Digital Loyalty Programs: Are They Right For Your Business?

Have you ever thought about creating a customer loyalty program for your business? Over the past year, an increasing number of small businesses have started to create them. In some cases, it makes a lot of sense, but in others it simply doesn’t. If you’re unsure whether you fall into the former or the latter, don’t worry – you’re certainly not alone. Take a look at the info below and use it to help you decide whether a digital loyalty program is right for your business.

As a business owner, you probably can’t count how many times you’ve heard “it takes years to win a customer and only seconds to lose one.” Creating a customer loyalty program can be a win-win for both you and your customers; your customers get discounts and you benefit from increased sales.

Loyalty programs certainly aren’t new. Larger companies such as Best Buy and Starbucks have been using their loyalty programs for a while now. In both cases, they have been successful in areas of customer retention and new revenue. According to the article, Why Small Businesses Should Be utilizing Customer-Loyalty Programs, Starbucks saw a 26 percent increase in profits in 2013 due to their loyalty program. Also,64 percent of companies who have implemented loyalty rewards programs state that it has been effective.” Both companies have also been able to use their reward programs to engage their customers through social channels and promotions.

As small businesses look for ways to increase their sales, there’s no sale that is more valuable than a repeat customer. After all, it pretty much goes without saying that new customer acquisition is more expensive than selling to existing customers. Implementing a loyalty program will enable you to nurture your customer relationships by implementing a valuable tool that gives your business a competitive edge. Plus, if the program is created properly, you will be able to analyze your customers’ purchasing patterns and use the data to improve their overall experience and purchase conversions.

Small Business Friendly

The popularity of loyalty programs has grown tremendously thanks to innovative software and smart phone apps that have made it possible for small businesses to participate in this space.

Below you’ll find a few different types of loyalty programs that you can implement:

Buy 10 Get One Free-This is a great reward system for businesses that sell a tangible product. This type of reward program was originally made popular through the use of punch cards. Now it has proven to be effective with the use of virtual cards and mobile apps. An example of this is sweetFrog, a frozen yogurt franchise that offers a virtual punch card via smart phones. It works like this: after a customer has 10 virtual punches, they receive a free frozen yogurt.

Points Toward Purchases – Customers accumulate points when they purchase from your business. The number of points they earn is based on how much they spend. The points are then applied toward future purchases. 

Partner Rewards – This is an awesome way to create partnerships with other businesses. You can offer discounts when a customer purchases from a business with similar interests. An example of this is a hotel offering discounts for a particular restaurant. This is a great way for your business to save while offering a discount to a customer.

Incorporating Smart Phones

It used to be that a small business had to provide paper punch cards to their customers to offer them some kind of reward system. Because larger companies entered the digital arena, the use of the punch card became out dated. And, there was also a problem with using the punch card. Unfortunately, some consumers figured a way to cheat the punch card system by punching a hole into the card using a hole punch or knife.

The popularity of smart phones has made it easy for small businesses to create digital loyalty programs. Additionally, using smart phone apps to create loyalty programs has been a great tool for small businesses to reach a younger audience. Remember, you have to meet your customers where they are, and it’s safe to assume that younger buyers have smart phones.

Small businesses are continually looking for ways to circumvent expensive marketing campaigns. Yes, there are big corporations that spend millions of dollars on apps to reach their customers. But that doesn’t have to be the case for your business.

Creating a digital loyalty program can be inexpensive. If you’re wondering why the costs are low, it’s because you’ll be part of a network of other small businesses. A few of the companies that provide cost-effective mobile apps and services for customer loyalty programs include Bellycard, Punchtab, LoyalBlocks, and Perkville. Most services start at $50, which is great for your business’ marketing budget!

No matter what type of business you have, you can create a customer loyalty program. But first you have to determine if it’s right for your business. Let’s take a look at the Pros and the Cons of implementing a digital loyalty program:


Customization – A digital loyalty program can be customized to meet your customers’ needs and spending behaviors. You can also tailor your rewards based on your preferences. For example, you can create a virtual punch card that can be redeemed for a specific service or product.

Segmentation – Segmenting is an important aspect of marketing and understanding your customers. A customer loyalty app can be used to segment customers based on the number of times that they buy your product or service. And, with customers that have a higher frequency of purchasing, you can reward them with a higher discount.

Linking Social Media – A great function of implementing a digital rewards program is that it can be linked to your customers’ social media accounts. This is a great way to gain additional exposure because your customers will be able to share discounts and promotions, which ultimately means that they’re sharing your business with their friends and family.

Increased Metrics – Most customer loyalty apps provide a dashboard that can be used to measure your business metrics and assess whether your loyalty program is a success.

Email Campaigns – By targeting your loyal customers, you gain access to their email addresses which can be used for future email campaigns. Using email to promote your loyalty program benefits is an effective way to increase your open rates as well.


Negative Experiences – You may experience hiccups in the beginning. It is important to create a sound program because program participants will be turned away by negative experiences.

Fee Based Programs – Fee based programs can turn your customers away. Customers should not have to pay to be rewarded.

Lost Revenue – It doesn’t make sense to implement a loyalty program if you are going to lose revenue. Make sure that any discounts or promotions being offered make sense for your bottom line.

Complexity – Make sure that the app is easy to use. If it is too difficult to maneuver it will turn customers away.

Is It Right For Your Business?

Now that you have an understanding of how a digital loyalty program can nurture your customer relationships and boost your sales, it’s time to decide whether it’s right for your business? Remember, it’s not always safe to assume that what’s good for one business is good for another.

Additional Tips

Buyer Frequency – The purpose of a loyalty program is to reward your customer base and entice them into becoming repeat customers. However, if your business is not one that has customers that buy frequently (e.g., weekly or monthly), then it might not make sense for your type of business.

Target Market – Any function of marketing includes understanding your target market. A loyalty program is no different. You will need to understand the behavior of your target audience. How much they spend may be a key factor in creating a loyalty program.

Review the Data – Although implementing a digital loyalty program can be done inexpensively, there will be a cost associated with it. Make sure that this is a cost that you have budgeted for. Make sure you examine all of the costs, including the cost of the program and the cost associated with additional sales and operations.

Exclusive Deals – Make sure you are using your loyalty program to entice your customers. Announce sales and special deals to your preferred customers. This is a good idea to build momentum while promoting special events.

Listen to Your Customers – As you measure the success of your program, listen to any feedback that is given to your brand.

There’s little question that technology is making small business possible. Now that you have the ability to increase sales and reward your customers for their loyalty, are you going to take advantage of a customer loyalty program? Tell us why or why not in the comment section below.

To learn more about building an awesome digital loyalty program take a look at our webinar, “How to Build a Killer Customer Loyalty Program for Your Business.”

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