If you want to start a loyalty program – avoid these six common mistakes

If you want to start a loyalty program – avoid these six common mistakes
Sandra Gudat is president and CEO of Customer Communications Group, Inc. (CCG), an industry-leading customer relationship marketing (CRM) and loyalty marketing firm. Sandra’s extensive background in consulting, data analysis, advertising, retail and business management helps CCG’s retail and financial services clients increase customer acquisition, activation, engagement, retention and ROI.

Starting a loyalty program can lend a major boost to your customer retention efforts — and your bottom line. But it’s a complex undertaking that demands time, strategic thinking and teamwork. To make sure your efforts pay off, get started on the right foot by avoiding these six common loyalty program mistakes. 

Mistake 1: Thinking all loyalty technology providers are the same

When it comes to loyalty platform vendors, one size does not fit all. Besides basic differences like price and experience, every vendor likely has a particular specialty or area of expertise, as well as differing levels of customisation available. Understanding the over-arching differences between vendor categories can help you narrow down the vast list of possibilities to those that most closely align with your company’s needs.

Start by reviewing these five categories of providers:

  • Point-of-sale (POS) technology vendors provide a basic infrastructure for customer data collection with their POS technology. Some also offer CRM/loyalty modules, although most have limited program functionality
  • Database marketing solutions are focused on hosting marketing database platforms. Several also supply strategy, analytics and engagement tools. The functions available in these platforms are often customised, but few offer robust loyalty functionality
  • Enterprise resource planning vendors offer a broad range of capabilities for CRM and loyalty programs. They do it all and sell it all. But they may not always be nimble enough to respond to retailers’ fast-changing needs
  • Marketing services providers/service bureaus support a full suite of marketing solutions, including loyalty programs and customer data utilisation, and offer a broad range of services — with a corresponding price tag
  • Loyalty niche vendors are the newest players, some rapidly gaining in market share. But they often require clients to share technology — which means you may lose your competitive edge

Mistake 2: Not fully researching your customers

Most loyalty marketers incorporate periodic customer feedback into their plans. But when you’re trying to develop new benefits or program features, the traditional quantitative survey may be too limiting. Often, it’s an issue of simply not asking the right questions or inadvertently skewing response by providing limited answer options. And then there’s the fact that customers always want that 100 percent discount, which makes it difficult to get truly good feedback on value-oriented benefit suggestions.

How do you get around those barriers? Using the right research approach in the right sequence is key to developing new ideas. For instance, you may start with more qualitative approaches, such as focus groups, one-on-one interviews or bulletin boards to build a potential list of program enhancements.

You can then prioritise this list according to your own internal criteria. Then take your top priorities back to your members in a more traditional quantitative survey. Adding a chat feature so that online moderators can join the survey in progress and ask additional questions from a cross-section of your members can help you continue to drill down on ideas and even generate a few more.

Incorporating a multivariate aspect to your quantitative research can help you determine the nuances of value-oriented benefits. For example, you can test whether a 3% program funding rate will actually outperform a 5% program funding rate.

Mistake 3: Copying the competition

When establishing or revamping your loyalty program, you may be tempted to look at what your competition is doing and follow their lead. But that could set up your program for failure.

First, you can’t simply assume that what the competition is doing is working. For all you know, it’s a failing test program that they’re about to abandon. Or it could be a flawed program that continues to run — despite lackluster results — because it’s the CEO’s pet project. Maybe it’s a great program for the company, but simply the wrong type of program for your business — or, more importantly, for your customers.

Second, not investing the necessary time and research to custom design your loyalty program could derail your efforts. Here’s why:

  • A generic or “borrowed” program doesn’t respect your unique customers and what will resonate with them in regard to your brand
  • You miss an opportunity to stand out from the crowd and distinguish your brand by doing something different
  • You lose the opportunity to make your program an interpretation and amplification of your brand

The solution? Start with a clean slate. Do the homework. Listen to what your customers are saying and get insight from your frontline employees, like your store managers and customer service reps.

Whatever you do, always stay true to your brand. It’s the only way to form a solid foundation that accurately reflects your business and your customers — and successfully works to build real loyalty.

Mistake 4: Taking reward selection lightly

Like the structure of your loyalty program itself, your rewards shouldn’t just be hand-me-downs from the competition. Nor should they simply reflect your personal favorite perks. When you randomly choose incentives, you’re taking a shot in the dark that those rewards will motivate members to take action, keep coming back and stay passionate about your brand.

Here are a few methods you can use to uncover the rewards your members really want:

  • Employ statistical modeling. For instance, CCG’s Statistical Loyalty Program Optimization™ model quantifies the reach and desirability of existing and potential program benefits, using multivariate and Total Unduplicated Reach and Frequency (TURF). With it, we can help you define the optimal mix of benefits for each of your key audiences, while factoring in ROI, operational efficiency, support of brand drivers, and aspirational impact for non-members and lower tiers
  • Ask your customers through surveys, focus groups, social media polls and other feedback forums
  • Learn from their behaviour by analysing customer data regarding their response to promotions, offers, rewards, messaging, channels and other variables to see what’s motivating customers to act and, just as importantly, what isn’t
  • Ask your team what they’re hearing when customers contact customer service and on-floor sales reps with questions, complaints and kudos

The bottom line: Knowing is better than guessing. And you’ll enjoy the payoff when you do the necessary homework to develop an effective incentive plan that will keep your customers coming back for more.

Mistake 5: Leaving operations out of the loop

Imagine this scenario: You’ve poured blood, sweat and tears into creating the most perfect loyalty program possible. Kick-off celebrations are planned, and you can’t wait to flip that final switch on implementation in a few short weeks. But then Operations raises a red flag, and suddenly your scheduled launch date is at risk.

Maybe you’ve planned for training that doesn’t fit the stores’ schedules. Maybe the customer handling procedure for enrollments is too lengthy and threatens throughput times. Or maybe you did everything right — except for ticking off Ops by excluding them from the planning and development process.

These are all real examples of issues that pop up when your Ops team isn’t looped into your loyalty program planning right from the start. And if you’ve already invited them to participate — say, in a best-practice, cross-departmental team — make sure they understand participation isn’t optional. Here are three reasons why:

  • Training isn’t just a once-and-done event. Partner with ops for ongoing training and store contests to keep program awareness and understanding high among existing and new employees. Make sure your efforts are reaching associates and incenting them based on your program KPIs
  • Ops knows the customer and directly influences the customer experience. Yes, everyone in the organisation shares in keeping customers satisfied. But ops gets more face time with customers than anyone. They can provide invaluable input on what’s likely to work (or not), from motivational benefits to enrollment ease
  • Ops always has an opinion. That input can be invaluable upfront — or a roadblock if it’s too late. Take time to understand ops’ concerns and address them head on. Probe into specifics and be willing to modify based on what you learn

One of the best ways to create a true partner is to ensure that ops has a stake in the program. For instance, make enrollments and capture rates part of the store ops compensation plan. By creating incentives for engagement, as well as the opportunity to be involved in planning and development, you stand to create a true advocate, as focused as you are on the success of your program.

Mistake 6: Overestimating your customers’ loyalty

When it comes to loyalty, best customers are more cat than dog. Think about it: A good dog is unabashedly loyal and wants nothing more than to spend all day, every day with you. Cats, on the other hand, tend to be a little stingier with their affection. Sure, they’re loyal and loving, but it’s on their terms, in their time.

In that very cat-like fashion, your best customers may love your brand, but that doesn’t mean they want to spend all their spare time with you. The reality is, even the most engaged customer only has a sliver of attention to spare for your brand. If you ask for too much of their time, you might just send them running the other way.

To hit the mark, take a step back and critically review your loyalty program from the customers’ perspective. Consider:

  • Is enrolment easy and quick?
  • Is your value proposition compelling — and can people “get it” in five seconds or less?
  • Are your communications useful and interesting — and can customers state their communication preferences?

When you’re respectful and courteous of your customers’ time and interests, you’re far more likely to enjoy a long-term love affair.

Enjoy your own rewards

When you bypass these mistakes, you’ll give your new loyalty program the best chance to win customers, maintain long-term relationships and build profits for your company.

What mistakes have you seen or experienced in developing and running a loyalty program that we haven’t mentioned? Please share your thoughts in the comments.

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