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Grow Your Business Sales & Marketing

Should I Offer a Customer Rewards Program?

Airlines do it. So do Starbucks, Barnes & Noble and just about every restaurant chain in America. Even credit card companies have customer rewards programs designed to foster loyalty among their best customers .

So, it stands to reason that you might want to consider instituting some kind of customer loyalty program for your small business , right? In a word: No.

No good evidence

“There’s very little evidence that customer rewards programs actually work,” said Professor Michael McCall of Ithaca College. He should know. McCall has been studying loyalty programs for a long time and he did some heavy duty research to determine what makes for a good program and what doesn’t.

“The most successful programs figure out what the customer values that doesn’t cost the company a lot,” McCall told BusinessNewsDaily. In reality, though, most companies say they offer rewards programs because they have to keep up with their competitors, not because they actually work, McCall said.

“Most of the people I’ve spoken to say they have these expensive programs in place because everyone else does,” McCall said.

One reason loyalty programs fail to build business: They don’t usually focus on the most valuable customers. Instead, they focus on rewarding the most frequent ones.

With airlines, for example, the customer that takes the most flights, even if they’re the cheapest, earns the most miles. Customers who fly first class and spend more, albeit less often, don’t get the same kinds of rewards.

McCall thinks that small businesses may be able to achieve customer loyalty through the use of good old-fashioned customer service.

“The idea is to use these programs to develop relationships and foster engagement,” said McCall. “You can probably do that by making an effort to remember your customers’ names and what they purchase.”

Problem-solving cements bonds

Exactly what kind of customer service will translate into loyalty is not, necessarily, common sense, said Ray Miller, owner of The Training Bank, a consulting firm based in Toronto.

Miller explained that there are, of course, the cornerstones of customer service – responsiveness, reliability, knowledge. And while they are all essentials, there are other opportunities for businesses to build real loyalty among customers.

“Customer service should be focused on the customer’s agenda, not on the businesses’ agenda,” Miller said. “Following a script provided by the company does not have the goal of making it the best customer experience in mind.”

Miller calls this the “Supersize Me” syndrome in which employees are instructed to try to upsell customers or follow a similar pattern of questioning rather than focus on solving a customers’ problem .

Solving problems, in fact, could be the biggest loyalty builder of all. Miller cites some statistics that have been around a while but still appear to be holding true.

“Research shows that 83 percent of customers say they will do repeat business with a company if they’ve shopped there and had no problem,” Miller said. “If they have had a problem and the company was able to resolve it in a fast and effective way, more than 92 percent said they would return.”

By solving the problem, the company has effectively proven it’s loyalty to it’s customer by standing by its product or service. That, Miller and McCall agree, is the best – and least expensive – way a small business can build a customer base that is willing to return again and again.