In today’s economic climate, it is getting increasingly difficult for small businesses to gain and retain valuable customers. Many merchants are cutting back on anything they feel is optional, including critical business initiatives like print advertising, promotions, trade show attendance and direct mail. This leaves businesses with a problem: how to effectively communicate to customers that they WANT and NEED them? Loyalty card marketing is one answer that many merchants may not have considered.

The concept of adding a gift card to your business has been well-embraced, as gift cards were the most asked-for gift item of the past holiday season. What many small businesses may not be familiar with, however, is the strong results you can see with a loyalty campaign. It may cost up to 10 times the expense to add a new customer than it does to retain a current one. With that in mind, more effort should be focused on keeping your current customers returning. Enter loyalty card marketing.

Loyalty card marketing has simple objectives at its core: to demonstrate additional value to existing customers and to motivate occasional visitors to a business to come back. A loyalty program that is properly crafted will not only provide additional value to the consumer, but it allows the merchant to gain access to valuable data they can use to increase sales and revenues. In essence, the merchant gains visibility into the purchase patterns of their most prized patrons.

One of the most appealing features of a loyalty marketing campaign is its flexibility. Programs can be customized to fit the economics of the business offering it. For example, a furniture dealer, who may deal with larger-ticket purchases and higher margins, may decide to offer a “Mystery Shopper” campaign. With this program, cards are distributed (either through direct mail or other store events) with varying discount values. A consumer’s card may include a discount from $10 to $1,000 off their furniture purchase. The card must be presented at the place of business in order for the recipient to determine their card’s value.

This promotion is successful because consumers consider it a “game” of sorts that can lead to a substantial discount. Merchants like this promotion because it enables them to strictly control the number of cards with a particular discount amount. And here’s a tip: advertise the “range of value” to be, for example, $10 to $1,000, but only create a few $10 cards with $20 being the most popular low-end discount. This way, almost every consumer considers himself or herself a “winner,” achieving something in excess of the lowest-valued discount.

For restaurants and bars, a very popular loyalty card campaign involves a free or discounted offering for accumulating “points” on every purchase. For example, a restaurant visitor may earn one point for every dollar spent, accumulating points until a reward level is achieved. The program can be set to automatically keep track of a consumer’s purchases and then notify that consumer they have reached a reward level by printing the information on their receipt. Once a customer receives a free lunch or haircut or another pair of shoes at half price, they immediately form a bond with your business that competitors will find very difficult to break.

One thing to also consider: make the program simple to follow. Making one dollar of purchase worth one point is easier for both consumers and employees to understand. The easier it is to understand, the easier it is to promote.

Regardless of the program a merchant chooses to increase their marketing impact, one simple rule always applies — good things happen to businesses that advertise their program. This is especially true when launching a new program or revising an existing one. Take the opportunity to shine light on your new program by placing a notice on cash register/terminal receipts; discuss your program in newsletters, emails and other customer communications. And most importantly, create awareness by placing point-of-sale materials in your place of business. Gift and loyalty cards are often an impulse buy, and using customized posters, displays, table tents, and other merchandising tools will impact sales.

It is difficult to survive in such a challenging economic environment, but often opportunities can arise from adverse conditions. Loyalty marketing is no exception. Consumers are looking for value anywhere they can find it. If you already have a loyal customer base, you are fortunate. Take it one step further and give those loyal customers another reason not to shop elsewhere.

Al Duggan is a specialist in loyalty cards and the VP of Business Development for Valutec Card Solutions, an FIS (NYSE:FIS) company, the nation’s biggest provider of gift card programs to small merchants. To get additional information, please visit their website today.

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