Loyalty programs have been around for decades. Who hasn’t, at one time or another, carried around a buy-nine-get-the-tenth-free punch card from their favorite local business? Simple as punch cards are, they demonstrate a fundamental of good business: The most lucrative customer is the one you already have. According to a recent study published by the consulting firm Manta and BIA/Kelsey, it can cost up to 10 times more to acquire a new customer than to retain an existing one. Repeat customers are also the best and cheapest form of advertisement. With the rise of social media and online reviews, existing customers have only become more important. When they recommend a business, they become brand ambassadors, testifying to its quality.

INNOVATIONS IN CUSTOMER LOYALTY

Every business, from yoga studios to car washes, can benefit from a good loyalty program. The premise behind such programs is simple: retain customers by giving them something they want. Rewards have ranged from conventional discounts and freebies to outlandish opportunities like the 30-second shopping spree offered by the Washington, D.C., grocery store FoBoGro.

The retail chain Canadian Tire created one of the best examples of a loyalty program. Launched in 1958, Canadian Tire Money, as the program was called, rewards customers with paper bills that can be used on future purchases, shared with friends or donated to local charities. Every year, customers receive more than a $100 million dollars in this retailer’s “money.” According to a company spokesperson, “It’s maintained its popularity over the years in part due to the novelty and heritage associated with it, but also due to the simplistic nature of the program.”

While paper Canadian Tire money kept customers coming back, it didn’t tell the company anything about the customer. So, in October, Canadian Tire launched My Canadian Tire Money, an updated digital version of the loyalty program. As the company’s spokesperson explains, “Data from the My Canadian Tire Money program will increase our understanding of how our customers make purchasing decisions, and responsibly using that data will change the way we do business. It will help us make better decisions across all areas of our businesses including merchandising, store layouts and marketing outreach efforts.”

As the company learns more about its customers, they plan to increasingly personalize and improve the overall shopping experience — everything from offering customized rewards to individualized digital flyers and website capabilities.

For example, the retailer focused on convenience, making it possible for customers to earn e-money in three different ways: by using a registered rewards card, a Canadian Tire Options MasterCard or the Canadian Tire mobile app. And, prior to the launch of the new digital program, the app was upgraded to provide with loyalty program members in mind. Customers can use the app to manage their rewards, access great new content and view bonus offers.

LOYALTY APPS

Some small business owners may avoid digital loyalty programs, afraid that apps and other web-based programs are better suited to major chains like Canadian Tire or Starbucks. Actually, over the last several years the tech industry has been designing digital loyalty programs with the small business owner in mind. For example, Belly, a mobile app and rewards card already used by 4 million members, enables businesses to create personalized loyalty programs and easily collect customer data. Molly’s Cupcakes in Chicago, for instance, used Belly to create a unique loyalty program that helped establish the business’s reputation for fun. Customers earned points with every purchase. Once they accumulated 50 points, they received a free cupcake. With 200 points, they could smash a cupcake in a baker’s face, and 250 points got them 10 minutes to eat whatever they want in the store.

Innovative rewards such as the ones at Molly’s Cupcakes keep customers coming back because of the positive emotionally connection established. This is particularly valuable for small businesses such as car washes, which may not always offer the cheapest deal in town but can provide a far better overall customer experience. Belly marketing executive Jenny Beightol said, “It’s been proven through several studies that digital loyalty programs are not only effective in creating affinity with customers, but loyal customers are 10 times more valuable than a new customer. Belly helps businesses strengthen relationships with new guests by offering tools to decrease time between visits, incentivize behavior and increase customer value over time.”

For small business owners who might feel overwhelmed at the prospect of sifting through mounds of customer data, Belly gives its businesses access to an easy-to-use Command Center. The center is an online database where business owners can monitor how frequently customers visit, their age and gender, and even how often they shop at other nearby businesses that also use Belly. Businesses can also launch email marketing campaigns and then track in-store customer activity. “Merchants can segment their customers depending on what they want to communicate and then actually measure how many customers came in,” Beightol said.

DIGITAL LOYALTY MADE EASY

Mobile apps aren’t the only option for car wash operators wanting to launch a digital program. Thanx, a company founded in 2011, does away with both rewards cards and apps. Instead, customers register their debit and credit cards with Thanx, and when they make purchases at participating Thanx businesses, rewards are sent directly to their phones. After the initial registration of debit or credit cards, there’s really nothing else for customers to do other than make their regular purchases, and this simplicity has led to big returns for participating businesses. In fact, according to Thanx head of public relations, Kane Russell, “Thanx merchants report 30 to 50 percent increases in transaction size and in-store visits.”

One example of Thanx’s success is Mixt Greens, a small Californian restaurant chain suffering from a revenue-draining loyalty program. As reported in a case study published by Thanx, the salad chain had invested over $10,000 in plastic loyalty cards, which only 18 percent of customers still used after 6 months. Seventy-four percent of the cards had never even been registered. Because the loyalty program had never caught on with customers, it couldn’t generate any kind of reliable data, such as customer demographics or frequency of transactions. Mixt Greens switched to Thanx, and after only 18 months, the new loyalty program had enrolled 7,000 customers. Thanx had analyzed more than 90,000 transactions, representing 30 percent of total transaction volume during that time period.

Once customers buy into the loyalty program, Thanx provides the businesses with targeted and relevant content according to their demographic (age and gender), behavioral (location, time of day), and transactional (amount spent per visit, visits per month) customer data profile, said Russell. Small businesses can use this information to customize their service and marketing campaigns according to their customers’ purchasing habits — a strategy that brought Mixt Greens customers back for another purchase 54 percent faster than before.

As most business owners already know, the best customer is the one you already have. This is as true for car washes as it is for national retailers and the neighborhood cupcake bakery. For car washes, the right digital loyalty program could not only increase revenue but also provide owners with invaluable easy-to-access customer data which could then be used to develop the business further. The key is to select a loyalty program suited to your particular customer. First, choose a digital technology your customers will be comfortable with, whether that’s a rewards card, an app, or a program that asks customers to register their debit cards. Then, tailor the rewards and marketing campaigns to your customers’ preferences. At the end of the day, the secret to a successful loyalty program is the same as the secret to a successful business — keep the customers happy and they’ll keep coming back for more.