"We find that (the loyalty card program is) great advertising because the kids show each other their little credit cards, and their parents spread the word." — Kathleen Tutone, Treehouse Toys

So many advertising trends. So many new promotional technologies. So little budget? Struggling to compete against the advertising war chests of national chains and big box retailers is a challenge most mom-and-pops face daily. The good news for retailers advertising on a tight budget? With word of mouth, most don’t have to compete.

“Retail seems always to come down to selection, service and price. That’s what gets people in the door,” Michael Gorey, a Los Angeles-based creative director/consultant and professor at Art Center College of Design, told TDmonthly Magazine. The easiest way is to “advertise directly to people that are already coming in, that know who you are, that are already buying your products.” Gorey recommends utilizing direct mail, newsletters to existing customers, and tracking customer purchases. “Know your customer,” he advised.

Nobody knows her customers better than Kathleen Tutone, co-owner of Treehouse Toys Ltd. in Portland, Me. Because Portland is a tourist destination, many of Tutone’s customers are out-of-town guests. By maintaining a detailed database of customers and their purchases, Treehouse Toys has devised a number of techniques to keep customers returning. By inviting tourists to visit the store’s Web site to shop for items not available in their hometowns, Tutone guarantees repeat customers. And if they can’t find the Web site, they need look no further than their very own shopping bags.

For local customers, Tutone has created a “loyalty card program.” Essentially a consumer rewards program, it allows children to accrue points with each purchase they make, and then redeem them for in-store discounts. “We find that it’s great advertising because the kids show each other their little credit cards, and their parents spread the word,” said Tutone.

Making donations to local charities and schools is also an excellent way to build local buzz. Matthew MacDonald, owner of Wooden You Know, a Maplewood, N.J. store that specializes in wooden toys, told TDmonthly: “Becoming part of the Maplewood community is a critical part of our success. Local shoppers respect a business that invests in its community.”

Because play is such an important component of childhood development, retailers can boost their community profile by aligning themselves with local schools. The Wooden Horse in Los Gatos, Calif., works with teachers and students in conjunction with “National TV Turn Off Week.” Last spring, the store offered a three-dollar gift certificate to students who didn’t watch television for an entire week, and kept a journal summarizing what they did instead. Each fall, the store also stages a Spooky Story Contest to encourage students to write creatively.

Stephanie Kaehler, owner of Game A Lot Hobby Games in Santa Cruz, Calif., sponsors in-store gaming and product demos in addition to monthly off-sight “Saturday Game Days.” By offering prizes and other incentives, these free gaming events are a fun and constructive way to give back to her loyal customers, while introducing the store to an ever-growing body of new business.

No one will disparage the benefits of a multimillion-dollar ad campaign. But today’s successful retailers have discovered that simply reaching out to their community is the most cost effective and personal way to build a loyal base of customers.

Writer's Bio: Brent Turner´s life is defined by a constant struggle between the forces of work and play. For him, freelance writing satisfies both. Read more articles by this author