Canadian consumers like getting a little something extra when they spend their hard-earned money.
About nine in 10 Canadians actively use some kind of loyalty program to collect points or miles, according to a 2013 study by the Canadian research firm Abacus Data. Air Miles, Shoppers Optimum, Petro-Points and PC Points were among the most popular programs.
Whether it's a free flight, a discount at the till or a latte on your birthday, Canadians are clearly accustomed to being rewarded for their purchases.
With this in mind, many small business owners wonder whether they, too, should implement a loyalty program to reward (and retain) customers. But is a loyalty program really worth the time and investment for a small enterprise?
"A loyalty program allows you to speak to your customers more regularly and deliver messages that are relevant to their needs," said Dean Mailey, founder and president of Fusion Communications Group, an advertising firm based in Vancouver. "It allows you to deliver the right message to the right person at the right time."
A well-executed loyalty program can help businesses leverage their marketing dollars. Instead of broadly marketing to everyone, as with traditional advertising campaigns, a loyalty program helps you capture the community of shoppers who already know your company, Mr. Mailey said. Offering rewards to them can encourage repeat visits and larger baskets.
"Today's retail climate is exceedingly competitive, so I think anything a business does to demonstrate to a customer that they care and they're paying attention is incredibly important," he said.
Simply wishing a customer happy birthday can be a loyalty program. "When we receive an e-mail with that message, it causes us to feel favourably about that business," he said.
Rewards programs can be decidedly low tech. Some businesses opt for simple punch cards offering a free item or discount. Another low-cost option is forming a partnership with a like-minded company, Mr. Mailey said.
"A clothing store could form a partnership with a local restaurant. The two of them could work together, like, 'Come in and buy a suit, then take your wife out to dinner at this restaurant.' These types of non-competitive, cross-promotional platforms can be very successful," he said.
Small business owners willing to spend more can buy into an existing loyalty program – a "turnkey" operation where another company does all the work.
Fiona Lake Waslander is the general manager of Vicinity, a retail loyalty program specifically designed for small businesses, introduced by Rogers Communications last year. Vicinity installs software and a "near field communication" (or NFC) scanner at the businesses' point of sale.
Sales clerks then offer customers Vicinity cards, which they can get simply by providing a phone number. Each time customers visits the business, they tap their Vicinity card on the scanner and their profile comes up. Customers get spend-based rewards, and business owners can offer discounts or incentives via e-mail and text messages.
For businesses that don't interact with customers frequently, the program can be set up based on referrals. At a mattress store, for instance, customers could rack up their referrals between purchases, and earn a 10-per-cent discount when they want to buy another mattress, Ms. Lake Waslander said.
Spoonity, an Ottawa-based startup, offers a rewards program where customers can use a swipe card or their smartphone to both pay for their purchase and collect points.
"The challenge a lot of medium-sized and small businesses face is you've got competitors like Starbucks that are investing heavily into their loyalty and quick-pay program," said co-founder Max Bailey. "Companies like ours come in so they can have the same competitive level as Starbucks, without having to make that huge investment."
But consider technology options carefully, advises Brent Purves, an Internet marketing coach and CEO of Stir Communications Group in Vancouver.
"A tool that's too expensive, too hard to set up, or too hard to self-manage will be a disaster for a small business owner," he said. "Explore all the options a tool has to offer. If they offer a free trial, use it. Run a small test program. Make sure the tool has great tracking options and includes a data collection component, one that will help you collect and track opt-ins to grow your database."
Mr. Purves takes a different approach to customer loyalty – he helps his clients craft and execute rewards programs in the online world. The difference between online loyalty programs and traditional ones is that they reward behaviours beyond simply "buying," Mr. Purves said.
"Those behaviours might be liking a Facebook page, commenting on or sharing a Facebook post or tweet, signing up for an online newsletter, joining an e-mail list, entering an online contest or sweepstakes," he said. For example, someone who "likes" a company's Facebook page or shares a post with their friends might receive a discount on a product or service.
If done well, said Mr. Purves, a successful online loyalty-rewards program can build brand recognition and buzz, drive Web traffic and increase an online fan following, which will ultimately translate into an increase in sales. Marketing agencies can help with proper execution, he said.
If a business doesn't have the time to devote great customer service and feedback to a loyalty program, it shouldn't do it.
"If customers sign up for a loyalty program and then feel unsupported or unheard, it'll be disastrous," Mr. Purves said. "Unhappy customers are exponentially more likely to post negative comments online than satisfied customers, and that can spread like wildfire.
"If that happens, the result of the program will be the exact opposite of the hoped-for outcome."