Jamie Herzlich Newsday columnist Jamie Herzlich

Herzlich writes the Small Business column in Newsday.

At Rocking Horse Ices and Ice Cream Treatery in Northport, patrons can earn free macarons, ice cream and even a free ice cream sundae party. But they don't have to keep track of a punch card to get their free goodies.

Instead, they can sign up for the Belly loyalty rewards program, a digital system that lets them earn points toward free items each time they make a purchase.

While many major retailers have had their own digital points programs for years, complete with swipe cards and apps, those systems were too expensive for small businesses to set up.

Now, Belly and several other companies are offering digital loyalty programs for small retailers like Rocking Horse, allowing them to replace their old paper punch cards. The technology gives business owners a new way to engage consumers, while also capturing key data about customer behavior.

"Five years ago a digital customer loyalty program was a luxury that only a big enterprise could afford," says Aleks Peterson, a technology analyst at Brentwood, Tennessee-based TechnologyAdvice, a technology marketing and research firm. "Now digital loyalty programs are more affordable and easy to set up, which is lowering the barrier of entry for small businesses."

By opting for a digital program as opposed to the old paper card method, you're able to capture key data when customers sign up, track their purchases and see how your loyalty program is actually performing, he notes.

"The punch card they either forgot or left it home," says Rocking Horse owner Diane Mondello. "This is more modernized and fun."

advertisement | advertise on newsday

Catching up to digital era

Rocking Horse replaced its traditional paper punch card with Belly about six months ago and now has more than 400 customers signed up.

More smaller merchants need to follow suit if they're going to compete with the larger chains, says Marshal Cohen, chief retail analyst for Port Washington-based The NPD Group.

They must become more progressive, he notes, adding that consumers are expecting a lot more for their patronage these days.

"The consumer is waiting for the retailer to catch up to the digital era," says Cohen.

And with the proliferation of mobile devices, consumer demand to be able to access loyalty programs on them is growing, he says. "It's a huge opportunity."

For instance, with Belly, customers can check in either with their bar-coded Belly loyalty card or via their mobile phones through an app, which pulls up a QR code that they scan on the merchant's iPad.

Participating merchants are provided with an iPad with the Belly software application installed, as well as a lock, stand and unlimited BellyCards, explains Jenny Beightol, director of brand communications at Chicago-based Belly. Each time customers check in, they earn points toward unique rewards offered by the merchant, such as a free cup of coffee, she notes.

Monthly subscription costs for Belly range from $99 to $199, not including a charge for the iPad installation.

Other popular digital loyalty programs on the market include PunchTab, Loyalzoo, LevelUp and BigDoor, says Peterson.

advertisement | advertise on newsday

What your business needs

When researching programs, business owners should consider an app-based loyalty program, which makes it easier for customers to keep track of points and rewards, he notes.

According to a TechnologyAdvice survey last year, 59 percent of people would be more likely to join a loyalty program that offered a smartphone app.

In general, focus on rewards centered around your products, as opposed to what Peterson calls "inane" virtual badges and the like.

Some businesses also offer experiential rewards, like "Shave your barber's beard," says Beightol, noting "we really encourage every business to customize its rewards to reflect its culture and business objectives."

advertisement | advertise on newsday

Make sure the rewards are worthwhile to your customer, but also cost-effective for you, says Peterson.

"You have to figure out a balance of giving people enough incentive that they will use it and not hurt your bottom line," he explains.

At Rocking Horse, rewards range from a free topping at 15 points and an ice cream cone at 45 points to an ice cream sundae party at 250 points.

"Most people save up for the ice cream," says Mondello.