You’ve finally decided to implement a loyalty program in your eCommerce store because of all the buzz around it. Now you understand that it is quite a significant step, so you don’t want to make any mistakes. By the end of this post, you should be able to identify some of the costly mistakes to avoid when setting up your rewards program.
To set the record straight, the reason why there is so much “buzz” around loyalty programs or rewards programs is that they are effective. Marketing experts recommend it as an excellent retention and revenue-boosting tool. The psychological effect of rewards programs is very powerful and for approximately 69% of shoppers, the presence of a rewards program alone influences their purchasing decision. However, the success of every loyalty program depends on its setup and how it can create a solid relationship with customers.
Unfortunately, too many businesses tend to rely on limited assumptions of their customers, then structure their program in a way that hurts their business and frustrates their customers. Even huge brands make some of these mistakes with their programs. But in the long run, it all comes down to learning, readjusting the program’s structure, and making another attempt.
In this article, we’ll tackle 10 of the most common mistakes to avoid when executing a loyalty program. Knowing these mistakes could make the difference between boosting growth and attracting more customers and churning customers. Whether you’re just getting started with designing your loyalty program, or have an existing one, ensure that you steer clear of these mistakes.
Inadequate, limited, and unappealing rewards
It is nearly obvious that the kind of rewards you offer will either break or make your entire loyalty program. If you give out rewards that do not incentivize profitable customer behavior, you may be wasting resources. Irrespective of whether you’re trying to use the program to incentivize them to purchase more, re-active their subscription, engage with your brand, or refer a friend, the greatest are those that your customers need.
In choosing rewards, your primary focus should be finding out your customers’ needs and wants. Avoid the mistake of selecting rewards only based on factors such as price, availability, or convenience to your business. Such rewards are limited, inadequate in value, and usually result in offers that are dissatisfying to the customer.
For instance, the Microsoft Xbox Live Rewards program offered gamers birthday points equivalent to $0.25. However, some gamers clearly expressed their dissatisfaction with the worth of the reward. Microsoft could have provided something more valuable and appealing, like a free trial or access to certain in-app features if the cost was a problem for them. Another great example is The North Face XPLR Pass which offers great and exclusive perks to its member.
Customers will not be thrilled by cheap rewards; however, valuable rewards don’t necessarily need to be expensive. You can always use alternative currencies instead of relying on the traditional points and cash system. The key here is to determine what your customers really want and serve it to them.
Not utilizing customer data
Another huge loyalty program eCommerce businesses make is failing to utilize the customer data they acquire properly. As shoppers transact with your business, gather points and redeem their rewards, you gain invaluable customer data. These range from their consumer behavior, the average amount they spend per transaction, the kind of products they like or dislike, and the day of the week they make purchases. For instance, an analysis of customer data might indicate that most of your customers cannot reach the highest tier in your program. It could be due to undesirable rewards or demanding tasks that do not motivate them to achieve that goal. Having access to all this data means you can continuously tweak your loyalty program, experiment more and eventually incorporate the most effective incentive strategies to yield the best results.
Failure to analyze and take advantage of the customer data you collect equates to failing to identify specific patterns in customer behavior.
Not promoting your loyalty program is another grave mistake to avoid. It is dangerous to think that your loyalty program will reach customers if you do not promote it. The global rental company Airbnb admits to having made this mistake with its referral program. The program was so poorly promoted in its early stages that even its employees did not know it existed.
If you realize that your loyalty program is not succeeding or driving as much customer engagement as you expected, the issue could well be that only a few people know about it. Retailers must understand that consumers are bombarded with so many images, words, and popups on the web that they would only notice the one things that are promoted effectively. Therefore, take advantage of the available digital channels such as your business website, social media platforms, email campaigns, signatures, invoice notes, and apps to promote your loyalty program.
Overcomplicating the program
One of the worst mistakes a retailer can make is to leave the complexities and math of their rewards program to the customer to figure out. The chances are that if they have to meander through numerous web links, fill plenty of forms and read complicated flowcharts to be part of your loyalty program, they will give up and go elsewhere.
The best loyalty programs are simple and easy to understand. They should be so straightforward and understandable that your customers can explain to their family and friends without referencing graphs and charts. Avoid overcomplicating the program by utilizing a concise explainer page that outlines the most essential details on signing up, collecting and redeeming rewards, or leaving reviews.
Treating all customers the same
Brands must recognize that offering the same rewards to all customers could make top-tier members feel less appreciated for their loyalty. Top-tiered loyal customers spend about three times more than the average customer and as such should be rewarded with better incentives. If you want to retain your most valuable customers, you need to offer them some exclusivity or advanced perks that make them feel valued and push lower-tier customers to spend more.
Not calculating the costs and ROI
Loyalty programs should be as beneficial to the business as it is to its customers. As such, you need to assess the program’s return on investments (ROI) and associated costs before you jump in. You need to find out if the investments you put in the program will pay off through the sales it brings in.
A typical example of this scenario is how Tesla had to end a referral program and revamp it later. The program offered new buyers six months of free Supercharging and extra prizes for referrals. Unfortunately, it affected Tesla’s profit margins, thereby increasing the cost of the cars. The company eventually revamped to a more sustainable program.
While it is essential to offer great value in your loyalty program, giving overly generous rewards can cripple your business. Ensure that you calculate the costs and ROI and strike a balance between the rewards you give and the estimated profits beforehand.
Not including referral rewards
Avoiding this mistake can be a game-changer in your loyalty program. As a retailer, never underestimate the power of word of mouth. You’ll be missing out on valuable lead generation assets if you fail to include referral rewards in your loyalty program. This failure could also result in low engagement with your brand, and most importantly, not gaining more new customers. Always ensure that you incentivize customers who refer others to your store. You can offer extra points or better rewards to customers with the highest referrals or offer a perk such as free shipping or discounts to members who invite others.
Failing to measure the program’s effectiveness
If you fail to measure certain vital aspects of your loyalty program, you could miss serious opportunities to grow your business. Monitoring and measuring how effective your rewards program is can determine the next steps and strategies to implement to make it better. Some of the areas you need to look out for include:
- Customer retention rates
- Negative churn
- Customer experience
- Reward effectiveness
Analyzing these factors can help you adopt strategies that will help increase your revenue, customer lifetime value, and purchasing frequency.
Not using an omnichannel platform.
A rewards program that does not utilize an omnichannel platform will lag in this modern age. Delight customers by connecting your brand with them across multiple channels. You can do this by using mobile apps, which they can use to sign up or track their progress in the loyalty program.
Launching without a long-term strategy
Before you design or launch your loyalty program, ensure that you have defined your long-term expectations. This involves knowing the kind of industry you are in, your customers’ needs, and the kind of relationship you wish to establish. Define the exact goals you want to achieve with your loyalty program. The strategies that might work for a clothing store may not work for a restaurant. Think ahead and design your loyalty program in a way that will build a lasting relationship with your customers. For example, the Sephora Beauty Insider program focuses on getting average shoppers to spend more in order to reach higher tiers in order to get access to exclusive events and benefits.
The truth is, businesses may never achieve “perfection” in a loyalty program, yet they need to strive to put in their best effort and resources to create a rewards program that has the highest odds of success. And the success of your rewards scheme can be measured by how it increases your Customer Lifetime Value. It all boils down to offering customers an incredible experience by first knowing what they need and what you can give. There is no limit to what you can achieve if you pay close attention to your customers’ needs. Offer them great value, and they will undoubtedly reward your eCommerce business with their loyalty.
To create a loyalty program that enables you to avoid these tragic mistakes, you need a well-designed plugin like the Beans loyalty program app.