It is common for companies to venture into the effort of creating a loyalty program. Sometimes they are designed specifically for a company. In other situations, it is more convenient for multiple shops to unite under one same umbrella and give benefits to users across the board, for example, all the stores at a shopping center.
What for?
Let’s be clear: the end of a loyalty program is two-fold. Those who think that it is only another means of income are just as wrong as those who think that it only benefits customers without any advantage to the company.
A loyalty program fulfills (or should fulfill) both purposes and their success depend on both parties of the relationship, customers and brands (companies, sponsors, etc.), earning something on each end of the program. The first receive additional benefits without spending more time or money, while the latter ensures more sales and higher average tickets from their customer base, as well as the arrival of new members to the arena.
Frequent Errors
One of the most common problems of a poorly designed loyalty program is when the sponsor wants to cash in immediate. For example, charge a membership or joining fee. This just creates a barrier for enrollment that costs much more than the few cents it actually costs to enroll someone. Plus, this few cents, at best, will only create invoicing and processes that end up washing up any kind of economic impact. And you still have a program with limited participation. It’s really worth it.
Another common failure is that many loyalty programs make the mechanics complicated when it comes to redeeming points or receiving the benefits. For example, there are programs that require the participant to take 5 or 6 steps in order to receive their benefit, and they still have to wait to learn if they are “eligible”. This does not allow for making things easy and promote participation. Usually this comes from the belief that companies will save money if less rewards are given out. Huge mistake.
Contrary to just about anything you will hear in the loyalty and rewards industry, you want high redemption rates. That’s not true, you want huge redemption rates. If the program is well designed, properly budgeted for and correctly managed, huge redemption rates mean you have already made a killing on the business side of the equation. And… reward costs will always be within the budget you established at the beginning. If, of course, the program was professionally designed and is professionally managed.
Another common mistake is to involve chance. A program that rewards loyalty must reward the preference your client has for your product or service. When brand asks for consumption in exchange for a chance to get something, without any certainty or warranty of receiving a reward, then it is not a loyalty program, it’s a promotion. And while promotional efforts serve unique purposes and do wonders for the short term results of a product or brand, they not be mixed or poorly understood as a synonymous of loyalty.
When it comes to your personal relationships, do you expect loyalty on the long term or are you happy if with the “chance” of it actually happening?
What Should You Do?
Reach out to experts that will help you design a plan that effectively rewards those who purchase from you and / or can attract more new customers. That encourages long-lasting relationships and reduce the intention of trying out your competition. Above all, come up with a plan that does not generate costs but enhances profits. Whaaat? Yes, that. Investments are to be expected, you cannot build a business without investing. But costs… that may just be a waste of money. And make sure you provide real value to your participants, not headaches or complications. Stand outside your door, build a program that you want to participate in!
For this purpose, it is essential that the customers know what they can receive in exchange for what actions, with clarity and without difficulties. Also, that it has high value perception and, very important, the profits from the additional sales will cover the investment of implementing and running the program.
If you want some help, we’re here to talk. Worst case scenario? We all walk away from that conversation having learned something new.
Would you like a free consult to understand if a loyalty or incentive program is right for your business?