Loyalty programs are a standard form of marketing in retail these days, whether they’re done digitally or via old-fashioned punch cards. All programs are not created equally, however, which is why it’s important for retailers to ensure they are getting the most out of the investments they sink into creating and maintaining loyalty programs.
Loyalty marketing works, but it has to be done correctly, said Mike Polner, director of product marketing for Five Stars, a mobile loyalty app provider. To keep its retail customers happy, Five Stars follows a specific formula when doling out consumer rewards: Number of signups Xnumber of additional visits X average ticket price.
"Over 97 percent of our accounts see success by signing up the most customers then letting loyalty rewards and campaigns work their magic," said Polner, who follows three important 'dos' when it comes to creating successful loyalty platforms.
1. Do make sign-up frictionless
Customers are used to signing up with Fortune 500 loyalty programs, such as Safeway, Walgreens and CVS, with just their phone numbers, so all sign-ups must be just as easy.
"It's easy, you only have one, and everybody knows it. It's also important to let customers sign up multiple ways, not just one," he said.
The most successful loyalty programs let customers sign up in-store, online or on the go.
"If you restrict your signup process to just one of those (ie., mobile only), you will never get the necessary adoption to make a program successful," said Polner.
2. Do reward customers for what they buy, not just how many times they visit
Customers love getting rewards, but they hate feeling cheated out of their points.
"We've seen merchants are most successful when they offer point-per-dollar spent, not just point-per-visit," Polner said. "If customers earn a point for every dollar spent, then their customers are actually incentivized to spend more and visit more often, not just visit more. And isn't getting a customer to spend more money what a loyalty program is really all about?"
3. Do hand out rewards based on each customer’s preferred method of receiving
While some retail consumers love receiving text messages, others want emails or prefer push notifications.
"Every customer has different preferences and it's critical those are respected," Polner said. "For example, our messages take into account a customer's preference for push, SMS, or email, and we only send rewards on behalf of merchants the way the customers want to receive them. This ensures the highest response rates, the lowest opt-out rates, and the most effective loyalty program in the industry."
On the flipside, there are several mistakes businesses can make when rolling out loyalty programs.
1. Don’t over-complicate the platform
"Creating a program with a lot of rules and limited rewards that expire can drive away users from engaging with the program on a consistent basis," said Vic Mahadevan, CEO of Punchh, a mobile CRM suite that includes branded mobile.
2. Don’t be passive
Don’t be afraid to play with your customers, Mahadevan said.
"Make it interesting and fun for them to engage with the program. Some of the ways to do this are in-app games, random surprise and delight campaigns and leaderboards."
3. Don’t forget to include your staff
Not getting staff fully engaged to sign up customers is the No. 1 mistake most companies make, Polner said.
"The most successful businesses ensure their staff is engaged and understand the value of loyalty," he said. "If they fail to get their staff engaged, a loyalty program will never reach its full potential."
While many loyalty platforms still use old-fashioned punch cards, others are seeing huge success with mobile loyalty apps. It’s important, however, to ask a few questions before making that move, Polner said.
He advised retailers to vet potential mobile partners by asking them how many members their average merchant has in their rewards program.
"This is important because more members means more customers will receive your offers and rewards," he said. "Then, these customers will return to your business again and again and again. And that's what's most important to a merchant and a successful loyalty program."
Polner also said that even when a loyalty app is mobile, it won’t be successful if marketers are only pushing sign ups via smartphones.
"Getting somebody to actually download an app is very hard," he said. "We see that mobile-only loyalty programs have the lowest adoption rates in general."
Although Five Stars has hundreds of thousands of downloads for its app, Polner said it’s because the chain augments the in-store customer experience with a mobile app. Business owners can't get the same sign-up or member rates from app-only loyalty programs, according to merchants who use Five Star.
"It's an important way to augment the customer and merchant experience, but it shouldn't be the only way for a customer and merchant to interact," Polner said.
/ Before joining Networld Media Group as director of Editorial, where she oversees Networld Media Group's nine B2B publications, Cherryh Cansler served as Content Specialist at Barkley ad agency in Kansas City. Throughout her 17-year career as a journalist, she's written about a variety of topics, ranging from the restaurant industry and technology to health and fitness. Her byline has appeared in a number of newspapers, magazines and websites, including Forbes, The Kansas City Star and American Fitness magazine. She also serves as the managing editor for FastCasual.com.