How loyalty programs help small retailers engage better with customers

Smaller retailers tend to have to work harder than larger, more recognisable retailers to encourage customer loyalty. The Australian retail sector is crowded, competitive, and dominated by large players with a huge network of locations and offerings, and the financial power to offer low prices or discount heavily. All of this weighs against smaller retailers who don’t have the same purchasing power or brand recognition.

However, it is possible for smaller retailers to compete effectively even in a market where the odds are stacked against them. Customer loyalty is the key. When these retailers can deliver an experience that engenders loyalty, with the return business and word of mouth that goes along with it, they can entice customers away from those larger retailers.

Customer experience is the deciding purchasing factor for three-quarters of Australians, and consumers are willing to pay a price premium of up to 16 per cent in exchange of a great experience. Research has also shown that successful loyalty programs make customers 80 per cent more likely to download the retailer’s app, three times as likely to engage with the retailer’s social media presence, and twice as likely to subscribe to email and push notifications. It seems clear that the answer for smaller retailers is to improve their customer service and loyalty programs so they can attract and retain more customers, charge a premium for their products and services, and develop a more committed following.

Unfortunately, legacy loyalty programs can be difficult for smaller merchants to manage. Furthermore, consumers have traditionally been unwilling to carry more than a few loyalty cards that are required to accrue benefits. Nearly 80 per cent of people don’t want to carry a physical membership card. Many organisations overcome this reluctance by letting customers accrue points at the checkout by providing their phone number or other details to link their purchase to their membership. However, this adds an extra layer of complexity at the checkout and can get in the way of a positive customer experience.

Once consumers are ready to finalise their transaction, they tend to become less patient than they were while browsing the store. Typically, they want to complete the transaction and leave. This is prevented by the friction created by loyalty and rewards systems that require a manual exchange of details. This inefficiency can become costly very quickly, with close to 45 per cent of customers preferring not to complete their transaction once it becomes too complex.

The recent introduction of card-linked loyalty programs has changed this forever, and has created a more level playing field for smaller or independent retailers. A card-linked program means that the simple act of paying for the goods or services accrues rewards for the customer. There is no need to provide additional information, scan a code, or present a membership card. This removes the friction that can be so frustrating for customers and lets them enjoy their experience with the retailer.

Card-linked programs are easy to set up and affordable for smaller retailers. This makes it easier for retailers to offer comprehensive rewards programs that delight customers. Rather than simply providing points that can be redeemed in-store, these programs can let merchants link to an entire ecosystem of providers who can deliver rewards such as charitable donations, cashback options, or even superannuation contributions depending on the customer’s preferences.

The game has changed for smaller retailers looking to compete successfully in a crowded market. Card-linked loyalty programs are helping them outperform their larger competitors and delight their customers without incurring significant or upfront costs.