Thinking about starting a new loyalty program, or need to improve the one you’ve got? With so many businesses using loyalty programs today, lessons learned can you help you make the right choices.

Here’s a top ten list of mistakes to avoid, so you can make the most of your loyalty program:

1. Launching a program without a long-term strategy

Define your long-term expectations before you design and launch your program. What do you want to achieve with your program? Word of mouth marketing? An increase in ROI? Awareness with a certain age group? This means knowing:

    • Your business
    • Who your customers are
    • What kind of relationship you aim to create

What works in a grocery store may not work in a designer clothing boutique or restaurant. Merchants must design their loyalty strategy and rewards in a way that speaks to their core clientele.

2. Failure to encourage the use of rewards

Many business owners believe that points unused mean extra money in their pockets. What they fail to realize is that reward redemptions actually help increase sales, even if the use of points means the customer is getting something for free. An unused loyalty program hurts business. It becomes a waste of resources and fails to help in building customer relationships.

By redeeming points, customers grow the relationship created through the rewards program, which in turn helps promote future purchases. Customer lifetime value increases as redemption increases, because the customer is committing deeper to this relationship. The more they buy and redeem, the more they will want to buy, and the more likely they are to spread the word.

3. Setting reward goals that backfire

If it takes customers too much time to build up and enjoy rewards it can backfire big time. When you set reward goals that take too long to achieve, customers may forget about the rewards altogether.

Timing is key to increasing earning and redemption opportunities, and it varies across different marketplaces. Grocery stores can afford to require larger points balances and shorter windows for redemption than clothing stores, simply by nature of purchasing volume and frequency.

By examining purchasing history, you will be able to see how often customers make purchases and then design appropriate goals that are attainable. This will ultimately translate into increased revenue and negative churn.

4. Failing to measure your program’s effectiveness

Lack of measurement could cause you to miss key opportunities that can help your business grow. By measuring key aspects of the program, and studying analytics and customer input, you’ll know where to direct your loyalty program.

Areas to monitor include:

    • Customer retention rates – how long do members stick around?
    • Does your program improve the customer experience?
    • Negative Churn – are customers signing up, but not returning?
    • Demographics – What gender or age group of your customers tend to be loyal?
    • Effective rewards – Which rewards are favorites for your customers?

Program effectiveness can help revenues, gross margin, purchasing frequency and value to customers. Measuring it provides invaluable insight into your business.

5. A program lacking seamless mobility

In the modern marketplace, consumers are connected through a variety of mediums. Focusing on traditional platforms, like punch cards, means that your loyalty program will not fly far. How can you track demographics, effectively manage, or learn about customers this way?

Loyalty programs lacking mobility miss out on opportunities to seamlessly secure stronger relationships with customers that could ultimately convert into increasing sales.

A digital loyalty program effectively supports program enrollment, management of incentives and redemptions, and delivering tangible results.