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When Loyalty Programs Go Wrong

Ignore these 4 Loyalty Principles at Your Own Peril

Recognizing and rewarding your best customers makes good business sense. So how can a loyalty program go wrong? How can it not work? It’s quite simple; the strategy gets lost in the execution. Here are loyalty principals that when not executed well can significantly impact the success of your loyalty program.

Loyalty Program Points Expiriing

1. Not So Rewarding Rewards

Have you checked your rewards lately to see how well they fare in today’s cost versus value department? It could be that while they might have made sense 2 or 3 years ago, they don’t hold water in today’s economy or with customers’ changing perception of value. Take an airline’s frequent flier program as an example. In 1981 a first-class fare was $200 more than a coach—a premium of 50%. Today, first-class fares can be anywhere from five to 20 times the discounted fare most frequent fliers pay. But neither rewards nor an elevated status reflects that all-too-relevant change in value.

For example, if you have points program with high customer breakage rates, it may mean that customers are earning points, but they are not actively engaged in your loyalty program.  They don’t see a value in redeeming points the points, so they let them expire.

Shop and Earn Loyalty Rewards

2. Timing of Loyalty Rewards is Everything

It used to be that you could reward customers next year for their purchase this year, but pair our society’s instant gratification mindset with the speed of social media and digital experiences, and chances are you need to speed up the frequency of your rewards in relation to program participation. There’s a direct correlation between engagement and rewards. Look at your redemption rates. As a benchmark, your high-value, loyal customers should be able to redeem for a reward within 3-6 months, while your next most valuable should be able to redeem within 6-9 months.

tiered reward structure

3. Go Beyond Rewarding Top-Tier Shoppers

One of the core principles of loyalty marketing is that you reward that top percentage of your customers the most since they are responsible for a greater share of your revenue. Nowadays, we have the capability to segment and create programs that are effective to that next tier down. Those customers might not be your very best customers, but they are still good customers and as such, are worthy of a program that will help engage and grown their relationship with you.

4. Understand the Life Cycle of Your Loyal Customers

How does your program fit into the life cycle of your customer? Say, you cater to business travelers. What happens when they leave the business world for retirement and stop traveling? All of a sudden they might be dumped from all those special perks and an otherwise golden relationship could go sour. Plan for how you can keep those loyal relationships positive, even after they no longer fit the typical best customer profile. Devise a plan that acknowledges their past loyal relationships and turns them into brand loyalists who continue to be advocates.

Ready to revamp your program, but not sure where to start? Ask the experts at Customer Insight Group for a Loyalty Audit. They can review your program, identify trouble spots and design a new strategy to jumpstart your program and help you meet your business objectives.

Updated 5/1/2018