Small Business Loyalty Programs – Giving Back to the Oft-Ignored SME Segment

For too long, the SME segment has been underserved, with companies doing little to cater to the needs of this extremely important and valuable group of customers. Some companies have begun to take heed, launching loyalty programs customized for this segment across numerous different sectors…

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Companies have long aspired to have a fully loyal portfolio of customers. In such a scenario, a company would have practically no churn, would receive minimal to no complaints, would be able to make errors on client accounts and get away with it, would be able to increase fees and rates all the time, would have full share-of-wallet, and, to boot, would have an army of advocates touting the company to anyone who would listen.

Making a customer loyal, however, is extremely difficult. It involves having a very competitive offer in place (be it from a quality or price perspective), providing an excellent level of service, and time – customers can’t be turned loyal overnight. Moving a customer from the skeptic zone to the advocate zone requires that the numerous interactions he or she has with the company over a given amount of time are as satisfactory as can possible be. These interactions we speak of can be the straightforward ones (i.e. the customer being addressed by his or her name as soon as a customer service representative answers the phone) or the exceptions (the way in which a grievance the customer has is handled) – across the board, companies must manage the entire customer lifecycle.

From companies we’ve examined across numerous different sectors on this issue of client relationship management, we’ve seen one common theme – that SMEs are relatively ignored. Be it in telecoms, banking, retail, hospitality, or a range of other sectors, companies focus most of their efforts on two general segments – consumer and enterprise.

For the consumer segment, companies constantly come up with customized offerings, manage a loyalty program, and differentiate their high-net worth customers, among other activities, to boost consumer loyalty. For the enterprise segment, dedicated customer service representatives are assigned as well as significant discounts given based on the size of the relationship. The SMEs, unfortunately, get lost in the shuffle – too few as a group to be as important as the consumer segment, too low in value individually to be treated like the enterprise segment.

This management approach is detrimental to the bottom line. SMEs are of the utmost importance and need to be treated as such. Let’s use an example to make this clear – The UK SME market is comprised of 1.2 million businesses, representing not only 99.7% of all businesses in the UK, but also 56% of the UK’s workforce. The SMEs in the UK also account for £2.4 trillion in sales, which is half the sales of companies in the UK. While no one SME in and of itself may seem of significant importance to a given company, the collective value of SMEs is undeniable.

Two separate phenomena also require SMEs to be treated as a highly important segment – first, some of the SMEs will be enterprises in the future, and will generate significantly more revenues for any given company – capturing such SMEs’ loyalty today will ensure value is retained in the future. Second, the experience of individuals as employees of a given SME reflect on their decision making process as members of the consumer segment. Poor experiences they may have with a bank or a telecom at the workplace, for example, will directly influence their decision making process as individual consumers. Considering that over half of the UK’s workforce is employed by SMEs and the influence the SME segment can have on the consumer segment becomes all too clear.

Some companies have quite clearly realized the importance of the SME segment and have taken tangent steps to deepen their relationship with small to medium-sized businesses through offering SME-only loyalty programs. Some examples that can be found from around the world include:

  • Emirates Airlines’ Skywards Business Rewards Program: Designed for SMEs with 80 or fewer employees, this program clearly aims to please not just business owners but their employees as well – the program generously gives the organization Business Rewards Miles, while also giving the employee his or her Skywards miles, for every flight flown with the airline. The program also allows for the easy centralized management of all bookings for the entire organization in a secure online atmosphere.
  • Verizon’s Business Link Rewards: This program provides businesses with points in exchange for their spend on phone, internet, or FiOS services, with the only requirement being that $125 must be the minimum bill each month to qualify for the program (essentially requiring the consolidation of several of the above mentioned telecom services, or at the least significant spend per category). SMEs can then redeem their points via a rewards catalog that focuses on business-related freebies (i.e. office furniture, dinner vouchers, travel vouchers, etc., all benefits meant to make the business appreciate their rewards as a workplace).
  • American Express Business Gold Rewards Card: In Canada, American Express offers a card designed specifically with SMEs in mind, giving not just points to cardholders and the SME that can be spent on a range of benefits (i.e. convert points into airline miles with Delta, Continental, or Cathay Pacific, or into vouchers to be spent on Apple or Sony products), but also discounts to business-related vendors, such as Hertz and FedEx.
  • Canada Post VentureOne Rewards: Aimed at fighting off the likes of FedEx and DHL by appealing to the bottom-line of SMEs, Canada Post has a program that gives members instant discounts on the various delivery services it offers. No bells or whistles built in like other programs, the VentureOne program has a few partners that provide discounts as well to members, such as SageSpark, an IT company providing computer repair and IT optimization solutions.

When designing and launching an SME segment-focused loyalty program, there are several differences that must be taken into account, differences that set such programs apart from those designed for use by the consumer segment. In addition, there are some must-have features that are common features of best-in-class programs. We recommend the following points be taken into consideration in any SME loyalty program design effort:

  1. SMEs have a much greater reliance and place more value on benefits that are relevant to their workplace, hard and soft. Hard in terms of a benefit that will reduce their overhead (i.e. free telecom minutes or airline miles, courier or office supply discounts, etc.), soft in terms of access to benefits that can boost morale in the workplace (i.e. earn xx number of points and dinner for you and your employees is on us). Testing out different concepts with one’s own SME customers is a proven method for ensuring the right benefits are offered, as different companies in different segments have different types of SMEs as their customers.
  2. Benefits must be built in for both the SME owner and the employees themselves. This not only ensures an SME-wide engagement in the program and thus a greater level of loyalty than that which would only be achieved through winning over the SME owner, but also builds loyalty for the employees, which can be translated into a relationship that can manifest itself on an individual consumer level.
  3. High value SMEs should be treated differently, particularly through the utilization of soft benefits. As with the consumer segment, high value SMEs that will one day possibly be valuable enterprise consumers should be treated as such immediately. This can be done through the dedication of a customer service representative via the loyalty program, or, through the offering of surprise benefits to the SMEs (i.e. on relationship anniversary’s a surprise gift basket can be sent to the SME).
  4. The program should be used as much as possible for incentivizing SMEs to conduct their business with the company in desired manners. For a bank, this could be incentivizing the SME to sign up for online banking through the offering of bonus points, particularly for those lower value SMEs that are a burden on the branch network. For a telecom, this could be offering sticky services such as mobile internet packages at a discounted rate for each additional employee signed up for the package. Such programs offer an excellent means for shifting consumer behavior into that which is most strategically desired and for driving the sales of strategic products and services.
  5. The program should drive the consolidation of all purchases by the SME with the company in question. For an electronics retailer, this means ensuring all electronics equipment purchased by an SME over a given amount of time should be from them. For an airline, it means ensuring every business trip by an SME is done with them. Such an objective can be achieved through building in targets for the SME, such that if the SME hits certain spend levels, they receive an additional level of benefits. A feature like this can be done behind the scenes as well, customized for each SME, based on each SME’s past spend and number of employees.
  6. One final recommendation is that such a program should reward the SME owner and its employees for having relationships with the company on an individual level, driving acquisition through the program. So a telecom, for example, can give 1 point for every X spent to employees of an SME enrolled in the program, but can give 3 points for every X spent to an employee if he or she also has an individual consumer account with the company.

The recommendations listed above all need to be of course tested in several ways, ensuring they are financially feasible and help achieve the desired results. This can be done through a thorough pilot effort prior to any mass-scale rollout of such a program.

Most companies ultimately need to do more than they are doing now in terms of addressing the needs of the SME segment. Loyalty programs are only the tip of the iceberg. Any effort to drive loyalty with SMEs needs to include ensuring the right products and services are being offered to them and that customer service levels are meeting their needs. Loyalty programs dedicated to them, however, is a good start, and a soon-to-be must-have as such programs proliferate around the world.

To learn more about designing and launching your own SME loyalty program, please contact info@forteconsultancy.com.

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