How to Create a Rewards Program for Small Business

Updated on December 17, 2019
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As hard as it is to come up with a concept for your company and launch it into the world, what’s almost definitely harder is keeping your customers coming back. That’s why a rewards program for small business is a great answer for so many business owners who want to gain an edge over competitors.

A small business rewards program provides incentives—like discounts and free merchandise—to your customers for their loyal business. The more they spend with you, the more they get back. It’s simple and it works. Who doesn’t like feeling appreciated?

We’ll show you the pros and cons of the different types of rewards programs for small business, different rewards options and point systems, a few rewards program technology companies to consider, and how to communicate with your customers about your programs.  


Which Reward Program for Small Business Should You Choose?

If you’re looking into a rewards program for small business, you have lots of options to chose from. Start by doing a quick mental scan of the different types of reward programs you’ve participated in over the years. Do you scan a card for discounts at the grocery store? Get a new punch on your card every time you purchase a latte at your local coffee shop? Which ones do you prefer and why?

You’ll notice that they’re all a bit different—and they all have pros and cons. So, before deciding on any one rewards program for your business, you’ll need to answer two questions of every program you examine:

  • Does this program fit into the existing point-of-sale structure of your business?
  • Is it simple for both you and your customers to use and understand?

Let’s take a look at some common options for rewards programs for small business that might work for you:

Punch Cards

The Godfather of the rewards program for small business.

  • Pros: It’s simple to use, implement, and understand. Your customer gets one punch for each purchase or amount of money spent. Gain a certain number of punches and get a reward. Customers are used to this model.
  • Cons: Collecting customer data, like email addresses, isn’t as easy since the cards are not part of an electronic system. Also, cards can get lost and lots of people prefer not to carry around extra items in their wallets. In a way, it feels archaic.

Scannable Membership Cards

The darling of grocery stores the world over.

  • Pros: It’s a great step up from the punch card since the membership card is part of an electronic system. You’re collecting customer data like email addresses and phone numbers, which you can use to share news and updates with your customers.
  • Cons: Customers are still asked to carry a card around, which may not be appealing to some.

Opt-In Email

The no-extra-cards-in-your-wallet rewards program.

  • Pros: You’re asking customers to share their email address with you so that you can send them discount and sale offers from time to time. This is a great way to announce sales, move merchandise when you have new items coming in, etc. Plus, it’s simple enough to collect email addresses through your POS system at the end of a transaction or through an iPad with a brief Google Forms survey.
  • Cons: Organization and technology is required on your end for collecting and using data. Not everyone feels comfortable sharing their personal information, so consider offering an immediate incentive for signing up (like 10% off your next purchase).

Mobile Apps

For the digitally savvy small business owner and customer.

  • Pros: You’ll most likely choose a technology partner who provides an easy to implement rewards app (think Dunkin Donuts’s DD Perks) that’s customized for your business. Many mobile payment platforms (like Square), are already integrating loyalty rewards programs into their suite of services. You can easily collect and organize your customer data and most apps provide easy ways for you to communicate with your customers via their platforms. Customers can easily see their rewards status by logging into the app and don’t have to carry cards around. 
  • Cons: Not all customers feel comfortable using apps (i.e. older generations), and it’s a much more sizable ask to have a customer download an app entirely devoted to your company. You’ll also need to come up with a program to market the app and convince customers to download and actually use it.


Choose the Kind of Rewards You’ll Offer

Remember that the cornerstone of customer loyalty is great customer service and quality. So, think of your rewards program as an extension of your already great business. You should strike a balance between offering free product, discounts, and experiential rewards.

If you’re an art shop owner, you could offer a discount on products when customer reach a certain level of points, but also offer a free art workshop for the loyal customers on your email list.

Create a Rewards Points System

Remember, the most important component of any business rewards program is simplicity. Your program should be simple to implement and simple for you and your customers to understand.

That’s why you should put some careful thought into your small business rewards program points structure. Here are some options for you to consider:

Rewards for Signing Up: You can reward your customers just for opting into your program. For example, by downloading and registering on your app, customers can receive exclusive app-only discounts and offers.

Rewards for Reaching Spending Benchmarks: Reward customers based on the amount they spend in your store. For example, a customer earns 100 points for every $5 spent. They earn a reward when they reach a certain points level.

Rewards for Types of Purchases: Customers earn points or punches for each purchase of a specific product or service. For instance, each time a customer purchases the “Gold-Level Car Wash,” they earn one punch on their card. Once they purchase a certain number of washes, they get one for free.

Pick a Platform

If you’re going the technology route for your rewards program for small business, there are many different companies out there to consider partnering with. The three things you should consider when determining which one to use are ease of implementation, cost, and customer experience. These could work for you:

Belly: Belly is one of the largest and most popular loyalty apps on the market. Customers who sign up for Belly have access to their network of businesses via the Belly app and earn points toward rewards every time they shop at one of those businesses. Business owners who sign up are given a free iPad for signing up customers, a customized rewards program, social exposure via the app, and a dedicated customer service rep.   

Fivestars: This app-based rewards program for small business helps owners craft automated rewards and promotion programs that are communicated to customers via the app and email. Owners don’t have to create their own marketing campaigns to promote their businesses.

Punchcard: Punchcard allows business owners to offer rewards and incentives to customers who are shopping near their store via the Punchcard app. It’s a unique way to attract new customers who are your area but might not have otherwise planned to visit your store.

Spendgo: Spendgo is a fully integrated customer loyalty and rewards tool targeted for the food and beverage industry. Customers who opt in are offered carefully timed rewards via the app, email, text, and in-store. Business owners can work with Spendgo to create different campaigns targeting retaining current customers, winning new customers, and reattracting old customers.

Market Your Rewards Program

Don’t forget one of the biggest rules of any rewards program: If customers don’t know about it, they won’t use it.

Make sure to have in-store signage displayed prominently—especially at POS. Include mention of it on your business website and provide customers a way to opt-in via online or by downloading the app. If you interact with customers on the phone, make sure your employees let every customer about the program and to remind returning visitors to keep using it when they check out. Employees should be kept up to date on the latest rewards so that they can incentivize customers with specific offers.


Make the Best of Your New Rewards Program

Of course, you’ll want to take advantage of what you’ve set up! Don’t forget to use that customer data you’ve collected. Your customers want to hear from you when you have company news to share, new sales, special events, and with rewards offers on special occasions, like their birthdays. But remember to keep your emails to no more than once a week (less is more in this case).

If you’re working with a technology partner, find out what marketing tools they offer. Most of them will help you create and send emails and app notifications with the latest rewards offers to your customers.

Though setting up a new rewards program for your small business may seem like a daunting task, the potential payback is huge. By keeping things simple to use, consistent with the personality of your brand, and varying your rewards offerings, you’ll have new loyal customers in no time.  

Mariah Petrovic
Contributing Writer at Fundera

Mariah Petrovic

Mariah Courtney Petrovich is most recently a director at The CMO Club, a membership organization for Fortune 500 Chief Marketing Officers. She’s written for KIPP Schools, Z Gallerie, Namale Fiji Resort, WPromote Marketing Agency, and many other B2B and B2C clients.

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