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The Biggest Mistake in Loyalty Programs

Jacob Brain


When it comes to loyalty programs, we’ve seen it all. Points, rewards, special events, exclusives, you name it — we’ve seen a loyalty program that does it. But what we see more times than we really should is the single biggest mistake in loyalty programs. This mistake actually works as a deterrent against your customers and prevents loyalty. Want to know what it is? Read on.

As a consumer, when you sign up for a new loyalty program you have a set of expectations. Those expectations come from the current experiences already embedded within the company, and whatever new expectations are set with the program. The program typically details both what the company is willing to do for your loyalty, and what loyalty actually looks like to the customer. The problem? Many times a loyalty program simply rewards customers for what they are already doing and does not set new expectations for what loyal behavior looks like! If the customer is loyal that is great, but when a customer is not a loyal customer and gets the same rewards, it can be fatal.

The points program failure.

You buy things, you get points. This is a very simple way to abstract loyalty purchases to a larger pool of rewards. But does everyone who walks in the door get those points? If so, there is a critical problem with this approach. Your loyalty program is being put in the place of a loyalty creator, which it was not designed to do. Loyalty programs are measurement and reward tools for the loyal. When you try to use your loyalty program to gain loyal customers, you put your program in a position of being applicable to every customer new or old, and rewarding them based on that. How is that separating the loyal from the infrequent? How does that create exclusivity? How does that enhance your relationship with the customer? The reality is that it is no longer a loyalty program, it’s a coupon strategy.

Loyalty programs reward for behavior of a defined status of loyal. If you don’t know what loyalty is for your business, how can you understand how to reward customers who fit that profile? In our retention strategy work, we’ve helped customers like Real Networks and Sunoptics, understand what a loyal customer looks like. And from there, we can take that data, and create a loyalty program that fits the profile of a loyal customer. The big mistake is not defining and expecting loyalty from your customers in your program.

You might ask, why can’t you just give loyalty points or card to every customer? The real cost of this approach is what you are willing to give in return. We’ll cover why in our next post. Subscribe to our blog to stay on top of our posts.

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