Tapping into Small Business Loyalty Market –
Not Your Average Consumer
By Keith Hendrick, Manager of Business Analysis,
Maritz Loyalty Marketing
Credit card issuers, who are specifically targeting small
businesses as a potential market for their products and
services, though not exactly new, is clearly a growing trend.
Savvy card marketers are looking at new and innovative
ways of tapping the small business market. One way is the
use of loyalty programs that are specifically tailored to meet
the needs, wants, and expectations of the operators of small
businesses of the type that typically employ from five to fifty
people.
There’s a school of thought that says a small business owner
– for example, a person running a business out of his or
her home or a professional practitioner like a doctor, lawyer
or CPA – is not really different from a general consumer
when it comes to the use of credit cards. And there are
small business operators who fit that description. However,
increasingly, small business owners behave differently from
the general consumer, in that they are looking for the types
of things in their redemption options that they can apply for
the betterment of their businesses – things that appeal to
them as entrepreneurs. Often, for example, they’re looking
for business equipment – all-in-one printers, paper shredders,
and so forth, as well as business services, such as – financial
management tools, business travel assistance and incentives
for deserving employees.
Typically, a small business operator working on a thin margin
has a hard time justifying dollar expenditures for things he
would like to have for the business, but doesn’t desperately
need. A digital camera, for example, might be such a “niceto-have” item; the business owner knows he could put one
to good use, but could buy a disposable camera for $5. So he
has a hard time spending $500 on a decent digital camera.
But if he can get one through reward redemption, he’s now
the owner of a very nice “nice-to-have” that he didn’t have
to pay for.
In general, small business operators tend to redeem fairly
heavily for more upscale items than a standard consumer
does, in part because they typically spend more on their card
product, accumulating tens and hundreds of thousands of
points, as opposed to thousands and tens of thousands. A
recent Maritz Loyalty Marketing Almanac study revealed that
45,000 points is an average order value in the small business
segment, compared to 4,650 in the consumer segment.
Furthermore, business card customers cashed in their points
for their prized possession 1.70 times per year on average
versus 1.02 redemptions per year for consumers.
In the small business sector, there is a much higher
redemption rate for travel-related items and high-end
experiential rewards – a wine-train tour or a fantasy camp,
for example – because small business operators typically
work very hard and tend to want to cram a lot of fun into
a short period of time. The same study also indicated that
business owners redeemed 35% of their points earned for
travel, as compared to only 14% for consumers.
Another thing that attracts small business owners to specific
card products is the ability to use the reward points they
accumulate to, in turn, reward their employees. Instead of
offering a $250 electronics’ retailer gift certificate, card
W H I T EPAPER
issuers can offer a package of ten $25 gift certificates that
can be passed out to employees as incentives, Christmas
gifts, etc. And they can go to even smaller denominations for
redemption for movie rentals or coffee houses, if offered in
their program of choice.
And one other trend is rewards in the form of businessrelated
services. Many small business owners like the idea of being
able to redeem points for tax services, for example, or
printing and other services that help them be more effective
and efficient.
Card issuers are in a highly competitive market these days,
and they are using their loyalty programs to give them a
little different value proposition than their competitors.
Their potential customers continue to look at interest rates
as a differentiator, but they are also looking at reward
programs that appeal specifically to them - that offer the
types of rewards that they are interested in earning. Small
businesses have always been a lucrative market segment
for card issuers, both because of the amount of money
they spend and the way they spend it. Therefore, the smart
card issuers these days are making intelligent use of their
loyalty programs to make them specifically appealing to that
important segment.
W H I T E PA P E R
www.maritzloyalty.com
(877) 4 MARITZ
loyalty@maritz.com
MLM-41383-43 01/07
© 2007 Maritz Inc.