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In a recent survey of small businesses by Belly, 70% of the revenue of the small business respondents came from loyal customers, not new ones. Even if you sell something people only need once (caskets, perhaps?), there’s still the power of referral that you can capitalize on. So how do you make customers return or how do you encourage them to refer others to you?

 

One of the most popular ways to do this is a formalized program. According to the book Marketing Metrics: The Definitive Guide to Measuring Marketing Performance, it’s 50% easier to sell to an existing customer than win over a new one, far less costly too (about 5-10x less). Your existing customers already know, like, and trust you. You just need to give them reason to think of you before going elsewhere.

 

What a Loyalty or Referral Program Does

Many business owners believe their product or service is so stellar, they needn’t implement any kind of loyalty program. Providing great service will help you make an impression but, like any relationship, you need to continually invest in it. After all, buying your significant other something on Valentine’s Day doesn’t give you a “Get out of Jail Free” card for the rest of the year and that person adores you. You must prove yourself to your customers again and again.

Loyalty and referral programs take many shapes including apps, punch cards, gift cards for referrals, and discounts for return business. A customer retention strategy, such as a loyalty or referral program, can help you remain top-of-mind for customers, entice them into return purchases, and make them enjoy doing business with your business.

Tips to Remember in a Loyalty or Referral Program

These programs are incredibly important to your bottom line, and yet, many businesses are doing them wrong. According to the 2015 Colloquy Customer Loyalty Census, US households belong to about 29 loyalty programs. However, they are active (earning or redeeming at least one per year) in only 12 of them. If you’re thinking about implementing one and you don’t want to lose money on your time and effort, you must ensure your customers get value from your business for being loyal. Here’s what you need to remember:

Make It Easy to Participate

According to statistics from Bain and Co. published in the Harvard Management Update, 80% of companies surveyed believed they provided superior customer service. Turns out, only 8% of their customers thought the same. That’s a large difference. Don’t let ego, and the belief that everyone is happy with your service and product, derail you from becoming your customers’ ideal.

Loyalty and referral programs make your customers feel good about doing business with you. They encourage and reward repeat buying behavior and they place the focus on the customer, or at least that’s the way it appears to them. Take a look at 7-Eleven’s loyalty app. It works the same way a punch card does. For every drink purchased, you receive a stamp. Drinks cost very little there and it takes only 7 of them to get a free purchase. They also offer specials discounts and freebies at different times of the year encouraging shoppers to buy other items. The app OCR code is scanned at checkout and the bonus is immediately applied. There are no barriers that make it difficult to be rewarded. These type of customer benefits make 7-Eleven stand out in a sea of options.

Bring Them Satisfaction

Yes, loyalty programs are about free things for returning customers but they can be so much more. Give your best customers opportunities to enjoy advanced releases, discounts, coupons, and information others are not privy to. This not only saves them money; it makes them feel like they are part of an elite group. While they may not have the initial investment in your business, customers are the silent partner in your business’ success. Why not make them feel that way?

Improve Sales through Referral Discounts

If you sell to other businesses, referral discounts are not always that appealing because decision makers are spending someone else’s money and not their own. While employees want to come in on budget, they may not shop around like they would on their own dime. However, SizzleIt, a video production company offered deep discounts to its marketing and advertising clients to refer them to other project leaders in their agency. This made the customer look good because they were passing on information for a company they had successfully worked with, they were receiving a steep discount for doing so, and SizzleIt had confidence in the “new” customer because they were already working with another part of the company. Everyone benefited.

Remember, offering a loyalty or referral program is not a guarantee of success. You want to ensure that whatever program you draw up, it entices people to continue the relationship they have with you and gives them something they value in return. After all, you don’t want to be another plastic card that falls off of a keychain without anyone noticing.

 

Christina R. Green teaches small businesses, chambers and associations how to connect through content. Her articles have appeared in the Midwest Society of Association Executives’ Magazine, NTEN.org, AssociationTech, and Socialfish. She is a regular blogger at Frankjkenny.com and the Event Manager Blog.

She’s a bookish writer on a quest to bring great storytelling to organizations everywhere.