Loyalty Programs for Small Businesses – and Why You Need One
3/14/2025 - By Elizabeth Levister - Manage Your Business | Small Business Resources
What if you could increase your businesses profits by up to 95% just by keeping your current customers happy? Research shows that a 5% increase in customer loyalty can boost profits by 25% - 95%. And with 75% of global consumers saying they’d switch brands for a better loyalty program, the message is clear: if you don’t have a rewards program in place, you’re leaving money on the table.1
Loyalty programs aren’t just for big brands – they’re a powerful marketing tool for small businesses to increase repeat business, encourage referrals, and strengthen customer relationships.
Still on the fence? Let’s break it down: what loyalty programs are, why they’re a game-changer for small businesses, and how you can implement one that keeps customers returning again and again.
What is a loyalty program?
A customer loyalty program is a marketing strategy designed to reward repeat customers and encourage long-term business. The idea is simple: the more a customer shops with you, the more perks they earn – whether that’s discounts, freebies, or exclusive experiences.
These programs come in different forms: point-based rewards (customers earn points for each dollar spent), punch cards (buy 10, get 1 free), and membership perks (pay a fee for exclusive benefits). The key is finding the right program structure for your business and customers.
The right format for you will depend on the nature, scale, and size of your business. What makes sense for one business might not work for another. For example, online retailers might offer free shipping on orders above $75, while a local coffee shop might give you a free specialty coffee after you’ve purchased 10 drinks.
Implementing a loyalty program provides a business with the opportunity to show customers they appreciate their repeat business. Not only do they help small businesses retain customers and deepen relationships, but they also help attract new clients as well.
Why is customer retention important?
Brand advocates and loyal customers are the heartbeat of any business. In today’s competitive market, it’s simply not enough to offer great products at low prices. You must strive to build and nourish meaningful relationships with your clients with each interaction – doing so will help to create repeat shoppers. With returning customers spending 67% more than new customers, it’s easy to see why building a loyal client base is vital to your business’ long-term success.2 In addition to increasing your profit, loyal customers refer 50% more people to a business than a one-time purchaser (word-of-mouth referrals are essentially free marketing for your business).3
Why Loyalty Programs Work
A loyalty program is becoming less of a luxury and more of an expectation of consumers. Beyond helping your business stay competitive, here are a few additional reasons why it’s smart to implement a loyalty program.
- Repeat Customers Spend More – Acquiring a new customer can cost five times more than retaining an existing one. A loyalty program helps keep customers engaged, boosting repeat business and increasing their lifetime value. When customers feel like they are at an advantage to shop at your business, they might avoid shopping with competitors.
- Stronger customer relationships – Loyalty programs can help bridge the gap between a business and their customer, allowing the business to take a more customer-centric approach to operating. When customers repeatedly purchase products or services from you and are satisfied with their experience, they start to trust your brand more. As you develop new products or services, your loyal brand customers are more likely to try the new products because they have good faith in your business.
- Free Word-of-Mouth Marketing – A loyalty program incentivizes happy customers to spread the word – without you spending extra on marketing. Loyalty programs are a fun and exciting way to boost your reputation and get folks talking about why they should be seeking out your business.
- Competitive Edge in a Crowded Market – Today’s consumers expect loyalty perks. With so many companies offering some form of loyalty program, it’s no wonder 83% of shoppers say belonging to a loyalty program influences their buying decisions. Offering rewards keeps your business top-of-mind and gives customers a reason to choose you over a competitor.
4 Customer Loyalty Programs for Small Businesses
There are several types of customer loyalty programs you can draw inspiration from when creating your own. Here are five common types of loyalty programs to consider:
- Point-based loyalty program – If you have a point-of-sale system, consider implementing a point-based loyalty program. This type of program is easy to manage through your POS system and hassle-free for your customers because the system is a database for customer information. Instead of having your clients carry around punch cards, you can simply have them enter their phone number in your terminal each time they make a purchase at your business. Your POS will track and manage their rewards points automatically under their unique customer profile.
- Punch card loyalty program – The use of punch cards is popular amongst small business owners looking to establish a loyalty program. Punch cards typically look like business cards and have the business logo along with the terms of the rewards program printed on them. When a customer makes a purchase, they collect a “punch” on their card. After a certain number of punches, they can get a free goodie or special discount. For example, after a customer purchases ten specialty coffee beverages and collects ten punches, they can receive a free drink.
- Paid loyalty program – Customers like feeling special; they enjoy feeling like they’re part of an exclusive club. Offering a paid loyalty program to your customers makes them feel connected to the business and they might even feel like they’re at an advantage over customers who aren’t part of the membership. Paid loyalty programs typically charge customers a fee and provide exclusive benefits to members of the program – in a sense, this is a challenge for customers to “get their money back.” For example, if you operate a winery, you might offer a wine club membership for $100 a year. For that yearly $100 fee, members get a 10% discount on all wines purchased from your business.
- E-mail lists – Email marketing is a highly effective and relatively easy way to implement a loyalty program. You will need to keep up with creating fresh content for your emails, but this is a great way to reach your customers and get them into your business with weekly promotions, exclusive offers, newsletters, or ads to keep your business top of mind. Whenever someone signs up for your email list, offer them a discount on their next purchase to say, ‘thank you.’
How to Get Started
You know your customers better than anyone; you decide the best way to approach and design a loyalty program tailored to your business. It might take a few tries to get it right; be flexible, be open to customer feedback or suggestions, and be willing to pivot when necessary to keep the program relevant to your business and customers.
After you’ve completed your initial research, consider investing in a POS system to help manage your loyalty program. SouthState merchant services representatives can help you find the right product for your business goals. Contact a merchant services representative to get started today.
