It can be hard for small to medium sized businesses to compete against the major powerhouses and big companies in their fields. In order to stay relevant, you need to find a way to keep your customers coming back and remaining loyal to your brand.

Large companies can afford to offer discounts in order to wow customers into purchasing, and so many smaller firms think that this is something that they should be doing as well.

But are loyalty schemes and discounts a strategy that your business can afford to take?

Reward your customers

By offering a loyalty program, you keep your customers returning and excited about your brand. We all know that retaining existing customers is cheaper than attracting new customers, and so it makes sense to reward their business.

A returning customer will typically spend more per transaction than a new customer. With this in mind, putting out a small cost for rewarding loyalty may pay off in terms of how you’re your customers spend with you.

By honouring loyalty, you turn your customers into promoters. Customers who feel valued are more likely to recommend your business and become your brand ambassadors to their circles of influence. This means you can increase your customer base while maintaining a healthy relationship with your existing clients.

As long as your loyalty scheme is well thought through, it should not have to cost your business a considerable amount. Make sure that you plan and budget for loyalty before your roll out a scheme – you don’t want to go into the red by offering a perk. However, you do need to make sure your system gives you the edge to rise above your competitors.

But not too regularly

To drive revenue, one of the first responses many people take is to slash prices to increase sales. However, this does not always work. For example, if you cut prices, you may prevent your customers from buying an item at full price.

As your customers know that you are willing to sell your goods or services at a cheaper rate, they may wait until your next sale. An annual sale can be something people look forward to and can actually drive sales, but when you have sales too often you are devaluing your product.

Discounting can devalue your products, making people reluctant to pay full price in future. It can be a sign that you lack confidence in a product and that it is not worth the price you command. With this in mind, you could lose your loyal customer base and only see customers when you offer discounts.

That would certainly be a negative consequence of what is meant to be a sales driver! Don’t risk it.

What rewards and schemes do you offer in your business? Leave a comment below or get in touch with us on Twitter or Facebook!

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About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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