7 Fatal Mistakes That Are Killing Your Loyalty Program (And How to Avoid Them)

The customers who stopped buying from you yesterday are now buying from your competitor. Customer loyalty is not a distant, future goal but a daily necessity, crucial for the growth and success of your business. Customer loyalty is not a business objective; loyalty is the path to commercial success.

Loyalty programs are essential for establishing and capitalizing on valuable, long-term relationships with your customers. At Leal, we can attest to this: hundreds of clients have increased their sales with our Benefits module.

Below, we highlight the most lethal mistakes and provide the best solutions for creating and implementing your loyalty program.

‍Why Loyalty Programs Are Essential for Your Business

Selling to a new customer is good, but selling to them again is better: Acquiring a new customer is between five and twenty-five times more expensive than retaining an existing one. Additionally, companies have between a 60% and 70% chance of selling to an existing customer, while the probability of selling to a new prospect is only 5% to 20%.

Customer loyalty impacts everything from the average purchase ticket to brand positioning. When loyalty programs are well implemented, they can bring multiple benefits to your business. What can loyalty programs do for your business?:

• Increase customer retention:
  The right incentives add value for customers, motivating them to stay engaged with your brand and continue choosing your company. Increasing customer retention by 5% can boost profits by 25% to 95%.
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• Increase customer lifetime value (CLV):
  Loyalty programs increase purchase frequency and average ticket size through reward mechanisms, cross-selling, and upselling.
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• Improve brand positioning and turn consumers into promoters:
  Shep Hyken, a customer experience and service expert, says, “True loyalty is when a customer is emotionally connected to a company, not just to the benefits and points of a loyalty program.”
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• They provide access to actionable data:
  Loyalty programs have immense, sometimes overlooked power: they are the key to accessing your customers' data. Customers are willing to share their information in exchange for benefits. Once you capture your consumers' data, you can take action based on who they are, what they prefer, what they expect from you, what they buy, where they buy, and how often.
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• Optimize customer investment:
  Investing in a loyalty program can be significantly cheaper than marketing and sales strategies to convert prospects into customers.‍
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• Improve performance during off-seasons:
  Loyalty programs can be a great ally during periods of low demand, offering exclusive promotions that motivate customer activity year-round.

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The Most Common Errors in Loyalty Programs

To reap all the benefits mentioned above, a loyalty program must function properly. However, it is common for companies to make certain mistakes that hinder the performance of their loyalty programs. Below, we highlight the most common errors and present solutions to correct them.

1. Unattractive or irrelevant rewards:

There are loyalty programs that offer a keychain after the fifth purchase and others that promise a luxury trip after a trillion points. Neither of these rewards motivates customers; the first is unattractive, and the second is unattainable.

To encourage customer participation, rewards must be:

• Well-suited to the needs and preferences of your customers to generate customer engagement.
• Realistic and attainable, proportional to the effort of the participants, with sensible and fair redemption times.

2. Ignoring Customer Feedback:

Your loyalty program can always improve; just adjust it based on your customers' feedback. The data doesn't lie. With Leal 360, you can analyze your customers' data, collect their opinions, and easily access various real-time metrics.

3. Not Segmenting Customers

When you don't segment your customers, you end up creating offers and rewards that are too generic. It's essential to know who your customers are: their socioeconomic status, purchasing power, where they're from, what interests them, etc. Only then can you segment them and tailor your loyalty programs accordingly.

4. Not Promoting the Program Effectively:

What is not displayed is not sold. If customers are unaware of the loyalty program, they won’t be able to participate in it. Your loyalty program may have the best rewards, but it won't be effective if your customers don't understand how it works, if they don't remember it, if they aren’t aware of your promotions and updates, and if the information they receive is confusing or untimely.

5. Not Having a Prepared Team

A loyalty program will fail if it doesn't have the support of a skilled and well-informed staff. You need a coordinated and trained team to operate the program, answer participants' questions, and resolve any issues they may have.

6. Not Measuring the ROI of the Program

Companies that don't measure the return on investment (ROI) of their loyalty initiatives often waste budget and efforts. It is essential to establish and track success and profitability indicators for your benefits program.

7. Not Setting Clear Objectives:

Loyalty programs that don’t have specific objectives cannot ensure their success.Before setting up a loyalty program, you need to define clear, concrete, and measurable objectives.

How Leal 360 Helps You Avoid These Mistakes and Create a Successful Program

Creating a successful loyalty program is a cross-functional and multidisciplinary task. It requires efforts from operations, marketing, sales, and customer service. Leal 360 is the most comprehensive, intuitive, and cost-effective solution to build customer loyalty and manage your relationships with them.

Over 700 companies have grown with Leal, building customer loyalty and boosting their sales.

FAQ:

1. What factors influence customer loyalty?

There are various factors that influence customer loyalty: customer service, effective omnichannel communication, the customer experience with the brand and its products, loyalty initiatives such as promotions and loyalty programs, and actively receiving and responding to consumer feedback.

2. What impact does customer loyalty have on a company?

Customer loyalty brings multiple benefits, including: customer retention, optimization of customer investment, increased average purchase value, higher purchase frequency, access to customer data, improved brand positioning, and converting consumers into promoters.

3. How do you measure customer loyalty?

Effective metrics for measuring customer loyalty include Customer Retention Rate (CRR), Customer Churn Rate (CCR), Customer Lifetime Value (LTV), Net Promoter Score (NPS), and Customer Satisfaction Surveys (CSAT).

4. What can a KPI be for the objective of “increasing customer loyalty”?

Customer retention is a good KPI for monitoring the increase in customer loyalty. Other valuable KPIs for this purpose could be average ticket value and purchase frequency.