5 Must-Avoid Mistakes for a Successful Customer Loyalty Program

Have you considered a customer loyalty program for your business?

If yes, then you're in luck because we're sharing the top mistakes businesses and store owners make when creating their loyalty program.

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

Now many businesses use them for both customer acquisition and customer retention.

There are a few things you need to know about loyalty programs in general. For one thing, as the name suggests, a customer loyalty program needs to be about the customer.

Many businesses fall into the trap of making the loyalty or rewards program about them rather than the customer who's the main use of that program.

In this article, we're going to uncover some stats and discuss the top 5 mistakes we've seen businesses, large and small, make when trying to build loyalty.

Stats about customer loyalty programs

One of the reasons customer loyalty programs have become quite popular is that research shows that being able to retain customers by 12% to 15% can increase a brand's sales by 55% to 70%. (Brandongaille)

At the same time, the success rate of selling your products or services to existing customers averages 60% to 70%. On the other hand, the success rate of selling your products to a new customer drops significantly to 5% to 20%. (Marketing Metrics)

Once customers are become loyal to a brand, roughly 78% of them begin spreading the word about that brand.

Loyal customers (68%) tend to buy more from a store or brand they like, while 54% "abstain from buying products from any other brand," according to Brandongaille.

What this shows is, using loyalty marketing and having a customer loyalty program can not only boost retention, but also increase your overall sales.

In fact, it makes it easier and less costly to grow those revenues.

Not to mention, loyal customers become brand ambassadors. Your store becomes their go-to shopping experience and they begin referring you to others.

There are also many industries that work well with loyalty programs. Among those are supermarkets, fashion retailers, restaurants and coffee shops, airlines, and book stores – just to a name a few.    

How do rewards programs work?

In a basic or standard loyalty or rewards program, customers accumulate points when they make purchases.

Once they have accumulated a specific number of points, they can use those points as a cash discount on their next purchase.

This type of program is called a cashback rewards program. And it's probably the most common type of loyalty program out there.

But like everything, customer loyalty programs have evolved.

Now, customers don't have to earn points simply for making purchases. They can get points by doing certain actions that you set up in your program.

These actions can include:

• Signing up to your loyalty program
• Providing information such as name, date of birth, gender, email (you can award 20 or even 50 points for every piece of information they provide)
• Following you on social media
• Leaving product reviews

By providing multiple options to earn points, your customers won't feel as if they're your cash cow. Instead, they'll feel appreciated and will want to earn more points and shop more from your store.

If you're using Gameball, you can offer various options for your customers to redeem their points.

Benefits of a customer loyalty program

The main reasons businesses use customer loyalty programs is for creating loyal customers, building customer retention, and growing their sales from people who know them well.

Some loyalty programs also include a referral marketing program, which allows store owners to reward their loyal customers for referrals.

According to data by Microsoft, 37.5% of consumers join customer loyalty programs to earn rewards, while 54.7% join to save money.

In addition, these loyalty and rewards apps, where members earn and spend points, can influence up to 69% of people to pick a particular store to shop at.

Other things loyalty programs help businesses with is customer lifetime value (CLV).

CLV is measures the length of business relationship between a store and a customer.

By using a rewards program, especially a branded loyalty program, businesses can prolong this relationship. In other words, they can increase their customer lifetime value and get more value from every customer.

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

AOV is used to calculate the average value of your customers' orders. To calculate AOV, you'll want to divide your revenues at the end of time period (week, month, quarter, or year) by the total number of orders.

In other words, customer loyalty is rewarding for store owners and having a customer loyalty program entices people to buy from your store.

Mistakes to avoid with your customer loyalty program

But loyalty programs aren't made equal. And many businesses fall in the trap of offering too little to customers or not being clear about how the program works.

So what should store owners like you avoid when creating a customer loyalty program? And what should they do instead?

Let's start with the 5 no-nos.

1. Points don't offer value

One of the top blunders businesses make is launching a 'rewards' program that's not 'rewarding.'

This can come in 3 forms:

1. The points customers accumulate take too long to translate into cashback or any form of reward.
   For example: Getting customers to spend $2,000 only to get a $10 cashback discount. Yikes!
2. Customers are unable to use the points till they have reached a specific number.
   For example: A store offers customers 2 points for every dollar spent. But customers can't begin to redeem those points until they have acquired 1,500 points or paid $750.
3. Points are hard to earn. This is a bit of a combination of the first two. Here, the customer struggles to accumulate points in the first place, which means redeeming them is Mission Impossible 100.

Points need to have value and be meaningful to the customer. Otherwise, people will look at other, more-rewarding opportunities.

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

2. Your customer loyalty program is a maze

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

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

Not to mention, they'll bombard you with questions about why they're not getting points and why they're unable to redeem them.

3. All your customers are the same

There are two ways to deal with customers: 1) Treat them all the same. That is, treating high-spenders the same as one-time buyers or low-spenders. Or 2) Offer rewards based on tiers. This means having different rewards depending on how much your customers shop at your store.

Not recognizing your top or most frequent buyers will make them feel unappreciated. It's important to recognize customer behavior and reward customers accordingly.

One of the benefits of being able to customize your loyalty program is having different levels or tiers, which offer levels of benefits for your customers.

Want to create a tiered loyalty program? Check out our guide featuring examples from the most successful brands around the world!

4. Sending the wrong offers to customers

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

For example, notifying your male customers about special offers on hair dryers will probably mark your correspondences as SPAM!

When you create a loyalty program, you get data. Not looking at this data means you'll be spamming customers with irrelevant discounts and opportunities.

However, tailoring your messages, whether it's email notifications or push messages and pop-ups, will draw customers to you. They'll also be looking forward to your messages because they know they're about their favorite products.

5. Not telling customers about your loyalty program

You may be surprised that some businesses do this. They don't tell or notify their customers about their loyalty program or the rewards they can get for being 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: You can use the signup as an opportunity to collect data and reward them with points they can use in their next purchase.

Telling people about your loyalty program doesn’t have to be costly. You can announce it via social media, email, and on your homepage.

4 tips for a successful rewards program

We've covered the big don'ts. Now, it's time to look at 4 tips that can turn your customer loyalty program around and make it a memorable and successful experience.

1. Understand your customers

When you have an idea about who your customers are and what their spending habits are, you can reward those behaviors and take your rewards program several notches higher.

By understanding your customers, you'll be able to meet their needs, exceed their expectations, and turn first-time and current buyers into loyal followers.

2. Personalize your program

Data by Red Point Global shows that 25% of consumers are unhappy with the level of customization they're getting in the loyalty programs they use.

You see, people love personalization. It makes them feel special. And who doesn't like feeling special?

While loyalty programs aren't new, personalized programs are. And depending on the app you're using, like Gameball, you can personalize various experiences within your program.

3. Offer meaningful rewards

When creating your rewards, consider your customers and their needs.

It's important to give customers rewards that are meaningful to them.

For example, a customer who always buys ebooks probably won't find a free shipping reward useful.

On the other hand, a customer who regularly buys from you but has to pay expensive shipping with love an opportunity to get a shipping discount or free shipping one of their purchases.

4. Explain how it works

We've mentioned that not informing your customers of how your customer loyalty program works is a big mistake.

So you can take the initiative and create a loyalty program explanatory page.

This will help you overcome confusion, queries, and hassles early on.

You can also point your customers to this explanatory page when they first sign up and whenever you add updates.

5. Use metrics to measure success

To measure the success of your loyalty program, you need to review a set of metrics each week - if you're running a campaign - and each month.

These metrics include your loyalty rate, your customer acquisition rate, redemption rate, repeat purchase rate, among others.

Next Steps

You now have a great idea about what-to-do and what not-to-do when it comes to your customer loyalty program.

It's time to put those tips into action.

If you haven't used or integrated a rewards program yet, check out Gameball's ultra-personalized loyalty program app.

In addition to personalization, Gameball allows you to create challenges to engage customers and get them to earn more points.

Gameball can be integrated via websites, mobile apps, Shopify, WooCommerce, Magento, and others.

Start your free trial and create a unique experience for your customers.