8 Mistakes to Avoid with Your Customer Loyalty Program

Updated: April 03, 2010

"We should have focused on the customer's priorities, not just our own."
This may seem like a straightforward concept, but it's not how most loyalty programs are built. Loyalty programs, by their nature, are intended to drive activity that has been pre-determined to drive value for the company. Shop here more often, increase your order size, refer your friends so we don't have to spend more marketing dollars. All great ideas. Problem is, many loyalty programs are built such that they so directly and transparently focus on these end-goals, that there's little value or actual incentive built in for the customer.

Building your loyalty strategy needs to be a two-step process. First, by all means determine your objectives. Know the business outcome you expect to create. But then, translate that into something customer-centric. Find the ties between your business objectives and your customer's priorities. Those direct ties - where there's little to no friction between what both parties want - is likely the foundation of how your loyalty program will grow and thrive.

"We made it too complicated."
Collect points, bundle them together, mail them in, then win a prize. Thanks for playing. Refer us to your colleagues, answer three trivia questions, then come back next week and answer three more. Then you're entered in our drawing.

OK, not every loyalty program is that complicated. But think about the programs you like the best. They don't require a lot of work. They don't require math. You do what you've been doing, and things happen. Buy an airline ticket, and you get miles. Buy enough tickets, and you get a free flight. Shop at my grocery store all the time, and we'll give you lower prices on certain items.

Problems with loyalty program complications arise when 1) you make the customer think too much, 2) you add too many steps to collect the motivation, or 3) you require either math or memory. Don't do these things. Make it simple, at least at first.

"When we stopped marketing, the program stopped working."
If you have to keep asking your customers to participate, then your loyalty program 1) isn't really resonating, and 2) isn't sustainable. If it doesn't eventually create a habit - where customers know it exists, want it, and naturally take the right steps to get it on their own - then it's either too complicated or not tied to an important-enough customer interest.

When you launch a new loyalty program, of course it's going to need its own stand-alone marketing campaign to build awareness and participation. But eventually, ongoing marketing of the program to existing customers should happen less frequently, less interruptively, and largely via existing communication channels.

If as you build your new loyalty program, this end-goal doesn't feel achievable, keep thinking.

"We didn't need to spend as much money to get the same behavior."
Your customers are money-driven, all of them. They want more of it, they want to spend less of it, they want products & services that will help them get and save more of it. They also don't mind free stuff, so if you want to drive behavior, you can 1) give them money, 2) save them money or 3) give them something cool for free.

Or, you could put a star next to their name on your Web site. You could make their membership card a different color. You could let them into the store an hour early. You could give them a special phone number that puts them at the front of the call queue.

Your customers are motivated by money, but not just money. They also want to feel special, have special privileges, demonstrate they're different or better than their peers or colleagues. The better you understand your customer and what ultimately motivates them, the more things beyond money you'll realize can be powerful drivers of behavior. And many of those cost next to nothing.

"Our best customers just wanted to be recognized."
This is a subset of comments above, but an important one. Recognition, differentiation and ego are powerful motivators. They work with business and consumer audiences alike. They are likely motivating behavior with your product independent of any existing or non-existing loyalty program.

And recognition can come cheap. A club that's little more than a name. A personal letter from the CEO or store manager. A hand-written thank you card. Their name written on the wall. Cheap but effective.

"It was too much work."
Ambitious new programs often require new tools, extra bandwidth, and more people thinking about and acting upon the program to make it work. If this work is required of existing people, existing systems and existing budgets without adding additional time or resources to execute, you're doomed to failure (or at least frustration from the get-go).

As you've already seen from examples listed above, great loyalty programs don't need to be complicated. They don't need to require significant new infrastructure, policies or procedures to make them work. And if they do need new resources, the program had better be important enough and cross-functionally supported well enough to get the support it needs to succeed.

"We should have tested it before the full roll-out."
Even if you follow the advice above and more, you'll still not get it right. You'll still find ways to improve. Better to know that with a subset of customers before those mistakes are made with your entire base.

Pick a handful of customers for a test group. Not your most vocal, not your most favorite. Try to find a cross-section, or a segment that's naturally unbiased (i.e. a particular store, or all customers in a particular city or state). Don't just tell them about the program, but try and actually roll it out. Feedback you get in a focus group or survey will be different from what they tell you when they're faced with what you're actually requiring them to do.

"We didn't involve others throughout the organization."
It's fine if the marketing team plans and spearheads the launch of your loyalty program. But execution should be a cross-functional effort. Every customer-facing team and individual should know about it and help you promote it. Teams and individuals beyond marketing could themselves have incentives for how well they get customers involved.

Marketing today can't be contained to the marketing team. Every member of your organization is helping to market your product, service, brand and company. The customer-facing teams do it directly. But your developers build product that impacts how your customers feel about you. Your finance team makes decisions that impact how well you can support them.

Each one of these groups will play a role in making your loyalty program successful. And if it truly drives the right behavior and business results, they'll be proud and motivated to continue their support & participation.

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