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Seven Warning Signs that it is Time to Revamp Your Loyalty Program

Warning Tape-BAPStarbucks was 40 years old and one of the most recognized brands in the world when it decided to revamp its logo in 2011. Yet the successful coffee chain knew that a number of factors, from a poor economy to more-focused competition, required it.

A less confident brand might not have pursued the change, but the bold move worked in Starbucks’ favor. The same goes for loyalty programs – regardless of one’s success and age, its operator needs to constantly watch out for events that can undermine its success.

A cost analysis is an obvious requirement, at least on a quarterly basis. But there are other less evident warning signs that will indicate when a company should revamp its loyalty program. Here are a seven of those signs:

A shift in participation activity: There are a variety of measures that reflect engagement, including collection frequency, scan rates and the percentage of sales tied to the loyalty program. These all should be monitored closely, and watch out for stealth trends that may be masking a broader problem. A shift in the age of primary shoppers, for example, may mean a decline in program use by your core, target market.

A high balance of unredeemed points: This is a sign that consumers are not recognizing the value of the program. The next step is defection to low-priced competitors. The program should offer more relevant or more immediate rewards.

The rivals look good: Just as airlines test proposed fare hikes by seeing if the competition will do the same, all organizations should match or beat what their rivals are doing. Every company has its defining benefit, either through the exclusive brands it offers or the experience or even its location. These qualities should always be used to edge out the competition.

The program has become a science: The risk of adding lots of levels of benefits and redemption options is complexity. If participation or redemption rates are down, it may be because the program is too hard to understand. The data can help companies stay on top of what their most valuable customers prefer, and deliver it in a straightforward fashion.

Negative WOM: Social media is great for many things, including temperature checks. If customers begin to negatively comment about the program via social media and question whether it is adding value to their lives, then desired benefits need to be added – fast. But be sure to analyze the nature of the complaints. The issue may simply involve timing or communication channels.

The program is a Luddite: To retain the interest of millennial consumers in particular, a single loyalty program should engage in multiple ways. If a program is not taking advantage of the new media channels available it will likely be overshadowed. That said, companies should not go into it willy-nilly. A lot of technologies, like mobile payments, are still in the early stages and may change dramatically in the next year.

The data isn’t teaching: If a program does not provide a sufficiently robust platform for data collection or for accessing consumers based on their shared insights, it is not doing what it was designed to do. Loyalty programs are vehicles for learning and sharing, for encouraging desired consumer behavior through elevated experiences – based on the data.

The Starbucks brand change was one reminder that even the strongest organizations need to occasionally wake up and smell the coffee. Consider these seven warning signs the alarms that will start the process.

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