10 Deadly Loyalty Program Mistakes



Inspired by a cheeky LinkedIn post, here are 10 deadly mistakes a loyalty program can make:


  1. Copy your competitors.


“Rip-off and duplicate” is not an effective R&D strategy, for loyalty or any other line of business.  What seemingly works for them will not work for you and neither would you want it to.  This strategy creates undifferentiated programs that do not account for your unique customer needs or what your organization brings to the table.  In the worst-case scenario, continuously copying competitors would lead to a race to the bottom, in terms of pricing, dividends, and promotions, which erodes margins and educates customers to become price and promotion-sensitive, rather than look for real value.


Instead, identify your unique assets (brand, data, people, processes, partnerships, etc.) and look for inspiration in unlikely places (globally, in different industries, or become niche in solving a particular target’s problems) to create a program that is reflective of your brand promise.


  1. Play the Amazon game.


Similarly, blindly following Amazon Prime or any other large player is never a good strategy.  They have the scale and infrastructure that you do not and can play their game, on their terms, much longer, while you lose margin. 

You don’t want to be a small player in a big game.  Instead, you can create your own game where you are the only player.  Define the value that you offer in the terms that help you stand out and win and you have no competition.


  1. Mass communications blasts.

Personalization is now table stakes.  33% of customers will walk away from your business if you blast them continuously with the same messages and marketing communications that do not consider their preferences and previous behaviour.  Leverage the most valuable asset of your program – your data – to determine the right cadence of communication for each customer and communicate only relevant, value-added content, products, and offers. 


  1. Boring, low-value program


Infuse fun and engagement into your program.  Make it enjoyable, entertaining, and useful to your members. 


Capping the value your customers get back from your program at 1% (for example) is arbitrary and does not recognize, reward or differentiate your best customers.  Instead, the value your members receive should be proportional to the value they bring to your business in terms of purchases and brand advocacy.


  1. Discount-based program design


While there is nothing inherently wrong with discounts, they should not be the only or even the main component of your loyalty program.  You do not want to turn your loyal customers into becoming price and promotion sensitive.

As a loyalty manager, you have many tools at your disposal to reward your customers: events, communities, ESG initiatives, access, convenience, exclusivity, etc.  You don’t have to stick to only discounts that are easily replicated by competitors.


  1. Technology to drive strategy.


Choose your technology partner wisely.  They need to be able to deliver on your vision, strategy, and capabilities.  Your strategy should ALWAYS come before technology.


  1. Difficult to earn and redeem.


Don’t make it harder for your customers to do business with you.  Test drive the key loyalty processes, such as earning and redeeming, for yourself and learn all the potential pitfalls. Then systemically work to make them more seamless and intuitive.  Continue iterating on these customer experience improvements.


  1. Punitive expiry terms.


If your customers’ points expire before they get a chance to use them, they do not get any value from the program, and you do not get any halo benefit from their actual redemption.  Punitive expiry terms are tempting to improve your bottom line but will hurt you in the long run.


  1. Long and complicated terms & conditions


Keep things simple.  Your customers shouldn’t need a legal degree to understand or maximize the benefit of your program.  While it is important that you don’t make yourself a target of fraud or undesirable behaviour, don’t make them jump through hoops to participate either with huge restrictions on what is or isn’t allowed.  Transparency, easy-to-understand language and mutual trust would go a long way.


  1. Plastic card only


Please allow your members the benefit of choosing the channel through which they interact with you. They may choose plastic or mobile app (some programs have done away with plastic altogether).  They may choose in-person shopping or e-commerce.  Meet them where they want to be met.

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