5 mistakes to avoid when building a customer loyalty program
By Arnab Mitra - Aug 30th, 09:49
Nowadays it seems like every retailer has a customer loyalty program. And if you don't have a program, you have definitely thought about launching one.
A customer loyalty program can be a great asset to your retail business, boosting customer retention and acquiring new customers. One of the biggest aspects for any retailer is if the program's return on investment is maximized as a customer loyalty program is a major investment. But it's not just a cash investment, it's an investment into customer experience. Cancelling a customer loyalty program or changing loyalty platforms in a short period can hurt your customer's experience.
When customers visit your business they are expecting a similar experience each time, whether it be a physical store, website and/or mobile app. If you make sudden changes that hurt their experience, they are more likely to visit a competitor. Now to help you maximize your investment and customer experience, here the top five mistakes retailers should avoid making.
1. Lack of data collection
How customer data is being collected and used is a major key for a customer loyalty program. But many retailers aren't give customer data the attention it needs. A customer loyalty program is not an out of box product. It should be customized to your customers. So with that in mind, as your program matures, your program should continue to be customized. How can you customize your program without customer data?
The customer data I recommend collecting includes:
Social media accounts
Age and gender
Marketing and sales campaign activity
Rewards earned and redeemed
Loyalty points earned
This data should be collected through your customer loyalty platform. The success of your program is dependent on data collection and using data to make enhancements. Don't be another retailer to have a failed customer loyalty program.
2. Non-insightful data
Retailers are collecting non-insightful data through their customer loyalty platform. While their platform collects minimum data, such as socio-demographic information, it isn't collecting key data points, including customer purchases, social media posts, marketing and sales campaign activity. These data points help retailers enhance the customer experience.
Often the biggest reason why a loyalty platform doesn't collect this data is because the platform isn't integrated with the POS system and/or e-commerce website. As a result, it's difficult to collect these key data points. How can you create segmented campaigns, personalized experience and offer personalized gifts, if you don't know what how your customers are engaging?
3. Inaccurately segmenting customers
One of the benefits of a customer loyalty program is customer segmentation. Through your customer data, you can segment customers into groups, based on of gender, age, buying habits, and more. But the issue retailers are facing is inaccurate customer segmentation.
The biggest reason for this mistake is related to the first two mistakes. Either retailers aren't collecting the right data or the data they are collecting isn't insightful. As a result, each customer in the loyalty program is receiving the same experience. And that is an issue. According to Accenture, 78 percent of customers are retracting loyalty faster than three years ago. One of major reasons is due to customers not being segmented or segmented correctly.
To paint a picture for you, imagine if you are a 40-year old man, working in construction. You recently received a high heel shoe campaign from a department store. Clearly, this store doesn't know your gender, let alone your preferences. You probably won't visit them or their website, even though they sell your favourite brand of jeans. The department store lost you as a customer, losing the chance to foster a long-term relationship. Only if they just segmented their list by gender.
4. Communication errors
One thing customers signing up for a loyalty program understand is they are giving businesses permission to contact them via email and phone. But retailers haven't figured how best to communicate with them. Either they are contacting customers too much or they aren't contacting them enough, both are issues.
If a retailer is contacting customers too much, customers will begin to disregard their messages. And if a retailer isn't contacting them enough, then their competitors might be benefiting. Either way, retailers can't create a segmented experience because customers aren't engaging with any of their campaigns. Customers can be missing out on promotions and campaigns for their favourite products, reducing how often they return to the retailer's store or website.
5. Stagnant loyalty program
Loyalty programs need to be updated over time, it could be the program strategy or the points and rewards structure. But retailers seem to struggle to make changes. One major reason why retailers are struggling to make changes is due to their loyalty platform. There are platforms that aren't flexible for retailers, as a result retailers have a stagnant loyalty program. Choosing a platform that is flexible helps you adapt your program as customers buying and engagement habits change.
Remember, a customer loyalty program is a great marketing tool to help increase customer retention and acquire new customers. But if you avoid these five mistakes you can expect your program to succeed.
© 2017 Networld Media Group, LLC.
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