methods for retention and deliver the right message to each of the target segments. Since we are focusing on a specific segment of customers by a targeted messaging and strategy, the cost per conversion and overall marketing costs will come down.

Swiggy uses data analytics to display the list of restaurants based on customer’s taste preferences, past food order data, and real-time feet data to reduce delivery time and retain customers. Swiggy has built a concept called ‘Food graph’ where they break a food dish by recipe, cooking style, calorie value, ingredients used, and variations of the food. By combining the food graph with a customer’s past food preferences, Swiggy can offer a personalized restaurant feed at the app homepage itself.

Gamification

Who doesn’t like to play games? Playing games to earn loyalty is an excellent way to engage customers. When we gamify interactions with customers, businesses appeal to satisfy human desires and instincts such as competition, exploration, curiosity, and the happiness of achieving the win. Gamification can be used by companies who want to turn this mundane system of loyalty programmes into a fun activity.

For example: Goibibo, an Indian traveling, and hotel aggregator app has introduced the game ‘goCashFest ‘during the Indian Premier League 2020. Users playing the ‘goCashFest’ game will collect GoCash (points) whenever Mumbai Indians play. The users will earn GoCash during the match by keeping their Goibibo app open during every Mumbai Indian match. Users will start collecting GoCash as the players hit boundaries, sixer, score 50s, 100s, or take a wicket.

Create a customized mobile app

Developing an app for business is filled with prejudices such as expensive, the hassle of developing the app, and knowledge of coding is required etc. Many programmes can build a custom-made app for your business. App makers use a template format that enables you to put in your branding, artwork, and business-specific information. With an app, you can put in a loyalty program that can track the customer’s purchases for future rewards. The example of The Bar Stock Exchange is apt for this. The Bar Stock Exchange is a fun, unique, and India’s first stock market based pub chain that has its customized app where it displays the drink prices that change based on real-time demand and give an experience similar to trading the stock market. As soon as the customers walk in the bar they are asked to download the app for ordering the drinks. 

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Social media is a contact sport.

-Margaret Molloy, CMO of SeigelGale

Social media customer service

There is rarely any such business without their presence in social media. For the past decade, social media has been the new platform where audiences vent out their anger and shower appreciation. Hence, it is imperative to social media platforms as a means of customer service to retain customers. Businesses can use social media customer service to address customer concerns to build trust and loyalty. Examples of social media customer service include businesses replying to tweets and mentions with offers of assistance.

Customer loyalty programmes without tech intervention

Use of punch card

Punch cards are one of the most used reward programs for business to customer companies. In this system, the customer receives a card that gets a hole punched with every store visit or a purchase they make. Once a customer reaches a certain number of punches, he/she becomes eligible for a reward. This reward system will guarantee that the customer comes to the store or makes a purchase the required number of times to issue the reward.

The ‘member’ only rewards 

Human beings want to feel special. This particular loyalty programme is to create a membership club. Customers like to become a part of exclusiveness. It makes them feel like they have an ‘in’ with the business and get an advantage over others. In this, we can choose to keep the membership plan either paid or unpaid or membership in tier plans.

Paid membership: The fashion and lifestyle brand Bewakoof brands has launched a paid membership club by the name Bewakoof Tribe where the interested customers can pay Rs 99 for a three-month membership and Rs 399 for one- year membership. The benefits of joining Bewakoof Tribe are to get priority customer support, access to exclusive collections, and discounts on merchandise.

Membership in tier format: There will be a particular set of customers whose purchasing frequency will be weekly, monthly, or fortnightly. We can also take them under the umbrella of loyalty programmes by introducing paid membership plans in a tier format. Every tier has some rewards to offer to the customers. For instance: OYO has introduced the OYO Wizard programme that has three tiers of membership- Blue, Silver, and Gold that are six, twelve, and twenty-four-month plans respectively. This plan offers unlimited hotel bookings during the period, cashbacks on every stay, discount coupons on hotel bookings etc.

Free trials/new product

If the company is introducing a new product or service, it can begin by offering a free product/service trial session to its loyal customers. It acts as a reward for customer loyalty as well as a marketing tactic through word of mouth that will induce a future sales call. For instance- A bar owner can invite its loyal customers for a fun wine crushing and wine tasting event that will be their upcoming wine product to be served in the bar. 

Building loyalty among customers does not happen instantly. It takes months and years to infuse loyalty. Playing the right cards will help to create strong brand loyalty that does not fade with time. 

Shalmoli Sarkar
Shalmoli Sarkar
An MBA in marketing and a BTech in chemical engineering, Shalmoli writes on marketing strategies and business technology for new and aspiring entrepreneurs.

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