Merchant Advance Blog

Blog Article: Customer Loyalty and the Small Business

In his satirical book How to Be a Canadian, comedic author Will Ferguson identifies some of the key principles of the Canadian economy. After throwing a few jabs at maple syrup exports and beaver pelts, he riffs on the immense proliferation and use of customer “loyalty rewards” cards, often of the stamp-collecting “buy 10, get 1 free” format, as a fundamental motivator of the nation’s gross domestic product.

Judging by the fluctuating, perforated and stamp-festooned contents of many a wallet I’ve had in the past (I think I have a free haircut hiding somewhere, I just need to find it!), it seems that Mr. Ferguson may have a point. Almost any business – online or storefront, small or large, regardless of industry or niche, may benefit from building a loyal corps of customers who will return predictably to their till time after time. Offering incentives (like a free product/service delivered every so often) that add value to a customer’s purchasing decision is, of course, one way to do just that.

Indeed, so many loyalty and reward systems have cropped up that the humble punch card may look a bit dog-eared in this day and age, replaced by Foursquare, game-like points systems, QR-code enabled scanning apps like Belly, and a whole host of other digitized methods (here’s a list of twenty, each with its own snappy Web 2.0 moniker) that aim to pull customers back through the doors of your business.

The long-term application of loyal customers’ purchasing power has a measurable effect on profitability, especially for small businesses. According to a study performed by Gartner Group, a 5 percent increase in customer retention can increase business profits by anywhere between 25 percent and 125 percent.

However, building customer loyalty goes beyond the punch card (or app.) Small businesses in particular can stand out from the crowd by creating a highly welcoming, personally engaging, and comfortable environment for their patrons. I’ve kept going back to plenty of small businesses whose staff or owners took the time to get to know me, my needs and interests, and treated me like more than just a customer. People will give your business a first look because they might like the product – but the reason they come back instead of finding the same product somewhere else is usually because they like and respect the people who stand behind the business.

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