Proven Ways for Small Businesses to Build Customer Loyalty

Establishing loyal customers will grow your sales while reducing your marketing expenses. Learn the best strategies for building customer loyalty for your small business.

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There is a difference between repeat buyers and loyal customers. The former regularly buys from you, while the latter does the same even though your competitors’ products or services may be cheaper or better.

You want to pursue the latter, of course. After all, the more loyal customers you have, the more predictable and established your business becomes.

The excellent news is that nurturing customer loyalty doesn’t have to be rocket science. By putting together sound customer retention strategies, you can foster customer loyalty and be on your way to Revenue Wonderland.

Overview: What is customer loyalty?

Customer loyalty is built on trust. It is a deep relationship between customers and companies forged through meaningful encounters often initiated by the brand through showing genuine concern and a sincere desire to help its customers.

Just like any meaningful relationship, customer loyalty isn’t built overnight. You need to show care, create a sound plan, and foster a reliable and repeatable strategy to produce an excellent customer experience. The more pleasant your customers’ experiences are, the higher your customer retention rate becomes.

3 benefits of investing in and building up customer loyalty

Loyal customers can do wonders for your small business. Below are some of the benefits you can enjoy for putting a premium on customer loyalty.

1. Generates sales while spending less

Selling to existing customers is easier and less expensive. You don’t need to educate them about your products; they’ve already bought and used them. You don’t need to prove your trustworthiness because they’ve already experienced it firsthand.

The same can’t be said if you’re trying to win new customers. You still need to establish that your company is legit and that your products are easy to use and worth purchasing.

Studies show that acquiring new customers is five times more expensive than retaining existing ones. This highlights why investing in brand loyalty is essential. Not only is it good for sales, but it works like magic on cost reduction, too.

2. Better conversions and sales

Loyal customers can spend 70% more than first-time buyers. The main reason? Trust.

These customers are likely to return to your store, purchase more, and recommend your products to friends and family. All these can boost your referral traffic, increasing conversions and sales opportunities.

3. Gain valuable feedback

Loyal customers aren’t indifferent to the brands they support. They talk about them on social media, blog about them, and take the time to share valuable feedback to the company about the product or service they received.

New customers, on the other hand, often do not care enough to share their feedback. As far as they’re concerned, it might be their first and last purchase or interaction with the brand, so there’s no point in investing time to share what they think of your products.

How to create a customer loyalty program

When implemented correctly, reward programs can draw in new customers and skyrocket your sales — after all, they nurture customer loyalty. Consider these initial steps for building an effective customer loyalty program.

1. Have a firm grasp of your customers’ characteristics

Create a loyalty program that resonates with your audience. Do this by offering customer rewards that your shoppers love. To know what’s important to your customers, use these tips:

  • Track customer behavior: Monitor customer behavior to learn about their buying habits, preferences, and needs. Use the information you obtained to come up with a satisfying and rewarding prize for your loyalty program. For instance, if you’re seeing more people buy through your mobile app, offer reward points to customers when they purchase that way.
  • Tie customer feedback to your loyalty program: Offer rewards for non-transactional customer engagements, such as giving testimonials about your brand or completing customer satisfaction surveys. Doing so encourages your customers to participate, which puts you in a better position to learn more about them.

2. Choose a loyalty program that best aligns with your brand image and objectives

You can build on and develop basic types of reward systems based on your customers’ and business’ needs. Here are some of the common types of customer loyalty programs.

  • Points program: For each purchase, customers earn points they could use for future transactions in your store or other types of incentives. If you’re using Shopify, set up a points program with plugins, such as S Loyalty, to reward customers for purchases and referrals (among others). The plugin lets you build your rewards page easily using themes and editing tools.
An image showing the rewards page editor using S Loyalty for Shopify.

Build points systems quickly by integrating a rewards program plugin to your e-commerce platform. Source: Shopify software.

  • Paid programs: For customers to join this VIP list, a one-time or annual fee is required. Entice consumers to participate in your program through member-exclusive rewards and other unique benefits.
  • Tier programs: Tiered programs offer different incentives based on specific milestones. The milestones are usually measured in dollars, so the more your customers spend, the higher the tier they enter and the more valuable the rewards they get.

Not every type of client retention program can work for your business. Use one that resonates well with your customers so they won't think twice about participating.

3. Specify the type of customer behaviors to reward

Base your rewards on interactions that help move your customers along your conversion funnel.

Consider these action-based rewards when building your customer loyalty program.

  • Offer more reward points or exclusive discounts to customers who purchase during non-peak seasons. This encourages them to buy more even on slow days.
  • Reward customers when they refer other people to your loyalty program. This motivates them to spread the word about you, allowing you to generate more website traffic.
  • Provide incentives when customers interact with you on social media, such as following your pages and liking or sharing your posts. It’s a great way to increase your audience engagement and build connections.
  • Incentivize specific products or purchases that exceed a certain value to help you sell particular items quickly while encouraging repeat business.

4. Segment your customers

Instead of creating generic loyalty programs, customer segmentation allows you to personalize so your programs become more relatable and enticing. Segmentation also lets you tailor your program’s mechanics to your customers’ preferences, letting you send the right message at the perfect time.

5. Use a customer loyalty program software

Use robust and feature-packed software to streamline your customer loyalty program. With the right software, you can track your results and tweak and optimize your campaigns.

Also, be sure to use intuitive software. If your loyalty programs are housed on software that's complex and clunky, you immediately discourage your customers from participating.

Customer loyalty examples

Take inspiration from these well-executed customer loyalty programs.

Starbucks Rewards

Starbucks' app-based loyalty program inspires customer loyalty and helps the company collect customer data to refine its marketing and sales strategies.

The image shows the three steps to joining the Starbucks Rewards program.

Encourage customer loyalty program membership with an easy sign-up process




It’s a great example of incentivizing customer purchases, centralizing transactions, and learning more about customers to improve your loyalty program and marketing approaches.

Sephora Beauty Insider Program

Beauty brand Sephora exemplifies using a loyalty program to build connections with shoppers through a private community. The brand’s Beauty Insider program offers different reward types that appeal to its customer base, from membership discounts to product samples and events.

The screenshot shows the different types of Sephora’s loyalty program rewards.

Inspire brand loyalty via reward offers that appeal to your customer base




The program also nurtures a community, a space for beauty lovers to get inspiration and tips from other members. It’s an excellent way to build communities, keep customers interested in your products, and build loyalty.

Grow your loyal customer base

You don’t always need to fight tooth and nail to generate sales. Your loyal customer base is more than willing to support you by telling its network about your products and buying. That’s why you need to grow your loyal customer base — you gain so much from having them.

Build upon the tips shared above. As you personalize and implement the strategies to fit your business dynamics, you are bound to generate more sales.

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The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.