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Entrepreneurs Get Creative With Loyalty Rewards

Oliver St. John
Wednesday, 12 Jun 2013 | 2:22 PM ET
AzmanL | E+ | Getty Images

Boring loyalty reward: 10 percent off coupon.

Not-so-boring reward: 30 seconds to grab as many goodies as you can.

The latter is no joke. It's the reward for loyal customers offered by FoBoGro, a Washington, D.C.-area convenience store. When 22-year-old Brian Smith won the 30-second sweep, he managed to raid the store's craft beer cooler and chips aisle.

There's one winner everyone talks about though, he says, and that's the guy who in 30 seconds "ended up fitting seven 24-packs of beer out the door."

This is the new world of loyalty marketing for small businesses. It's all about concocting a creative way to get customers jazzed about coming back again and again. And you don't have to be Starbucks to do it.

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Long have only large companies such as airlines, hotels and department stores had the resources to offer elaborate loyalty rewards programs, leaving small businesses with Stone Age solutions such as punch cards, incapable of rewarding much more than a free cup of coffee after the fifth one purchased.

Now with digital loyalty rewards services provided by third-party companies such as Belly, Perka and even Groupon, the little guy, like FoBoGro, can launch complex loyalty programs to compete with retail giants like CVS, Safeway or Ace Hardware.

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Before FoBoGro founder Devlin Keating got a Belly rewards system for his business, he had tried running a card-based loyalty program that awarded discounts. No one went for it, and cashiers got tired of promoting it.

Belly, on the other hand, provided an eye-catching tablet that customers use in the store to check in for five points a visit and to see how close they are to being able to cash in their points for rewards. It's the first thing you notice when you're at the cash register.

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With the old rewards program, he'd try to get people to sign up, "and they'd be like, 'Eh, whatever. What do I get? ' And we'd be like, 'Discounts and stuff.' And they'd be like, 'Yeah, whatever,' " says Keating. "Now the rewards are staring them right in the face at the counter, and they're like 'Oh my God, how do I win that?' "

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The "How do I win that?" of course, is prompted by the kooky rewards—such as the 30-second sweep—that Keating gets to think up. Other rewards include a fist bump for 15 points, a date with Keating's co-founder, Kris Hart, for 250 points, and for 500 points, a chance to invent a sandwich and put it on the menu for a week. The sweep goes for 500 points as well.

While no one's cashed in on the date with Hart yet, the point, says Keating, is to give customers something to talk about by offering rewards that no other business could.

"If we're going to stand out, we've got to be better at this than CVS. We've got to make it more fun," he says.

If there is one thing small businesses have been good at selling, it's personality, say small-business gurus. Now small businesses are using that personality edge in loyalty rewards plans.

Take AlleyCat Comics in Chicago, which lets customers punch the owner in the stomach after 50 visits. Or Bagelsmith in New York, which lets customers who've scored 7,500 points arm wrestle the owner for equity in the store. You don't see US Airways doing that kind of thing.

But maybe you will, says customer experience expert and consultant Jeanne Bliss. As technology helps businesses run more efficiently, they can also feel more impersonal. Even big businesses are realizing that they need to start interacting with their customers on a more personal level.

Which is more memorable, she asks, a coupon you get from using your loyalty card, or that time you punched the comic book guy in the stomach?

"So much of what people call service is this automated impersonal stuff," says Bliss, CEO of Customer Bliss. "But they're realizing it's human beings that they're trying to connect with."

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"You don't go to your favorite coffee shop because they give you $2 off of your bank statement," says Belly CEO Logan LaHive. Belly not only provides a program, but advises businesses on creative rewards offerings, telling business owners what's worked in the past for other Belly businesses, and what hasn't.

The digital rewards programs from Belly and others also track exact data about the rewards, showing businesses which of their rewards are most popular, and at what times.

They also give businesses data that lets them track peak traffic times and predict big rushes. For example, Keating now knows that he's going to get a big rush of college kids cashing in all their points at the end of the school year.

It's not always pretty. Especially when it comes to the reward where you get to create a sandwich and put it on the menu, says Keating.

"I got to be honest. The last one this last guy made had ham, pulled pork and bacon on it. And Craisins. It was a terrible sandwich. It was just horrible, but we put it on the menu and to be honest, it sold. I think he was telling his friends to buy it."

—By Oliver St. John, USA Today

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