The popularity of loyalty programs has been on the rise with American consumers belonging to an average of 13 programs in 2016. However, the flipside of that growth is that consumers are only active in 7 programs. How can brands successfully engage customers and nurture customer loyalty? Listed below are ten fatal flaws of loyalty programs and ten things that will ensure your loyalty program’s success.

Where do they go wrong?

  1. Failure to develop a shared management perspective of loyalty opportunity.
  2. Quality of data is not properly addressed (e.g., invalid customer info, too small of sales base)
  3. The loyalty program doesn’t stand out from the competitors.
  4. Lack of clearly defined and measurable business objectives.
  5. Little or no attention paid to employee skill sets and abilities; too great a focus on tools and hardware instead of ongoing training about the program and the benefits to the organization.
  6. Customers don’t understand what it takes to earn and redeem rewards or to achieve new status levels.
  7. Both transactional and engagement data is not leveraged to communicate to customers.
  8. The loyalty program was launched and went into auto-pilot.
  9. Lack of value and relevancy of the reward to the customer.
  10. All members are treated the same. Customers are not segmented and customer-specific offers are not based on needs and preferences.

What do the winners do right?

  1. Built-in time for testing and learning.
  2. Change behavior rather than just reinforce it.
  3. Demonstrate innovation and regular re-invention. Each year program results are analyzed to optimize customer enrollment, retention, redemption and ROI.
  4. Over-invest in coordination with users and across functions.
  5. Advocacy by senior management.
  6. Rewards and offers are personalized to the different customer segments.
  7. Develop robust multi-channel communications to proactively manage customer migration and growth.
  8. The program is focused on both business goals (retention and sales) and on the customer experience, creating strong brand affinity and satisfaction.
  9. Research has been conducted to understand the customer’s expectations and the program is designed based on what the customer values most.
  10. Social media is used to extend the loyalty program's reach and organically generate brand advocacy.

A well-designed and managed loyalty program can generate significant benefits for the brands offering it. Getting it right is worth it when you consider it costs five times more to acquire new customers than it does to keep current ones. Reducing your customer defection rate by 5 percent can increase your profitability by 25 percent to 125 percent.