Three Big Mistakes You Could be Making with Your Customer Loyalty Program

There's good news and bad news about customer loyalty programs. First, the good news: Customers who belong to retail loyalty programs generate significantly more money for retailers than other customers do, according to a study by Accenture Interactive. Now, the bad news: Many retailers are focusing on the wrong things when it comes to their customer loyalty programs. Here are three common mistakes retailers make when it comes to loyalty programs, and what you can do instead to make them right.

Retail Loyalty Program Mistakes

Mistake #1: Not Measuring ROI

Fewer than 20 percent of retailers in the survey say return on investment is a key factor in evaluating the success of their loyalty program. Instead, the study found, retailers are focused more on metrics related to growing and maintaining their loyalty program membership. Some 45 percent measure membership growth rates, 42 percent measure the percentage of transactions by loyalty members and 36 percent measure the number of transactions by loyalty members. In addition, 40 percent focus on measuring the retention rate for loyalty programs.

Make it Right: Sure, you should be measuring all of the data above. However, ROI is where the rubber meets the road. Boil down all of your retail loyalty program metrics to determine whether your investment in a loyalty program is paying off. Assess the costs of your retail loyalty program, both in terms of the fees for the program and the costs of running and promoting it, and compare that against the sales that result from it.

Mistake #2: Not Differentiating your Loyalty Program Enough

More than seven out of 10 retailers in the survey believe their retail loyalty program is either “differentiated” or “significantly differentiated” from their competitors' programs. However, few customers feel the same way. Research cited by Accenture shows that about one-third of loyalty program members also shop at competing retailers, and 44 percent say the competition's loyalty program could easily replace the other retailer's program.

Make it Right: Monitor what your competitors are offering when it comes to loyalty programs. You may even want to sign up for the programs (or have a family member sign up, if you're worried about being obvious) so you can see how they work “from the inside.” Is there something missing from your competition's programs that you could offer? How can you differentiate your retail loyalty program from theirs? Use all the marketing methods at your disposal to educate customers about the value of your loyalty program. Promote it in print ads, on social media and in your email communications. Even talk it up when ringing up sales at the checkout counter.

Mistake #3: Not Keeping Up with Technology

Sophisticated digital loyalty programs are now available to even the smallest business. Many of them include additional features that help you market to loyalty program members in a more personalized way. With many customers using their smartphones through every stage of the shopping process, it often makes sense for retailers to use digital loyalty programs with a mobile component. However, four in 10 retailers in the survey say they struggle to keep up with mobile and digital loyalty technology. The same percentage say finding enough in the budget to invest in loyalty program technology is a challenge.

Make it Right: Do your homework to investigate the variety of digital loyalty programs out there and which one will work best for your retail business. Take your customers into consideration, too. If they're young early adopters, your program needs to be mobile so customers can do everything from their phones. If most of your customers are older and not so smartphone-reliant, a mobile app may not matter as much. However, that doesn't mean you can stick with old-fashioned punch cards. Today's teens are tomorrow's middle-aged parents, and they'll be taking their tech habits into the future, so the time to catch up with loyalty program technology is now.

Loyalty Photo via Shutterstock

This article, "Three Big Mistakes You Could be Making with Your Customer Loyalty Program" was first published on Small Business Trends