This article is contributed by Spencer Hoffman, Vice President of Sales and Product at POS Nation. Spencer dives into four actionable next steps for creating a loyalty program for your customers – and how that can benefit your small business. 

For any organization that sells goods or services directly to the public, a growing base of loyal repeat customers is like the holy grail. It can unlock fantastic growth potential to help you generate more revenue and meet even more customers over time.

A loyal customer base is especially important for nonprofits and related organizations like social enterprises that sell goods or services. Nonprofits rely on a mix of sometimes unpredictable revenue streams—individual donations, major gifts, sales, grants, and more. To stabilize and consistently grow your sales revenue, we recommend creating a customer loyalty program.

As we’re headed into the summer, now is the perfect time to take stock of your strategies and develop new ones for the remainder of 2022 and beyond. If a customer loyalty program sounds like the right move for your organization, understanding its benefits and best practices will be key.

The Benefits of Customer Loyalty Programs

You’re likely already familiar with customer loyalty programs at some of the retailers you personally frequent. Their most common form is punchcards or automated systems that track your purchases and let you know when you’ve earned a reward or discount to redeem.

For organizations, the benefits of instituting a loyalty program can be significant:

• It encourages customers to keep returning to make purchases so that they can earn rewards. This boost in sales can give you steadier revenue, making it easier to grow your business and impact sustainably over time.
• Growing and engaging your base of loyal customers can help increase word-of-mouth marketing, as happy customers who’ve made your organization a regular part of their lives mention it to friends and family. This boost in your name recognition can also generate increased foot traffic over time depending on the location/nature of your business.
• Plus, when you make an effort to genuinely connect and engage with your community of repeat customers, you can rely on their feedback as you experiment with new offerings.

These are similar to the benefits of a donor membership or recurring donation program. These foster increased engagement from a base of donors to create more stabilized revenue streams and to help you better focus your attention on higher-ROI activities. Specifically, engaging and growing your relationships with those who are already committed to your organization.

Depending on the nature of your organization, a customer loyalty program, membership program, recurring donation options, or some mixture of them can all be excellent choices. Get creative to come up with the right configuration for your organization. For instance, you might try implementing a loyalty program as a way to increase sales and funnel customers towards your higher-tier membership over time.

Our Top Tips for Building a Customer Loyalty Program

As mentioned above, building the right loyalty program for your organization will require a bit of creativity and tinkering. You’ll need to think carefully about your business, brand, customers, and their motivations.

However, there are a few tried-and-true best practices you can rely on to get started:

1. Offer customers real value in exchange for their loyalty.

First, make sure your customers have real incentives to sign up for your program and keep returning over time.

Think about why customers choose to visit your business in the first place. What about your organization stands out in the community? What is special about your organization’s brand and identity? Lean into these insights as you consider different loyalty perk options, like:

• Special discounts after reaching a purchase threshold
• Free items or prizes after reaching a purchase threshold
• Birthday or sign-up anniversary discounts or freebies
• Discounted or eliminated sign-up fees for your higher-tier membership program
• Access to special in-store or online events or online resources

These are just a few common examples, but the key is to tweak them to fit your unique business needs and your customers’ motivations. And if you offer discounts or freebies, be sure to do a bit of math. Calculate your average transaction amount for the segment of customers you’re targeting, and compare it against any purchase thresholds and the value of the rewards you’re offering.

2. Actively promote your program to the right people.

Your organization’s time and marketing dollars are limited, so focus first and foremost on promoting your loyalty program to the right candidates.

Loyalty programs enable you to more easily focus your attention on a set of customers who’ll stick around for the longest period of time and engage with your business more often—and who will therefore generate the most ROI. This means you’ll need to define exactly who those highest-ROI customers are so that you can target your program towards them.

Study your sales data to learn more about your repeat customers. What do they typically buy? How much do they typically spend per transaction? What are your highest ROI items or services sold? Use these insights to develop a persona of your ideal loyalty program member.

Later, once your program is up and running, you can use member signup data to learn even more and keep refining or expanding your personas. For instance, use birthdays to determine the average age of different segments of repeat customers, or use addresses/ZIP codes to determine the locations of your most valuable members.

Of course, a broader promotional strategy can still help, especially if it doesn’t take much extra time or money to implement. A point of sale system that automatically reminds cashiers to ask customers if they’d like to sign up is a great example. Bonus points if the POS system then makes the signup process as quick and easy as possible, too!

3. Use point of sale software with built-in loyalty options.

Speaking of software, your organization’s POS system can play an important role in the success of your loyalty program and customers’ experiences with it.

Point of sale systems with built-in loyalty tools can completely streamline the day-to-day management of your loyalty program. Your software should be able to:

• Automatically track new member purchases
• Easily create new member profiles upon signing up
• Remind cashiers to tell customers about the program
• Notify the cashier and/or customer once they’ve reached a reward threshold
• Be easily customized to support the specifics of your program

Although there are standalone loyalty tools out there, one that’s built into or integrates with your POS system will be the best choice. This will ensure that actually engaging with the program is as seamless as possible for both staff and customers.

And to generate the most value over time, we also recommend using software designed with your type of business in mind. Nonprofits and social enterprises like markets, thrift shops, and specialty retail stores have unique needs. Their POS tools should have unique features and customization options that truly meet those needs rather than requiring the business and its staff to use inconvenient or confusing workarounds. For examples of what to look for, check out our top picks for thrift store point of sale software.

4. Use your loyalty program to build community.

Finally, remember that the benefits of your loyalty program can be deeper and more long-term than just boosting revenue from repeat customers. Building a real emotional connection with those customers and growing a community around them can be a huge asset for your mission.

Use the loyalty program as a springboard to keep customers and supporters involved beyond encouraging them to make repeat transactions. Continually engage with them other mission-related offerings and activities. For example, you could:

• Host special events for program members or the public
• Give program members special access to unique products or behind the scenes tours of your work
• Partner with other local businesses and nonprofits to share visibility
• Attend local festivals, farmers markets, or craft fairs
• Encourage program members to post or share messages about your business online

Combined with the loyalty program’s perks and rewards, the feeling of being involved in your mission can be a powerful motivator for continuous engagement. For example, a nonprofit that runs a food pantry and cafe could create free members-only cooking classes by partnering with other local vendors or ask supporters to volunteer to run its farmers market booth and solicit donations.

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Nonprofits and social enterprise businesses face the dual challenges of generating more revenue and engaging their supporters. Developing a customer loyalty program can help you tackle both challenges at once. It can immediately help to boost repeat business while simultaneously laying the foundation for an engaged, supportive community around your mission.

Just think carefully about your business, brand, customers, and what motivates them to visit you. Get creative to find the perfect combinations of rewards, promotional tactics, technology, and community-building ideas and you’re sure to see positive results.