5 Mistakes to Avoid in Loyalty Program Implementation

Loyalty programs are now everywhere and in every industry – from restaurants to retail to travel companies to B2B projects. Their number is growing steadily. A loyalty program is no longer just a nice to have, but a must have – up to 75% of consumers say they would switch to a company with a better loyalty program.

The effectiveness of a long-term investment like a loyalty program depends on many factors. However, there are issues that cannot be overlooked if you want the program to work and grow over time. Here is our subjective list of the five most common mistakes we warn customers against in order to make their loyalty programs as effective as possible.

1. Intuitive mechanics selection

Firstly, we have to know that mechanics are designed to positively influence consumer behavior and encourage identification, so it is important to choose their form in relation to the expectations of the participants, but also the capabilities of the company. It happens that contractors come to the agency with an idea for a particular mechanic. They base their opinion on their own preferences or the programs of their competitors. When a company focuses on one mechanic, it sees only its benefits, usefulness and rightness of application. With only a hammer, all problems look like nails.

At Loyalty Point, we always take into account the characteristics of the company, the constraints present in the company, the profile of the customers. Based on an in-depth analysis, we recommend the selection of the optimal solution. In this way, the mechanics will provide a good experience for program participants, and on the other hand, will not be problematic for employees to use.  A program based on the right mechanics will be an investment in customer value over time. The customer, knowing the rules of the program, will certainly first check the offer of the company where he is a club member before going to the competition.

2. Ignorance of customers’ needs

As can be seen a loyalty program is not just a large customer base to which we send occasional discounts. As the size of the base increases, the cost of promotion and direct communication increases faster than the ROI. Practicing this approach, translates into unfavorable financial results for the company. By understanding a brand’s customer characteristics and segments, you can identify the growth levers necessary to effectively manage your loyalty program, and thus plan a strategy that will work in your case. Depending on the brand and industry, this may include a focus on:

  • increasing purchase frequency,
  • incentivizing an increase in basket value,
  • access to limited-edition offers,
  • referrals to friends
  • or better retention.

Segmentation helps determine which customers to target with a loyalty program. It is important to identify the customers or customer groups that have the potential to be involved in a loyalty program and tailor it to their needs.

3. Unattractive rewards

When creating a loyalty program, one cannot forget about rewards, the main motivator for registering new club members. In this case, on the one hand, the problem is the inappropriate selection of rewards to meet the needs and expectations of the program’s target group. On the other hand, the unfavorable conversion rate – that is, the value in the sense of how much time and expense the average customer must incur to obtain the reward. What we offer as a benefit should have a value relevant to what the club member is expected to receive in return for his or her commitment. This is why there is an increasing shift away from material rewards to a benefit in the form of an exclusive privilege, thereby improving the overall customer experience.

A good example of a reward is also cashback in the form of a discount on subsequent purchases, which encourages repeat visits to the store within a certain period of time. However, be sure to adjust the timing accordingly. If our store has a low shopping frequency, a cashback valid for a week will not motivate the consumer to make more purchases. On the other hand, if a customer shops with us several times a week, a cashback for subsequent purchases valid for 6 months will not trigger an increase in the frequency of transactions, since the customer would probably return even without this motivator.

4. Member first, meaning the club member always has it better

Loyal customers buy more often and spend more. So a company should reward them for their loyalty every step of the way. It’s not just a benefit in the form of a reward or personalized offer, but the entire service process. A clubber deserves an extended return time or a lifetime warranty. These types of activities make customers want to be identified and eager to take advantage of offers within the loyalty program. Ideally, all special offers and discounts should be available only to club members.

However, if the club does not have such a sizable base of club members, it is still necessary to keep in mind that the club’s offers are far more favorable than those available to all consumers. Interoperable implementation is important. The program must work in the minds of everyone – sales, IT, marketing, customer care. So that when implementing individual projects, everyone has the club member, their needs and rewards in mind.

5. No activities showing positive long-term impact

Over time, as the program grows and the number of club members increases, so do the expenses associated with operating the program. That’s why it’s a good idea to establish an irrefutable method for reporting loyalty program profits at the very beginning. Marketers should be able to prove at any time that the program is earning and making a profit. It is also important to analyze the balance of costs incurred against what has been earned. It helps to turn this incurred cost into thinking of it as an investment.

Loyalty programs are a long-term investment that takes time in terms of ROI. Unfortunately, some companies don’t study control groups, and as a result are unable to demonstrate the positive impact and real financial growth for the organization. Important, it is also important to promote the program within the organization. Employees should know how the loyalty program is evolving over time: how many new customers have joined the program and what financial benefits this has brought, so that the rising costs from maintaining the program minimize in much faster growing profits.

A loyalty program is an investment in a regular customer who feels the need to interact with the brand – to buy, to use services, to recommend to friends. Its implementation should be properly planned and supported by in-depth analysis. Proper preparation for implementation will ensure success and effectiveness. By eliminating the above mistakes, we will certainly increase the effectiveness of the loyalty program.

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LOYALTY POINT is implementing a project with Contribution from European Funds. Learn more