Small Business

Beyond Groupon: Strategies For Long-Term Customer Loyalty

Carolyn Horwitz|Special to
Exchanging Money
Michael (Mx5tx)

The key to growing a healthy business in a tough economy is to have a base of repeat customers providing a steady stream of revenues. That was the promise of daily deals sites such as Groupon and Living Social.

And while many small businesses have sought new avenues of exposure through such sites, some have found that such campaigns attract bargain-hungry consumers who use their coupons and never return, leaving small business owners short of both stock and cash.

Are there better ways to generate customer loyalty? We asked small business owners to tell us their best strategies for bringing in customers and keeping them coming back. While some of these tactics are tried and true, don't discount them. Good, old-fashioned customer service is what can differentiate your business from the big guys.

Offer a cash discount. Credit card processing fees can eat into your profits. Let your customers know that if they pay with cash, you will pass the savings on to them. Gas stations have routinely done this, typically offering discounts such as 10 cents less per gallon. Now, restaurants, dry cleaners and other service businesses are getting in on the action, offering flat or percentage-based discounts. For example, some therapists at Massage Works Healing Center in Littleton, Colo., will take $5 off a treatment for cash payments.

If you offer a cash incentive, make sure to note it in marketing materials and on your website and social media profiles, and list your business with a directory such as

Get your game on. There’s a new factor in mobile loyalty programs: fun. Gamification is the latest wave in customer retention, allowing businesses to extend their reach and to better monetize their websites.

Location-based social media platform gives merchants the chance to reward frequent customers who “check in” via the service to become “mayors.” Other mobile gaming programs, such as SCVNGR, allow consumers to win prizes at participating locations by completing challenges, such as posting a photo of their meal to Facebook. Prizes may include free goods or discount codes.

These games do more than foster loyalty; they encourage user engagement and social media activity—essential for building your brand.

Implement a card-based loyalty program. One of the simplest and cheapest ways to reward your customers is to print up a punch card offering a free gift after a certain number of purchases. Coffee, sandwich and frozen-yogurt shops; nail salons; car washes; and recreational businesses all use such enticements.

You might also try the strategy employed by Vito, a restaurant in Santa Monica, Calif. In its 30-plus years in business, the Italian restaurant has drawn legions of neighborhood regulars, who come back not just for the famous Caesar salad and old-school service, but because Vito rewards them with a card entitling them to 30 percent off all food and wine—for life. It’s a generous offer and a constant reminder to the locals that their patronage is appreciated.

Go digital. Punch cards too retro? Consider digital loyalty programs. These not only reward your customers, they help you by automatically keeping track of sales information and offering insight into spending patterns.

New mobile services are integrating loyalty programs with QR codes. Some companies provide customers with a personal QR code, tied to a credit card account, that they can scan to make payments at participating merchants, receiving credit dollars that can be applied to future purchases. With other services, QR codes are printed on receipts and can be scanned by consumers using a free app, enrolling them in loyalty programs. QR codes allow customers to interact with their rewards accounts and engage with your brand online, and they allow you to create customized rewards based on consumer preferences.

Support your community. Corporate-weary consumers are eager to patronize local businesses. Do your part by utilizing local vendors and products. You may want to institute a reciprocal program with a nearby business to use each other’s goods or services and to note the relationship in advertising, signage or marketing materials—letting customers know that their purchase supports not just your business, but the community at large.

Chefs especially are keen to buy locally; it shows that they use the freshest ingredients and are working to reduce their carbon footprints. For his pop-up eatery Le Comptoir, Los Angeles chef Gary Menes used produce and eggs from the Growing Experience, an outreach program for inner-city youth in nearby Long Beach, Calif. “It’s about getting more local, finding home farmers or urban farmers around your area,” he says.

Follow up with a call. A follow-up phone call after a service visit or major purchase will always be appreciated; it lets your customers know that they remain a priority even after the work is completed and the bill is paid. Thank them for their business, inquire if your work or product met with their satisfaction and ask if they have questions or if there’s anything else they need. Just think of the minute or two you spend on the phone as an investment in future sales.

Send a note. Luxury retailers have been doing it for years: sending handwritten thank-you notes to regular clients. It’s an effort that makes customers feel special and will keep them coming back to you. A personal email may work, but a handwritten note has more impact.

Ask for your customers’ mailing address or email when you see them, add an email sign-up link to your website, or put out a bowl for business cards, offering some small prize in return. You might also ask customers to fill out a form with contact information, product preferences and date of birth.

Send a note after a significant purchase and on major holidays and birthdays. Just remember: Your customers have entrusted you with their personal information—don’t abuse the privilege. Keep your correspondence significant and to a minimum, and make it clear that you won’t resell names or data.