Most businesses have realized the importance of having a customer database, especially one that includes their best customers. That has been the genesis of reward and loyalty programs. Before I describe the four factors that could cause your program to fail, I want to be clear that reward and loyalty programs are NOT the same. You must first decide if you are you going to reward your customers for their purchase levels (which is a bribe, and should be meaningful), or are you going to acknowledge customer loyalty which is an expression of your appreciation for their loyal patronage (this may have less dollar value, but should be very reflective of your brand loyalty characteristics). The following common mistakes can affect the success of either type of program:
- Making it Complicated. Frequently, retailers, big and small, either get too clever or too greedy and think they can drag their customer through a series of hurdles in order to get a seemingly illusive acknowledgement or reward. If you cannot explain your loyalty or reward program in two simple sentences, then it's too complicated.
- Making the Threshold for Reward or Acknowledgement Too Lofty. In first developing your program, be very realistic who your target customer is and what is a realistic activity for them to undertake to receive a reward. One simple test is the 80-20 rule. If what you're asking someone to do to be rewarded is greater than what the best 20% of your customers would do, then your program is unrealistic, will fail, and will likely anger otherwise good customers.
- Failing to Properly Monitor and Execute Your Loyalty or Reward Program. Often, I've seen when retailers are sold reward technology programs by various software vendors that does not work properly with their in-store or online purchasing system. This can create a lot of anger and frustration for the consumer who decided to pursue a reward or acknowledgment. Also, it has potential to undermine the positive perception the customer had of your brand prior to participating.
- Failing to Communicate or Overly Aggressively Communicate with Your Reward or Loyalty Members. When someone signs up for your program, they want their actions to be acknowledged. They don't, however, want to become the targets of an endless borage of solicitations and offers. Determine your communication strategy ahead of time and ask yourself “Am I going to annoy my best customers?”
Because I don't like to end on a negative note, here are some bonus thoughts for making your reward or loyalty program positive: Offer member-only meaningful rewards or sales opportunities. If you’re doing a loyalty program, it's okay to include something that's just fun and frivolous. My favorite barbecue restaurant offered an acknowledgement of emblazing your name on a brick in the store if you made 20 purchases within one month. On an individual visit, you could purchase a lunch and then visit the bakery, and get credit for two visits. This made it less ridiculous and a lot more fun.
Whether it's a loyalty or reward program, remember these are your most important customers and you should always treat them appropriately. A bad program is far worse than no program at all.
