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Is Your Loyalty Program Betraying You? – Know the Do’s & Don’ts

  • Posted on August 28, 2022 by Robert
  • Reading time about 6 minutes
Loyalty program platform

Thousands of loyalty programs are being launched every year but not all of them are successful! As for the fact, we know that retaining an old customer is worth more than acquiring a new one. However, making your loyalty program work takes a lot of research & well-planned strategy with the right expertise.

Our main motive should be to clarify our business goals, design the reward structure & build customized incentives that are good enough to change buying behavior for better profit margins. In this blog, we will learn what experts suggest the effective ways to make your loyalty rewards program work & the patterns to discover to get the program right for your business needs.

What Exactly Should Your Loyalty Program Do?

Knowing the purpose of your loyalty program is a must before you start to ensure its success. The program with clear business goals is the one that will be successful in the long term and will be operating effectively to gain customer loyalty.

– Keep customers from switching to competitors

Your loyalty program should be built in such a way that it acts as a barrier to exit from your brand, making it hard for them to switch to new ones. This is the main motive where you need to ensure that your customer keeps choosing you again and again.

– Increase in Wallet Share

For customers that buy goods and services from multiple sellers, we can use a loyalty program that encourages consolidation of purchases like air travel, daily grocery needs, food, and drinks, etc. The main motive here can be fulfilled by using a Loyalty Points Program that rewards points for purchases that can be used in multiple businesses.

– Encourage to Make More Purchases

Your loyalty program must be designed in such a way that it prompts customers to make more and more purchases. This is possible through multi-tiered loyalty programs where every tier brings benefits encouraging the customer to attain the next status level, which will eventually make them spend more.

– Get Insights from Customer Behavior & Preferences

One of the best features of a good loyalty program is the ability to extract insights that give an idea about customers & their preferences. This enables sellers to target promotions and marketing campaigns for individual customers. As data collection is becoming easier and cheaper, many companies are making use of marketing insights through data retrieved from loyalty programs.

– Gain Higher Profits Through Loyalty Program

Loyalty programs can help you generate profit apart from retaining your loyal customers. E.g. American Airlines’ AAdvantage program gained a huge profit by selling their miles to other businesses while making them used as rewards for their customers. Another example is the Marriot rewards program that enabled customers to collect points for a future hotel stay by shopping at stores like Target, the Gap, Macy’s, etc.

Common Mistakes to Avoid While Generating Customer Loyalty

It’s now time to reflect on some of the most common mistakes that brand owners make while building customer loyalty software so that you can learn and avoid them in the future.

Here are the mistakes that must be avoided-

– Don’t Create a New Product

Using a loyalty program for huge discounts and double values means you are paying people to buy, which can cause more disloyalty. You will be drawn into the equivalent of the price war automatically, which will generate lower profitability.

For example, Airlines offer double miles for every air travel before a specific month. This encourages price shopping and is not profitable in long run.

– Do Not Reward the Unfaithful Customers

It is important to ensure that the program you are building only offers rewards to loyal ones, not to the unfaithful. One example is a grocery store card that attracts customers to get exclusive discounts for members on promotional items.

This type of program does not reward loyal behavior, it rewards only card ownership. Such a program must focus on rewarding card usage over time rather than on a given purchase time, as it can discriminate against more or less loyal customers in terms of rewards.

– Don’t Reward Volume Over Profitability

Rewarding customers solely as per their purchase quantities can be misleading. That is why your program must focus on its most profitable customers. E.g. if a customer calls a hotel for a night’s stay, they can generate a spot price based on the customer’s profitability and availability.

This means profitable ones may be able to stay for free while others may have to pay thousands for the same room. Keep track of customer profitability and reward loyalty to the ones that can generate more profits. This will also help to target better rewards.

– Never Commit That You Can’t Deliver

As customers can easily compare the type of treatments in different levels of service, your loyalty program must ensure that the services provided to special customers are much better than services for regular ones. For example- preferential treatment for top customers like shorter wait lines, faster delivery, special toll-free numbers, etc. can be used to reward customers.

Your loyalty program must make sure that lower bounds of premium service are never looked down as compared to standard ones.

Closing Statement

As we can see, loyalty programs can act as a great way of marketing tool if designed and executed properly. They will be able to reduce churn, boost sales, and profitability and even extract insights to offer more valued services to customers.

Novus, being a reliable Loyalty program platform can help in designing a well-customized loyalty solution that will perform the way it is expected to do. However, take time to know your requirements and what your program will achieve for your business. To help you guide with the same, you can connect with our expert developers and take a quick tour of Novus to see how we can help in adding value to your business with stronger customer bonds.

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