Benefits and Pitfalls of Loyalty Programs

Have you ever thought about a customer loyalty program for your business?

If yes, you’re in luck, because we're going to tell you the most common mistakes that businesses and store owners make when creating a loyalty program.

Customer loyalty programs have been around for decades, even centuries. But over time, they've evolved.

Many businesses now use them to both acquire and retain customers.

There are a few things you should know about loyalty programs in general. First, as the name suggests, customer loyalty programs should revolve around the customer.

Many businesses fall into the trap of targeting themselves instead of the customers who primarily use their loyalty or rewards programs.

Benefits of Customer Loyalty Programs

The main reason businesses use customer loyalty programs is to attract loyal customers, strengthen customer loyalty, and increase sales through people who know their customers well.

Some loyalty programs also include referral marketing programs that allow store owners to reward loyal customers for referrals. 

According to data, 37.5% of consumers join loyalty programs to earn rewards, and 54.7% join to save money.

Additionally, these loyalty and rewards apps, where members can earn and spend points, can influence up to 69% of people to choose a specific store to shop at.

Another aspect that loyalty programs can help businesses with is customer lifetime value (CLV).

CLV measures the duration of the business relationship between a company and a customer.

Reward programs, especially brand loyalty programs, can help businesses extend this relationship. In other words, you can increase your customer lifetime value and get more value from each customer.

A rewards program can also increase your store's average order value (AOV).

AOV is used to calculate the average number of orders a customer makes. To calculate AOV, you need to divide your revenue at the end of a period (week, month, quarter, or year) by the total number of orders.

In other words, customer loyalty is valuable to store owners, and a customer loyalty program entices people to shop at your store. 

Mistakes to Avoid in Customer Loyalty Programs

But not all loyalty programs are created equal. And many companies fall into the trap of offering too little to customers or not being clear about how their program works.

So what should store owners like you avoid when creating a customer loyalty program? What should you do instead? Let's start with five don'ts.

1. Points Have No Value

One of the biggest mistakes businesses make is introducing a “rewards program” that isn’t “rewarding.”

This comes in three forms:

• It takes too long for the points customers collect to be converted into cash back or other rewards.
• Yay! Customers are only redeemable when they reach a certain number of points.
• Points are hard to earn. This is a bit of a mix of the first two. Here, it means that customers have a hard time earning points in the first place and redeeming them is mission impossible.

Points need to have value and be meaningful to the customer. If not, people will look for other, more lucrative opportunities.

Remember: A loyalty program can help you stand out from the crowd. But it's also a kind of give-and-take relationship.

2. Customer Loyalty Programs Are A Maze

It's important to help your customers understand how your loyalty program works, how to earn points, and how to redeem them. 

If customers find your rewards program difficult or confusing, they won't use it.

Not to mention they'll be bombarded with questions about why they can't earn or redeem their points.

3. All Customers Are Equal

There are two ways to deal with customers:

• Treat all customers the same. It means treating high spenders the same as one-time buyers or low spenders.
• Offer rewards based on tiers. It means offering different rewards depending on how much a customer spends in your store.

If you don't recognise your top or frequent customers, they won't feel valued. It's important to recognise customer behavior and reward them accordingly.

One of the benefits of being able to customise your loyalty program is that there are different tiers that offer different rewards to customers.

4. Sending The Wrong Offers To Customers

Another trap is when store owners or marketing managers send irrelevant offers to customers.

When you offer a loyalty card, you receive data. If you don't take this data into account, you will end up spamming your customers with irrelevant discounts and offers.

However, customising your messages in email notifications, push notifications, popups, etc. can draw customers in. They will also look forward to your message because they know it is about their favorite products.

5. Not Informing Customers

About Loyalty Programs you might be surprised that some companies do this. They don't inform or inform their customers about their loyalty programs or the rewards they can receive for their loyalty. 

The more customers know about your rewards program, the more likely they are to sign up for it and tell others about it.

Remember to use sign-up as an opportunity to collect data and give them points to use on their next purchase.