Customer Loyalty

Mistakes to Avoid When Building Customer Loyalty Programs

Written by Clayton Reeves for Gaebler Ventures

When implementing loyalty programs, avoid these common mistakes. Otherwise, your customer loyalty program will not achieve your business objectives.

Customer loyalty programs can be employed to grow your business.

However, there are several common mistakes that firms make when implementing loyalty programs.

The most common mistakes are outlined below. By avoiding these pitfalls, your firm can create a successful loyalty program.

Do Not Overpromise

There is nothing more annoying than promising what cannot be delivered. If something is promised to the customer, then that good or service must be produced promptly.

Do not assume that customers are not going to reach the loyalty marks or choose a certain reward. The company must be honest with customers. For example, if your firm promises to give shorter telephone service waits to top customers, make sure the difference is appreciable and consistent. All it takes is one twenty minute wait on the telephone to ruin a relationship with an otherwise loyal customer.

Do Not Give Too Much

Along the same lines as the previous loyalty program advice, do not give away the farm. The firm must balance customer demands with the responsibility of operating a profitable business.

Although it may be tempting to reward very loyal customers disproportionately, it turns into a slippery slope of them asking for more and more. It is important to never give too much, as a result.

Do Not Reward Volume

There is a difference between rewarding high volume customers and high profit customers. This difference is important to define if you expect to turn a profit on your loyalty program.

For example, consider a food vending business. Just because someone buys the most sandwiches doesn't mean they are the highest profit customer. The customer that regularly purchases chips, a soda and a cookie is probably creating the most revenue and profit.

Differing between high profit and high volume customers will be the most difficult thing you do as part of your loyalty program.

Do Not Reward the Disloyal

This may seem like common sense, but sometimes loyalty programs reward people that are actually very disloyal.

For instance, if a customer signs up for a credit card that has an initial reward point bonus, redeems those points and then cancels the card, then a disloyal action has been rewarded. It is important to distinguish loyal and disloyal customers. Once this has been done, then it is easier to reward the right kind of customer.

Do No Create a Commodity

It is imperative to create a reward system that distinguishes itself from the competitors' reward programs. Without any difference, then the first reward system released will have first mover advantage. After this advantage is created, only differentiation can erode that market share.

The trick is to create a unique reward system that creates value for customers.

When he's not playing racquetball or studying for a class, Clayton Reeves enjoys writing articles about entrepreneurship. He is currently an MBA student at the University of Missouri with a concentration in Economics and Finance.

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