3 Fundamentals of a Good Loyalty Program

I’ve never been an enthusiastic loyalty program member. Cafe owners try to sell me on the concept to little effect. I accept the card, to be polite, but I don’t like feeling obligated to any single merchant. Thus, a stack of never-used loyalty cards now clutters my wallet.

I doubt I represent most American consumers. According to a survey by researchers at Colloquy, the average American household enrolled in 29 separate loyalty programs in 2015. Even if they didn’t cash in on every one, the high participation rate lends credence to the effectiveness of loyalty programs at some level.

But what do customers want from loyalty programs and what does a loyalty program truly accomplish?

Why Customers Join and Stay Joined

Consumers join loyalty programs for a simple reason. A customer likes your product and sees value in the reward you offer for being loyal. Research bears this out and gives deeper insight into customers’  attitudes.

Another 2015 survey from Maritz Motivation Solution showed that 43% of loyalty program members said the top reason for joining was a desire to earn rewards. What about the rest? Well, 31% joined because it required little effort to do so.

Meanwhile, Colloquy uncovered that 81% of those who joined a loyalty program said they continued to participate because it was easy to understand. And 75% said they stayed because the rewards and offers were relevant to them.

So customers join and stay joined because:

• They want to reap rewards.
• Programs offer rewards relevant to their interests.
• Loyalty schemes are easy to join.
• And programs are easy to understand.

Making Your Loyalty Program Work

Businesses that reward customers know how loyalty programs benefit them. These programs encourage customers to spend more with them. They help retain your happiest customers, who make the best word-of-mouth evangelists to your brand. Observers note, however, that businesses often let their loyalty programs get out of hand. They typically point to a few fundamentals.

Keep Your Program Simple
One of the biggest problems in loyalty programs is complexity. Programs that require too much fine-print will be difficult to manage and leave customers cold. An easy-to-understand points-based loyalty system that offers relevant rewards based on historic activity keeps things simple.

Make The Value Proposition Obvious
Good programs give customers tangible reasons to sign on. Customers should know exactly what discount or free item their loyalty will win. They won’t shy from a pay-to-play program if they know the great value they’ll get from a small additional fee. This can be free shipping on all orders for a year or exclusive product offers.

Look for ROI
Businesses sometimes treat loyalty programs as an end to themselves. They neglect to measure success beyond enrolment. Accenture reports that only 19% of retailers measure the return on investment in their loyalty programs. Tracking stats including frequency of purchase and lifetime spend will give you a better idea of a loyalty program’s worth.