Small Businesses Turn to Loyalty Plans
Thursday, April 26, 2007 
Page: IS5 | Section: Loyalty & Its Rewards | Source: For CanWest News Service

While Coral-Lei Schweigert, a kinesiologist in Surrey, B.C., is already inclined to shop at Choices Market because of the retailer's selection of organic food, the store's loyalty card is the clincher.

For each 2,000 points Ms. Schweigert earns, she gets $20 off her grocery bill.

"It always feel good to have cash off,'' says Ms. Schweigert. "It was an incentive right from the get-go."

With seven stores in the greater Vancouver area, Choices is an example of how small businesses are starting to add loyalty programs to help retain customers.

A long-time staple of large corporations, loyalty programs are showing up in everything from coffee shops to retailers --even online.

Spa Boutique, an online retailer of beauty products based in Vancouver, opened its Web site for business 11 months ago and added a loyalty program five months later. Shannon Yelland, the firm's online Web marketing manager, says they're already seeing results.

Since the retailer integrated Spa Boutique's loyalty program with the monthly e-newsletter it sends to customers, re-orders and loyalty redemptions have jumped 20% in the last two months, Ms. Yelland says, and online orders in which a customer opens an account rather than proceeding directly to the checkout have increased 30%.

Ms. Yelland designed and tailored Spa Boutique's loyalty program to engage its customers and attract their attention. She branded the program to reflect her business, offering different levels such as Spa Princess, Spa God and Spa Royalty.

"Gold, silver and bronze are so boring,'' she says.

Ms. Yelland also advises keeping the rewards simple. Cash back for future orders and additional points for higher levels work well.

"You are not Air Canada and don't have the resources to man this program like them,'' she says.
Nonetheless, Ms. Yelland sees the value in the firm's loyalty program and spends a lot of effort putting it out in front of customers. She has a system in place to remind the customers of the program monthly when they receive their balances, has integrated the program with contests and customer satisfaction surveys that offer extra points, and on each page of the Web site ensures the loyalty program is front and centre.

For a small business, Spa Boutique's program may be on the more sophisticated end of the scale, but Ms. Yelland insists it wasn't difficult to assemble. She says they found software they had to purchase, install and configure themselves and which plugged into their online store.
That said, Ms. Yelland notes that some small businesses without an in-house Web master or their own online store may want to use a third-party solution. The latter is easier to use but will incur a monthly cost.

On the other end of the spectrum, a small business loyalty program may be simple as Java Moose's. The Saint John, N.B.-based coffee chain offers what these days is a must for such shops: a loyalty punch card good for free coffees after a specified number of purchases.

"I realized there's a lot of loyalty programs out there,'' says Java Moose owner Randy Pederson, "but, believe it or not, 10 years ago they weren't that prevalent."

Originally, the program was as simple as passing out coffee cards and initialling them each time a consumer bought a beverage. But as the chain grew from one shop to four, things became a little more complicated.

Now the shops use a special key-punch for the cards to prevent customers from initialling their own cards. And the cards cover everything from the average cup of joe to a number of specialty coffees, as well as hot chocolate.

"The perk at the end of the trail is the product the customer wants,'' Mr. Pederson says.

Rob Wilson, a professor at Ryerson University's School of Business Management in Toronto, says loyalty programs for small businesses can be useful.

"I think it can be part of an overall marketing program," he notes.

But he says small-business owners should keep in mind such fundamentals as service and product pricing.

If firms do introduce a loyalty program, Mr. Wilson says, they need to ensure the reward is of value to the customer. Coffee shops could give customers DVDs for each 10 cups of coffee, he says.

"But if your customer base doesn't give a darn about DVDs, then your program really has no value."

- 30 -