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You already know the importance of a strong loyalty program, but there are a few pieces that need clarity. Today, it seems that every retailer has some kind of loyalty program. But they aren't all the same. While these programs can be a huge asset in acquiring new customers and boosting retention, one of the biggest hurdles to overcome involves getting the maximum ROI.
Launching and maintaining loyalty programs is a big investment in terms of cost and overall consumer experience. Changing or cancelling a program prematurely can damage your consumer's experience. Customers expect consistency; they want the same experience each time, regardless of whether it is online or offline. Any sudden changes will trigger distrust and inevitably a visit to your competitor. To maximize your investment and avoid costly mistakes, here are five common loyalty program pitfalls to watch for.
Mistake 1: Asking your customers to carry loyalty cards – According to a CodeBroker Mobile Loyalty Survey, 43% of shoppers view this as a major pain point. A whopping 71% state that they are much more likely to become a member of a loyalty program which they can access from their smart phone. There's a good reason why 60% of loyalty membership programs aren't active. All you have to do is think about a past shopping experience where you may have signed up for a loyalty program. You were quickly handed yet another piece of plastic to carry around. Customers don't want to jump through hoops for a reward that seems too distant in the future. You may think that prompting your employees to remind customers of your loyalty rewards program will solve this, but only about 26% of your customers enrolled in programs remain active after six months. Add to that the cost of each card, which can be as high as $1. Thanks to mobile technology and mobile wallets, this costly mistake can easily be avoided.
Mistake 2: Complicated Rules and Puzzling Point Conversions – A good example of this is Chipotle's new loyalty program. Rather than using a simple points-for-purchase system, Chipotle's program skips points altogether. Instead, there are three different status levels, which are reset monthly. Additionally, only one purchase a day will count. Other than having an overly complicated rule structure, one of the other problems is with puzzling point conversions. Consumers want to know the exact worth of their points, and they want it to be clear and simple. If you cannot communicate your terms in a way that makes it quick and easy for them to understand, they will not sign up. Here is where the cost comes in, with lost membership opportunities. The whole point is to get your customers to sign up for the loyalty program, so that you can increase their purchase frequency.
Mistake 3: Not treating your VIPs Special – One of the primary purposes of any strong loyalty program is to determine who your most valued customers are. Even with that knowledge on hand, many programs don't grant premiums for VIP customers. A good example of recognizing VIP customers is with the airline industry. Airlines let their VIPs board first and rightly so. So here we get into personalizing the loyalty experience. In this example with the airlines, the reward of early boarding has a higher perceived value than the actual cost to the airline. Early boarding costs the airline nothing, while the perceived value of recognition and special treatment VIPs receive boosts loyalty.
Mistake 4: Not properly segmenting your customers – This involves either not collecting the right data or collecting data that is useless. As a result, all your customers end up receiving the exact same loyalty program experience. This is a problem. Imagine you are a 43-year-old male construction worker and you received an ad in the mail for women's high heels from your local mall. Most likely, you'll never visit their website or their store, even though they may sell your favorite brand of jeans. Every lost sale is a costly mistake. Segment your customers, not just by how much money they have spent, but also by gender, education, age, past purchase habits, and other relevant and meaningful information.
Mistake 5: Making a smart phone app available & thinking this is equal to a mobile loyalty program – It's not enough to have a mobile app. Out of the 1,207 consumers surveyed in the CodeBroker Mobile Loyalty Survey, none of them shared the same exact preferences about how they expected to interact with their loyalty programs. Here is a list of how their various preferences rated percentage-wise: