Unlock the Power of Small Business Rewards: Types + Tips to Launch in 2025 – From Shopify Experts!

In today’s competitive corporate landscape, strong customer loyalty can mean the difference between a surviving business and a thriving one. What’s one way to bring customers in and have them come back for more? An enticing rewards program.

Small business rewards programs can be a cost-effective way to build trust with customers and encourage repeat business. Read on for a breakdown of how small business rewards programs work, and a step-by-step guide to designing your own.

What is a small business rewards program?

A small business reward program is a type of loyalty program that incentivizes specific customer actions with redeemable discounts, cash back, or free products. For example, a business might reward customers for making purchases, referring new customers, or publishing content about the brand. After taking enough of these actions and accumulating a certain number of points, the customer can redeem the corresponding reward. The primary goal of a rewards program is to increase purchases and/or engagement with the brand.

Types of small business rewards programs

• Punch card programs
• Referral programs
• Points programs
• Subscription programs

Small business rewards programs are flexible—you can reward customers for anything you want them to do, using anything they value enough to do it. Here are four popular options to get you started:

Punch card programs

Punch cards are a classic way to encourage repeat business. They typically look like business cards and display several icons, like 10 tiny coffee cups or 25 hot dogs. Customers earn a punch or a stamp for each purchase, and when the card is full, their next purchase is free.

Consider punch cards if your business model relies on repeat purchases of relatively inexpensive products or services. Bakeries, ice cream parlors, and oil change shops are good candidates, while mattress stores are not. Punch cards are particularly popular with brick-and-mortar shops, but you can also use an ecommerce app to add one to your online store.

Referral programs

Referral programs reward existing customers for recommending your business to others. When a potential customer makes a purchase, the referring party earns a reward, like store credit, a free item, a discount, or a specific number of loyalty points.

Referral programs help small business owners quickly build a customer base. They also improve relationships with current customers and keep your company top of mind, encouraging repeat business. Consider thanking referring customers through email or social media shoutouts, or even in person if you run a services business, to maximize program benefits. Personal acknowledgments make customers feel appreciated and encourage future referrals.

Points programs

Points programs are a versatile and flexible choice for small businesses. You decide how customers earn points, what they’re worth, and how they’re redeemed. You can also adjust incentive structures as your needs change, shifting focus without introducing customers to an entirely new program.

Here are example activities you might reward:

• Referring a customer
• Making a purchase
• Purchasing a specific product or product type
• Subscribing to a service
• Tagging your company on social media channels
• Reviewing your company on a review site
• Signing up for email marketing newsletters
• Completing surveys
• Providing testimonials or product photos
• Signing up for a free trial

Design your redemption system to meet your needs. You might allow customers to trade in points for store credit, exclusive discounts, or free items, or provide VIP rewards like free samples, instant access to sales, or special deals to customers who reach a certain number of points. If you choose a non-redemption strategy, customers continue to accrue points to access more personalized experiences and increasingly exclusive perks.

Points programs allow business owners to adjust terms as business needs and available resources change. If you received an over-shipment of a certain product type, you can add it to your rewards shop or distribute it as a VIP gift. If a product recall issue generates a batch of negative online reviews, you can add review points to your incentive structure or increase the point value assigned to that action to counteract your negative reviews.

Subscription programs

Subscription ecommerce businesses use rewards programs to encourage sign-ups and boost brand loyalty. They may also discourage customers from cancellation: It’s one thing to stop paying for something, but another to give up free perks.

Claudia Snoh, the founder and CEO of the subscription coffee concentrate company Kloo, shared the details of her company’s program on an episode of the Shopify Masters podcast. Kloo automatically enrolls all subscription customers in its program, The Cupper Club. The club offers members the following benefits:

• Free shipping
• Seasonal gifts every few months, including free samples of new product launches
• First invitations to exclusive Kloo events like coffee cuppings
• Access to member-only products and merchandise
• Guaranteed best pricing on all Kloo products
• Early access to new product drops
• Priority concierge support

“The program is designed to reward our most loyal customers and create a community of coffee enthusiasts who appreciate the sommelier experience we provide,” Claudia says, noting the program’s effectiveness as a relationship-building tool. “The Cupper Club has created strong brand affinity and loyalty. When we send out seasonal gifts and exclusive offers, we regularly receive personal thank you emails from members,” she says, adding, “These moments of connection have transformed many customers from casual buyers into genuine brand advocates.”

The Cupper Club has also helped Kloo build its subscriber base. “The program has become an effective conversion tool, helping us transition one-time purchasers into long-term subscribers who experience the full value of our brand,” says Claudia.

How to create a small business rewards program

1. Set goals
2. Identify actions
3. Build an incentive structure
4. Launch your program and monitor performance
5. Adjust strategy and plan for the future

Small business rewards programs are infinitely customizable, so where do you start? Kloo took inspiration from competitor programs. “As we developed the concept, we studied successful loyalty programs from other brands, drawing particular inspiration from Flamingo Estate’s Estate Membership,” she says. This strategy supports the brainstorming process and provides helpful inspiration—so long as you don’t copy your competitor’s approach exactly, Claudia says.

Here’s a five-step framework to help you design and run a small business rewards program that works and feels unique to you:

1. Set goals

Loyalty program goals are typically a subset of a business’s overall marketing and sales goals, so review yours to identify your areas of greatest need. Common rewards program goals include boosting revenue, improving brand reputation, and attracting new customers.

Kloo designed The Cupper Club’s program to build relationships with its subscription customers. “We began our rewards program journey by focusing on a core question: How could we meaningfully show appreciation to the loyal customers who supported us during our soft launch phase?”

This customer-first thinking guided their entire approach because it came from a genuine desire to show appreciation to early customers who believed in Kloo before the brand was fully established.

2. Identify actions

Next, identify customer actions that support your goals. Dig into sales data, target audience demographics, and market research to get specific. If your goal is to boost profits, you might ask yourself the following questions:

• Do you need to increase sales volumes across the board, or are you only struggling to move your higher-margin products or services?
• How’s your market penetration? How does it compare to your competitors’?
• Do you earn repeat visits from existing customers? How much do they spend, and are those figures consistent with industry benchmarks?
• What actions or behaviors indicate a high-value customer for your business? Do you earn more from customers coming from specific sources?
• What are your biggest sales and marketing expenses? Could a rewards program be a cost-effective alternative to pricey campaigns?

Use these questions to figure out what you want your customers to do. A company with strong retention rates might reward referrals, for example, and a company with a content shortage might reward customers for participating in user-generated content (UGC) campaigns.

Kloo focused on habituating customers to use its product based on data showing that customers in its market form long-term brand attachments. “We recognized that coffee is a product with high lifetime value potential,” says Claudia. “Once customers connect with a coffee they love, they tend to remain loyal over time.”

3. Build an incentive structure

Create an incentive structure that encourages the actions you choose, aligning the value of the reward with the value of the action for your business. Ratings and reviews tend to earn small discounts or free samples, for example, but successful referrals can earn customers hundreds of dollars from some business types.

Consider offering rewards that serve your business goals. If you’re struggling to generate interest in a new product line, offer a product-specific discount to VIPs or allow customers to redeem points for a free trial of the product type.

Kloo focuses on perks its members actually want. “We created The Cupper Club to reward subscribers and create additional incentives for customers to engage with our brand long term,” says Claudia. “The structure was designed to offer meaningful benefits that coffee enthusiasts would genuinely value, like seasonal gifts, first look access to new products, and exclusive events.”

4. Launch your program and monitor performance

Launch your program and promote it to customers. Encourage signups or automatically enroll customers, depending on your goals. Elective signup lets you educate new members on program terms and allows you to position your program as exclusive. Automatic enrollment maximizes participation and creates an opportunity to surprise customers with benefits they’ve already earned.

Once you’re up and running, monitor performance by tracking targeted metrics with your analytics software. Look for outcomes beyond your targeted metrics, too. Although The Cupper Club was designed to reward current subscribers, it ended up attracting new customers to the brand.

“Potential customers frequently reach out specifically to learn more about our rewards program, and these inquiries have directly contributed to increased subscription sign-ups,” Claudia says. “The program has become an effective conversion tool, helping us transition one-time purchasers into long-term subscribers who experience the full value of our brand.”

5. Adjust strategy and plan for the future

Use your metrics to evaluate performance and identify any issues. If you’re not seeing results, ask yourself the following questions:

• Are our customers aware of our program?
• Have we selected the appropriate actions for our business and marketing goals?
• Are we offering rewards that people want?
• Are reward values sufficient for the effort the action requires?
• Are customers attempting to use our program? If so, what barriers to entry do they face?

Survey or interview your customers for more accurate insights, and adjust your strategy based on what you learn.

Once you’ve ironed out the kinks, give yourself permission to think bigger. “Looking ahead, our vision is to evolve The Cupper Club into a more sophisticated points-based rewards system similar to airline miles programs,” Claudia says. “We’re excited about the potential to gamify the experience, creating even more engagement opportunities while giving our most loyal customers increasing value as they continue their journey with us.”

Claudia also cautions business owners against scaling their programs too quickly. “Just because fast growth is celebrated and appears sexy doesn’t mean it’s the right approach for your specific situation,” she says. “Sometimes, the patient, deliberate path leads to more sustainable success and greater fulfillment.”