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Mission: Loyalty – Loyalty Program Mistakes That Shrink Your ROI

While undercover, I asked a lot of people about running loyalty programs. Based on their answers, loyalty programs are such an easy concept. “I just give my customers points for the money they spend, some cool rewards — maybe sprinkle in some tiers for good measure — and boom, instant success! It isn’t rocket science”, some have said. However, there’s more than meets the ear… I’ve since learned the whole truth.

In reality, there’s a huge divide between loyalty programs that are functional, and loyalty programs that are successful. If you are aiming for the latter, it’s time to embark on another mission—this time to avoid loyalty program mistakes that hurt your bottom line (and your reputation). This is crucial not only if you’re planning a loyalty program but also if you are revamping one. According to my Loyalty Intel, based on the Global Customer Loyalty Report, 7 out of 10 respondents want to revamp their loyalty programs in the next three years.

So now that the mission is clear, it’s time to get serious and inspect loyalty program mistakes that, although they might be common, you can surely avoid.

1. Trying to Launch With all the Bells and Whistles at Once

The first common mistake made by ambitious businesses is going to market right away with the biggest, flashiest loyalty program. Although there is absolutely nothing wrong with thinking big and creating your dream loyalty program, squeezing in every possible feature into the launch prolongs the development process. Plus, it will be more difficult to keep the experience fresh for customers later on.

 

Get your spy gear ready, as we are diving into the curious case of loyalty program mistakes that might cost you your customers — something all businesses wish to avoid.

Imagine starting off with a loyalty program that has half a dozen tiers, gamification, badges, challenges, contests, prize draws, and a few mystery gifts, too. Initially, the excitement would be huge, but after all the hype dies down, what features would you add to surprise customers in the coming years? Not to mention, a bombastic opening sets member’s expectations high, and they will expect every new feature to be equally as flashy and exciting.

As the saying goes: Dream big, but start small! Launch your loyalty program with a solid, well-thought-out MVP. This approach also makes it easier to collect customer feedback and iterate new features based on that feedback. It’s easier to keep the experience fresh with an ever-evolving program, so you can continually show members that you value their commitment.

BMW’s Inside Edge loyalty program.
BMW started with a soft launch for a limited number of members and got feedback from their most frequent and loyal drivers. Then they refined the program and added to it before going public.

2. Overcomplicating Things

Another issue I see all too often in loyalty program management is when companies either overcomplicate or over-restrict the program. If the loyalty logic is too convoluted or not clear from the get-go, customers will quickly abandon the program.

Similarly, making the system too generous in the beginning only to add restrictions later on will leave customers upset and dissatisfied. For example, if members can collect points for writing product reviews once a week, but then you change it to once a month, customers can get frustrated and will be less likely to engage with the feature.

Before introducing the loyalty program to the wider public, it’s a great idea to hold a soft-launch for long-time brand lovers. They can help you test the features and provide valuable feedback on whether the system is too strict or complex.

A banner recommending to download Antavo’s ‘Loyalty Program Concept Worksheet’
Ensuring that you start off with a solid loyalty program concept minimizes the risk of overshooting your goals. Use our handy worksheet to plan ahead for all situations!

3. Being Afraid to Push for Long-Term Engagement

Loyalty management systems are more than just a carrot on a stick: they’re there to promote long-term engagement and increase customer lifetime value. If you’re looking to get short-term returns by preventing customers from receiving too many benefits, your program will never reach its full potential.

Alert! Shying away from reminding customers to spend their points is a classic mistake. Short-sighted businesses do this — alongside setting overly strict expiration dates — to prevent customers from spending their points on coupons or benefits like free shipping, thinking that they will save money.

Every time a member claims a reward, the chance of them making another purchase increases. In the long-term, getting customers to reach their second or third purchase is far more beneficial than skimping on points.

Antavo’s chart on what the extended customer lifecycle looks like.
As this diagram of the customer lifecycle shows, focusing on points stops you at the first point of loyalty. Not letting customers have fun prevents you from reaching the true loyalty stage.

4. Only Rewarding Transactional Activities

The main selling point of next-gen reward programs is that they engage customers outside of the buying cycle. In other words, customers can earn points or unlock benefits for non-transactional activities. This means they can earn points for writing a product review, being active on social media, filling out surveys, recycling old products, donating to charity, or doing other activities.

As Michael Shrage, author of “Who Do You Want Your Customers to Become?”, summed it up in one of his articles on Harvard Business Review: “Confusing loyalty with retention, promotion, and rewards undermines brand equity more than it creates new value opportunities.”

If you’re only rewarding customers for making purchases, you’ll miss out on so many valuable touchpoints. The rate at which points are earned will be lower, and it’s more likely that members will lose interest. In our recent North America Customer Loyalty Report, 87% of existing program owners said they’re planning to reward non-transactional behavior in the next three years!! So get on the non-transactional train before this strategy becomes the standard.

Aligning customers with your brand values is key to building brand love. One way to do so is to be present in their everyday lives. For instance, an activewear company can reward their athletic customers for working out by integrating a sport tracking app with the loyalty program.

A banner recommending downloading Antavo’s Bergzeit Club’s case study.
For the mountaineering product retailer Bergzeit, Antavo created a loyalty program that rewards customers who track their hikes using the Strava sports tracker. Read more about it in our case study.

5. Not Considering Fraud

A rather sensitive, yet incredibly important topic is fraud. There are a number of individuals who are looking to game the system and get an unfair advantage. They will exploit any cracks in your loyalty logic to earn more points than they’re eligible for, or progress through tiers faster than they should be able to.

Fraud, unfortunately, is a part of the loyalty program management game, so you have to prepare for it. While testing your loyalty program, you and your soft-testers might overlook a small loophole, which will only be revealed later on. Remedying the issue might even require an immediate rule change, or the temporary removal of a feature. So what’s my advice? When looking for the right technology vendor, be sure to take into account what kind of fraud detection/prevention capabilities they offer.

Keeping an eye out for fraud requires vigilance from your management team. Be sure to choose a loyalty provider that offers extended reporting capabilities, so you can spot any discrepancies in customer activity.

Antavo backend image about its no-code Workflow editor.
Antavo’s Enterprise Loyalty Cloud includes a sophisticated, no-code Workflow editor that allows users to fully customize their loyalty campaigns to prevent loyalty program fraud, like point caps or special filtering criterias.

6. Fumbling With Enrollment

First impressions are everything, right? Customers’ first interaction with your program happens when they enroll. So my advice is to avoid hiding the registration link in a drop-down menu or at the bottom of your brand’s page. This program is the result of your hard work, after all, so make sure to flaunt it!

Speaking of visibility, I’m always saying that companies should use images to entice customers to join the program, rather than a plain, old “Join our loyalty program” button. Visuals allow you to communicate the benefits and value proposition so much more efficiently.

Make sure to remove all the barriers to sign-up. It’s tempting to want to capture all the data you’d like to have about your customers in the registration process, but this can stop people from completing enrollment. Start with the essentials and then incentivize more data and preference sharing with rewards.

Kelllog’s loyalty program enrollment message.
Kellogg’s keeps things simple and stylish with its loyalty program enrollment. To get moreinspiration, check out our review of Kellogg’s Family Rewards.

7. Underestimating the Power of Gamification

I can hardly think of a bigger loyalty program mistake than thinking that gamification is just a mere gimmick. People love games and gamified loyalty program mechanisms. After all, receiving a reward is one thing, but isn’t it more exciting (and memorable) if you receive a reward by spinning a prize wheel?

Gamification in loyalty programs can take a variety of forms, from challenges and badges to gamified surveys and treasure hunts (either offline or online), gamification has the potential to shake up the experience for loyalty program members, and change their habits by encouraging them to interact with the program in new ways.

One gamification technique that changes customer behavior is badges. Offer customers a unique badge and special reward for downloading and signing into your dedicated loyalty app. This way customers familiarize themselves with your app, and can get used to interacting with it.

KFC’s Rewards Arcade loyalty program.
In KFC’s Rewards Arcade customers receive an in-app invite to play after every order over £3 and there are 12 fingerlickin’ freebies up for grabs, for instance including: 6-piece Bargain Buckets, Popcorn chicken and many other tasty prizes. Creatively themed around a gaming arcade, the app features a vibrant, fun and colorful 3D space. The first game to mark the Arcade’s launch is Hammer Time, a classic arcade-style game where players choose one of three hammers and swing to win by ringing the bell at the top of the tower.

8. Missing out on Word-of-Mouth

Word-of-mouth is a powerful tool: customers will always value the opinion of their friends more than what they hear from ads or marketing materials. But if you don’t motivate customers to be active and spread the word about you, only a very small, enthusiastic segment will do so.

Here’s what you can do. For starters, reward customers for sharing product pages on social media platforms by giving them points. Next, come up with a referral system where both the referee and the referrer are rewarded, because it’s more likely that customers will invite their friends if it’s mutually beneficial. Lastly, to truly capitalize on virality and UGC, organize Instagram hashtag and comment contests where the most creative participants receive a prize.

Instead of providing a handful of points after each referred friend, why don’t you create a progression system with milestones or tiers? The more people a member invites, the better the rewards they receive. You can even reserve benefits, like free shipping, for members who invite a minimum number of friends.

Setting up a hashtag contest on Instagram.
If influencer marketing, referrals and community building are important KPIs for you, consider launching a specialized loyalty program that focuses on these key areas.

9. Not Wanting to Surprise Customers

Variety is the spice of life. And how can you add some variety into your customers’ lives? By surprising them, of course! Surprise & delight is the ultimate secret formula for great rewards programs. And it has more impact on customer loyalty than you can imagine.

Don’t want to surprise customers? You’d be giving up on a powerful incentive (as a matter of fact, surprise birthday emails are an enticing benefit that often results in spontaneous purchases), and your program won’t be able to generate memorable moments.

Don’t just stick to what appears on the loyalty benefits page of your website. Design hidden rewards for maximum emotional impact. Loyalty is a long-term profitability retention tool, but you can create opportunities for short-term traffic/footfall bumps with surprise & delight experiences and offers.

An email message from LVR demonstrating the allure of surprise & delight birthday offers.
Italian luxury fashion retailer LuisaViaRoma experimented with a surprise & delight birthday email campaign that ended up as one of the most popular email campaigns in the company’s history. See the full story in our case study.

10. Lacking a Dedicated Loyalty App

Nowadays, being omnichannel is more of a hygiene factor than a differentiator. Allowing customers to go through the loyalty journey across multiple channels is an expectation that your business should definitely live up to.

The first, and probably most obvious, loyalty program mistake is not bringing the loyalty experience to mobile. If your brand already has an app, adding a loyalty-related section is a no-brainer. However, you can achieve even more by introducing a dedicated loyalty app. Don’t worry—thanks to innovative new solutions, this endeavor is easier than you may think.

Your loyalty app should be treated as a hub that customers on the go can use to review their progress and effortlessly access their loyalty card or pass, so they can identify themselves during in-store visits. Not to mention, smartphones are ideal platforms to offer daily challenges and gamified features, because members can engage with them during coffee breaks or while in transit.

Starbucks built its loyalty program with an omnichannel mindset.
Starbucks’ omnichannel loyalty program allows members to check their balances and reload their cards through the app, website, or in-store. Any change to the card or the customers’ profile is instantly updated across all channels.

The Biggest Mistake of All: Not Choosing Antavo as Your Loyalty Platform Provider 😉

Tongue-in-cheek headline aside, as torchbearers in loyalty program management technology, we pride ourselves on the sophisticated and innovative features that the Antavo platform provides. Not only that, but we offer you top-notch industry knowledge to help you avoid common pitfalls and build a loyalty management system that reflects your brand values.

If you’re interested in starting a discussion about next-gen reward systems, our experts are more than ready to help you. So feel free to include us in your loyalty program’s RFP process, or book a demo to see what we have to offer.

In the meantime, here’s a handy worksheet to help you work on the rewards for your loyalty program:

Banner recommending readers to download Antavo's Reward Planning Worksheet

Antavo
Author: Antavo

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