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Ep. 15 Why a Retail Loyalty Program is Valuable

Have you ever gotten a free drink at Starbucks, earned cash back at Target, or paid a lower price for an item at Ikea? If so, you’ve experienced the joy of a retail loyalty program. 

Retail loyalty programs are valuable to consumers because they get free items, discounts, or special offers. But for independent retailers, offering a rewards program can give you valuable insights into your customers’ buying habits, retain the customers who are most likely to buy from you again, and boost your bottom line. 

Keep reading to learn why a retail loyalty program is a smart move for your store and how to implement one in your indie retail business. 

Having a retail loyalty program is incredibly beneficial for indie retailers. One of the main benefits? Customer retention, or getting customers to buy at your store repeatedly.

Repeat customers are part of your “hot” audience. They’re already familiar with you, and you know that they like what you have to offer. To keep a hot lead from turning into a cold one, you need to get them to return to your store and make more purchases. 

Not only does it cost up to 25 times more to find new customers than to retain existing ones, but repeat customers also generate up to 44% of revenue for the average indie retail store.

So how can you keep your hot customers from turning cold and generate more income for your business? By creating a retail loyalty program.

loyalty program

What is a Retail Loyalty Program?

Simply put, a retail loyalty program is a way to encourage customers to continue to shop with you. 

On a deeper level, your retail loyalty program is a key piece of your marketing toolbelt. Having a loyalty or rewards program is a smart marketing strategy! But designing an effective program takes planning—there isn’t a one-size-fits-all approach that works for every independent retailer. 

Let’s look at the nitty-gritty of how you can create a retail loyalty program that works for your store and gets customers to come back again and again.

Why Your Indie Retail Store Needs a Loyalty Program

In a 2024 case study from Snappy, 76% of American consumers reported spending more money when part of a retail loyalty program. In addition, having a loyalty program not only incentivizes customers to return, but can be the very reason that customers choose your store in the first place.

Your returning customers account for up to 44% of your sales (as is true for most independent retailers), and rewarding those customers just makes sense so you can continue to generate revenue. 

If you think about the places you shop, such as your local grocery store, Target, or Starbucks, you’re probably already part of a retail loyalty program. Who doesn’t want a free frappucino after a certain number of purchases?! 

How to Design Your Boutique’s Loyalty Program 

While larger retailers can afford to have smart phone apps for their loyalty programs, you don’t need to get quite so technically advanced. You can design a simple, effective, and revenue-generating retail loyalty program for your indie retail store—let’s dive into how.

Identify Your Ideal Customer

For your retail loyalty program to be effective in retaining and rewarding repeat customers, it needs to be appealing to them! If you don’t understand your ideal customer, they might be turned off by the rewards you choose to offer. 

In addition to understanding your customers, take a look at the data from your sales system. Look for what products sell well, then try to pinpoint why those products are popular. 

You can also sift through your data to understand your customers’ spending habits and buying trends. Some point of sale systems are able to run these reports for you, so be sure to look into the reports available to you. 

Set Goals for your Retail Loyalty Program

Next, consider why you want to set up a retail loyalty program. 

Do you want your customers to spend more? Do you want more repeat customers? Do you want them to sign up for your email list?  Or do you want their information so you have more data about your typical customers and what they buy?

All of those are valid reasons from which you could create a goal for your program. Consider setting goals related to how many customers you want to sign up for your program, how many repeat customers you have in the next quarter, or how much your email list grows after starting your loyalty program.

Choose What Type of Retail Loyalty Progam You’ll Offer

There are lots of options for your loyalty program! You could base it on quantities of certain products, create a points accrual system, or focus on the dollar amount spent by each customer. 

These options might seem better or worse to you depending on the type of retail store you own. For example, a coffee or cupcake shop might base their rewards on quantity—for every six you buy, get one free. 

A gift shop might choose a dollar amount program. When a customer spends $100, they get a $10 store credit. The possibilities are endless!

You should offer rewards that are a) attractive to your ideal customer, b) easy to redeem, and c) are easy for you and your staff to communicate. Keeping it simple will encourage customers to participate and make it more rewarding for everyone.

loyalty program

Digital vs. Paper: Retail Loyalty Program Options

There are a lot of software programs and point of sale systems that have integrated retail loyalty programs, but some independent retailers prefer an analog rewards system.

Inside Master Shopkeepers, there are store owners who prefer pen and paper order forms, spreadsheets over bookkeeping software, and manual cash registers instead of a point of sale system. As long as your system makes sense to you and is easily explained to your staff, you can absolutely do a pen and paper retail loyalty program. 

Design-It-Yourself Rewards Card

If you want to go with a traditional pen and paper system, design a rewards card for your store and print it on card stock. If you’re a member of Master Shopkeepers, there’s a Canva template inside the Lab for you. 

Using your POS System’s Built-In Rewards Program

Most point of sale systems offer a digital rewards program, however, it’s often a paid service or add-on. 

For example, Square offers an integrated retail loyalty program based on dollar values or points. The system tracks all of the information using the customer’s cell phone number, updates the customer via text with their points information after a transaction, and even sends the customer a reminder to let them know when their points are expiring.  

Adding a Rewards App or Plugin to Your POS System

Some POS systems don’t have a built-in rewards program, but they do allow for 3rd-party apps or plugins. 

With Shopify, you can create a robust POS system curated to your needs with the addition of apps. Each app provides a different tool/system that helps you improve your sales, refine your marketing, or create a retail loyalty program. 

Although there are lots of free apps available, many come at a price. The better the service of the app, the more it will cost you.

Reward Your Best Customers With a Loyalty Program for Your Indie Retail Store!

While it does take a bit of work to create an effective retail loyalty program, I guarantee it will be well worth it. Setting up your retail loyalty program will help you retain your most loyal customers, attract new ones, and encourage one-off shoppers to return again and again. 

With a well-designed retail loyalty program, both you and your customers win! You gain valuable insights that help you enhance your marketing strategies, and your customers have an incentive to remain loyal to your indie retail store. 

Resources

Timestamps

  • [04:40] What is a Retail Loyalty Program?
  • [05:39] Why Your Indie Retail Store Needs a Loyalty Program
  • [06:57] How to Design Your Boutique’s Loyalty Program 
  • [09:46] Digital vs. Paper: Retail Loyalty Program Options
  • [15:46] Reward Your Best Customers With a Loyalty Program for Your Indie Retail Store!

Connect With Kathy

Kathy Cruz is an Independent Retail Coach who helps store owners work smarter, profit more, and grow their brick and mortar businesses. 

Connect with Kathy and learn more here:

Website: www.savvyshopkeeper.com 
Instagram: @savvyshopkeeper
Mastermind Group: Master Shopkeepers

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