Avoid these 5 traps for a successful loyalty program
Do you know that it is 5 to 25 times more difficult to get new customers than to keep old ones? Also, research shows that if you manage to keep just 5% of your old customers, the increase in profits can be as much as 95%. However, that is not all. Old customers spend as much as 67% more than new customers, and as much as 12% to 18% of revenue is brought by members of the loyalty program than those who are not.
All these statistical data clearly show how important it is to build a quality loyalty program and work on the basis of loyal users. However, the fact that you have introduced a loyalty program does not mean that you have completed your part of the work. You will feel the real benefits only if you do everything right and avoid the most common traps you can fall into. Regardless of the size of the business, these 5 universal pitfalls apply to every loyalty program.
First pitfall – Don't overcomplicate
Are you one of those businesses that like to complicate things? Complicated loyalty programs, those that are difficult to understand and follow, are doomed from the start. People like simplicity. They like when something is clear to them, when they understand how the program works, according to which principle the rewards are realized and what the rewards are. They don't like it when they have to study your program as if they were preparing to defend their doctorate in college. Simplify it.
Many businesses fall into this trap, and it's actually very easy to avoid. Create a simple loyalty program that is easy to understand and follow. After a while, if the need arises, you can make it a little more complicated.
Second pitfall - The prize is too hard to come by
If your rewards program is too heavy, customers won't feel like they've won anything, and there's a chance they'll be very angry and frustrated. This leads to reduced visits and reduced profits, as well as bad advertising for your brand. So while it may seem like it's not good for business to give out too many rewards and lose out on revenue, that's not really the case. Of course, you should not exaggerate. The ideal is to find a middle ground where you give as much as you can afford, but enough to attract new customers.
Take Starbucks as an example, which allowed itself to fall into this trap despite its name and strong brand. That's what happened when they decided to drastically tighten their rewards program. Previously, it was enough for a customer to have 12 stars for a free drink, but now for the same reward, it was necessary to collect as many as 125 stars. It is clear that this did not go unnoticed and that the members of the loyalty program were more than dissatisfied. After that, the rating of Starbucks dropped by as much as 50%, and they managed to recover from such a debacle solely because of their established brand.
To summarize, find the golden mean, which will suit both you and the customers, so that you do not get into a difficult situation from which you will not be able to extricate yourself. Always test the market, try, change, adapt to changed circumstances and you will have a much higher chance of success.
Third trap – Bad loyalty program promotion
You can have the best loyalty program in the world, but if no one knows about it, then you're in serious trouble. There are many methods of advertising loyalty programs, and the sweetest ones are those that are completely free, and at the same time ultra effective. Here we are referring primarily to social networks, which have exploded in the last few years.
The power of social networks was used in the right way by an Italian restaurant in America - Veni Vidi Vici. A program was designed in which you can win, for example, an additional glass of wine or another drink, which was the basic prize and was available to almost every guest. The originality comes to the fore when someone visits this restaurant for the hundredth time, because then the guest gets the honor of having his name carved on the table where he sits most often.
However, it does not end there. This restaurant went one step further and promised the guest who visits it a million times nothing less than a Ferrari car. Regardless of the fact that this is obviously not possible, because even if you go to a restaurant every day it will take you over 2,500 years to win a Ferrari, the idea itself is ingenious and very likable. However, all this would not have been significant if the loyalty program had not been brilliantly advertised on social networks and thus achieved enormous business success.
Fourth Trap - Track analytics and data
It is very important that you follow the numbers. Numbers and statistics don't lie, so it's a big mistake not to listen to what they have to say. In most cases, you will know what to do next and whether something is working or not, simply by keeping records.
Collect data before you even enter the process of creating a loyalty program. After you've designed your program, continue to actively keep track of it and you'll know what decision to make at any given moment, when to change something, and how. In order to be as successful as possible in this, you can periodically send surveys and questionnaires to your members. Without clear statistics and record keeping, you will often be wandering in the dark, not knowing where you went wrong and how to proceed.
Fifth trap - Report regularly to your loyalty users
One of the biggest mistakes and pitfalls you can fall into is keeping your customers in the dark about the news you want to introduce or have already introduced to your loyalty program. People don't like surprises, especially when it comes to changes that limit or diminish something.
To avoid falling into this trap, the best practice is to notify members before making changes to give them enough time to prepare. Consider even consulting with them about the change you want to implement, in order to get useful feedback and to make your loyalty members feel like an important part of the program, whose opinion is valued and respected.
If you manage to avoid these few frequent pitfalls that many businesses fall into, you will be well on your way to making your loyalty program come to life to its full extent and bring you enormous success.
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