Your Loyalty Program's Number One Mistake

January 25, 2018
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So you have a loyalty program (or want to build one) - amazing! There are dozens of reasons a loyalty program increases your repeat customer rate and boosts your revenue. However, there’s also one reason it doesn’t.

The number one mistake we see with a loyalty program here at Smile.io is making the program about you, and not your customers.

The number one mistake I see with a loyalty program is making the program about your business and not about your customers.

Seems obvious, right? The problem is that when you actually start to build out your program and get into the specifics, it can become easy to get lost in the details. I see A LOT of people start with the best of intentions only to end up with a program their customers are going to hate.

Here are a few ways businesses end up making the number one loyalty mistake.

 

New Customer Only Promotions

If you are going to run a loyalty program, please do not advertise that you have special promotions for new customers. Why would anyone in their right mind want to continue to shop with you again and again if you are giving better value to new customers than you are to existing ones?

If you are serious about starting a loyalty program, you should make sure that no repeat customer ever sees a first time shopper promotion.

 

Trying to Save Money by Being Cheap with Rewards

The fundamental rule of a loyalty program is that you give your customers additional value in exchange for being a repeat and loyal customer. If you are not giving them anything extra for staying loyal to your brand…why would they?

Your Normal Sales Are a Better Deal Than Your Rewards

If you are like most retailers, you have annual, semi-annual, or even monthly promotions to try and generate some additional business. Usually these promotions are of similar value.

If you are frequently giving 25% off or running get one free promotions and your items are only $50, your loyalty program members are going to expect more than that for being a repeat customer.

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If your normal sales are 25% off, why would shoppers care about a 1% back points program? Give them something special or of more value!

 If you are offering a $5 discount in exchange for 500 points and your customers are getting 1 point per dollar spent, that means you are only giving them 1% back. Why would they care to participate if they can checkout with a guest account and get 25% off during one of your sales?

The solution to this is to give them more than what they would normally expect to get through your sales and promotions. Give them a variety of rewards like free shipping, exclusive products, or a better redemption value than 1% on purchases.

Your Rewards Are Also Given Away for Free

It is a very common practice to give swag away as part of a loyalty program. Whether it’s 1,000 points for a t-shirt, or a free water bottle when you enter the silver VIP tier, these actually make fantastic and cost effective rewards. The problem is they lose all value if given away elsewhere.

See how the world's best programs offer rewards.
Sometimes the best rewards are simple.  See how Starbucks, Sephora, and more are rewarding customer loyalty.

If that same t-shirt is given out for free at every event your team attends, and that water bottle is included in all orders above $100, you are not making them an appealing option for your loyalty program members.  They want additional value for their continued loyalty that the average shopper is not getting. Don’t sell customers short with rewards that you are willing to give away for free.

 

Making It Hard for Customers to Redeem Their Points

I have heard some crazy things working on loyalty programs and retention strategies for the last few years, but one in particular really stands out.

I don't actually want my customers to spend their points on anything - I just want them to earn them.
Misinformed Smile.io Client

In his defense, he was a retailer who sells mostly discount goods and it is in his nature to try and save money and cut costs where he can. However, this is a cardinal sin and definitely plays into the number one loyalty program mistake.

The rate at which customers turn points into a reward is called your redemption rate. The merchant in my example was hoping for a redemption rate of 0%. That is a terrible idea higher redemption rates are a signal that your program is performing well and is engaging to your customers.

redemption rates guide icon
The easiest way to increase your program redemption rate.
Redemption rate is a sign of your program's success. Find out how the programs with the highest redemption rates do it!

By purposely making it hard for your customers to claim a reward, you are dooming your loyalty program. A shopper will see value in your program when they have the pleasant experience of getting a reward, not when they earn the points.

Having customers only earn points and never spend them would be like them buying your product but you don't ship it - a one way exchange of value.

If getting a reward is hard for your customers, you are not creating that exchange of value. If you are not giving your customers a reason to stick with you, I can guarantee they won’t!

 

Don't Make a Mistake - Your Program is For Your Customers

Remember that the the number one mistake you can make with a loyalty program is to put your business needs ahead of your shoppers’ needs/wants. Even though it is obvious while reading this, it can get lost in the hustle and bustle of a busy quarter.

Remember: the number one mistake with a loyalty program is making the program about your business and not about your customer.

Avoid disaster by making  your program a two way street. Give your repeat customers a reason to keep coming back, and they will reward you with multiple purchases. Try to fool them with a shell loyalty program, and they won't shop with you period.  In that case, you would be better off not even offering one.