Having a customer loyalty program can be very rewarding for your business. It can drive new sales and bring back loyal customers to drive repeat sales.
A study by Bain & Company, along with Earl Sasser of Harvard Business School found that increasing customer retention rates by 5% increases profits from 25% to 95%.
However, despite having points raining down on your customers, they are not returning to your store or redeeming any gifts. You do not see the numbers going up or the money pouring in.
When your loyalty program isn’t producing the right results, it could be because you’re making some common and fatal mistakes.
In this article, we’ll address some of those mistakes so you can check and tweak your loyalty program accordingly – and hopefully have customers flooding your store.
Here are some of the common mistakes that most people make with their loyalty program:
1. Your reward system is too complicated
Imagine this: for every $10 spent, you’re entitled to 0.25 points.
That’s not rewarding. That’s giving your customers a headache.
Your customers do not want to do the math – they just want to get points and free gifts.
Keep your reward system as simple as possible. Use multiples of 1, 5 or 10 to facilitate calculation.
For example, customers get 1 point for every RM 10 spent. So if they spend RM 160, it’s easy to calculate that they now have 16 points.
While you’re at it, you should also make it easy for them to redeem their rewards.
Don’t make them give you their ID cards and thumbprints, and such. Redeeming points should be a breeze for them.
Tools like Eber make it super easy for your customers to claim their rewards. All they have to do is scan the QR code on the web app and hit redeem.
Also, giving it a catchy name helps!
2. Your rewards are inadequate and not giving enough value
Imagine if you do stamp cards and your customers will only get their free cup of coffee after 200 stamps.
That’s a long way to go and might give your business the reputation of being stingy and greedy.
Plus, you’ll easily lose out against your competitors who are offering one free coffee for every five visits or so.
Put yourself in the shoes of your customer.
How often would you like to be rewarded? How many points would you like to receive with each visit?
3. Customers’ points expire too quickly
Let’s just say that for every visit, you give your customers 10 points. After their fifth visit, they have accumulated 50 points.
Unfortunately, their points will expire in one week. Not only that, they also cannot redeem anything because you’ve set the minimum redemption points at 100.
Which means they are never going to hit that mark and ever receive anything from you. And they don’t have to. They will turn to other businesses and brands who are giving them a better deal.
4. You’re not promoting your program
There’s no point having the best loyalty program in the world if your customers are not aware of it.
Make sure to tell every customer at the checkout counter that you have a membership program.
It can be up to them whether they want to join – but ideally you want them to get onboard right away.
Aside from that, you can also promote your loyalty program through newsletters and social media.
5. You’re focused on only one segment of customers
It’s a rookie mistake that most businesses do.
If you’re using a tool like Eber, you will be able to track your customers in four segments; new, loyal, at risk, and dormant.
Most businesses only focus on nurturing their loyal customers. That’s fine of course – your loyal customers are the biggest drivers of sales to your business.
However, you shouldn’t neglect new and dormant customers.
You can send out welcome text messages or emails with promo codes to your new members to make them feel welcome.
You can send customised promo codes to customers who are dormant and at risk to encourage them to visit your store again.
The best part? All these processes can all be automated with a tool like Eber.
6. You’re not tracking results
After sending out text messages and emails, you have to make sure you track the results of your campaigns.
Don’t worry, you don’t have to generate the report by yourself.
Campaign report generated by Eber
With Eber, you will automatically receive a report on the number of customers who opened and clicked on those emails or messages – as shown in the diagram above.
All these data can help you plan better for future campaigns.
7. You’re rewarding all your customers the same
Customers want to feel exclusive when they’re part of a loyalty program.
They want to tell people they’re a Mayor on Foursquare.
They want to show off their Platinum status on Grab and their Gold status on Sephora.
Reward your customers according to their spending habits to see better results.
If a high spender is getting the same perks as a new member, they might feel discouraged or undervalued.
However, there are some brands that use a one-system-for-all reward system.
For example, Starbucks recently revamped their membership program from having a two-level membership to a single level rewards program.
Which means all their members will be receiving the same perks.
Study both types and see which one is the best fit for your business.