Avoid these 5 mistakes in building a customer loyalty program

Avoid these 5 mistakes in building a customer loyalty program


By Arnab Mitra, marketing manager, SailPlay

Nowadays it seems like every retailer has a customer loyalty program. And if you don't have a program, you have definitely thought about launching one.

A customer loyalty program can be a great asset to your retail business, boosting customer retention and acquiring new customers. One of the biggest aspects for any retailer is if the program's return on investment is maximized as a customer loyalty program is a major investment. But it's not just a cash investment, it's an investment into customer experience. Cancelling a customer loyalty program or changing loyalty platforms in a short period can hurt your customer's experience.

When customers visit your business they are expecting a similar experience each time, whether it be a physical store, website and/or mobile app. If you make sudden changes that hurt their experience, they are more likely to visit a competitor. Now to help you maximize your investment and customer experience, I offer the top five mistakes retailers should avoid making.

1. Lack of data collection

How customer data is being collected and used is a major key for a customer loyalty program. But many retailers aren't give customer data the attention it needs. A customer loyalty program is not an out of box product. It should be customized to your customers. So with that in mind, as your program matures, your program should continue to be customized. How can you customize your program without customer data?

The customer data I recommend collecting includes:

  • Contact information
  • Social media accounts
  • Age and gender
  • Purchase data
  • Marketing and sales campaign activity
  • Rewards earned and redeemed
  • Loyalty points earned

This data should be collected through your customer loyalty platform. The success of your program is dependent on data collection and using data to make enhancements. Don't be another retailer to have a failed customer loyalty program.

2. Non-insightful data

Retailers are collecting non-insightful data through their customer loyalty platform. While their platform collects minimum data, such as socio-demographic information, it isn't collecting key data points, including customer purchases, social media posts, marketing and sales campaign activity. These data points helps retailers enhance the customer experience.

Often the biggest reason why a loyalty platform doesn't collect this data is because the platform isn't integrated with the POS system and/or e-commerce website. As a result, it's difficult to collect these key data points. How can you create segmented campaigns, personalized experience and offer personalized gifts, if you don't know what how your customers are engaging?

3. Inaccurately segmenting customers

One of the benefits of a customer loyalty program is customer segmentation. Through your customer data, you can segment customers into groups, based off of gender, age, buying habits, and more. But the issue retailers are facing is inaccurate customer segmentation.

The biggest reason for this mistake is related to the first two mistakes. Either retailers aren't collecting the right data or the data they are collecting isn't insightful. As a result, each customer in the loyalty program is receiving the same experience. And that is an  issue. According to Accenture, 78 percent of customers are retracting loyalty faster than three years ago. One of major reasons is due to customers not being segmented or segmented correctly.

To paint a picture for you, imagine if you are a 40-year old man, working in construction. You recently received a high heel shoe campaign from a department store. Clearly this store doesn't know your gender, let alone your preferences. You probably won't visit them or their website, even though they sell your favorite brand of jeans. The department store lost you as customer, losing the chance to foster a long-term relationship. Only if they just segmented their list by gender.

4. Communication errors

One thing customers signing up for a loyalty program understand is they are giving businesses permission to contact them via email and phone. But retailers haven't figured how best to communicate with them. Either they are contacting customers too much or they aren't contacting them enough, both are issues.

If a retailer is contacting customers too much, customers will begin to disregard their messages. And if a retailer isn't contacting them enough, then their competitors might be benefiting. Either way, retailers can't create a segmented experience because customers aren't engaging with any of their campaigns. Customers can be missing out on promotions and campaigns for their favorite products, reducing how often they return to the retailer's store or website.

5. Stagnant loyalty program

Loyalty programs need to be updated over time, it could be the program strategy or the points and rewards structure. But retailers seem to struggle making changes. One major reason why retailers are struggling to make changes is due to their loyalty platform. There are platforms that aren't flexible for retailers, as a result retailers have a stagnant loyalty program. Choosing a platform that is flexible helps you adapt your program as customers buying and engagement habits change.

Remember, a customer loyalty program is a great marketing tool to help increase customer retention and acquire new customers. But if you avoid these five mistakes you can expect your program to succeed.

Topics: Consumer Behavior, Customer Experience, Customer Service, Loyalty Programs, Marketing

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