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7 Loyalty Lessons From Reward Programs Past

As retailers end the year with 1.3 billion loyalty memberships issued, it may be time to reflect on why so few are active. These seven missteps from loyalty programs past can help pave the way to a more prosperous 2016.


Like cookies and milk on Christmas Eve, loyalty programs today have become as plentiful as they are predictable. And each year we put out more, often expecting a different result or a better return.

SantaChristmasCookiesNow, as we end a year that hit more than 3 billion loyalty program registrations, 1.3 billion of which are retail programs, perhaps it is time to reflect on the mistakes of programs past; to consider why less than half of those memberships (42 percent) are active; and to acknowledge the missteps of our own.

Following are seven key reasons loyalty programs fail, or will fail. Consider it a baker’s half-dozen of prevention to be enjoyed now, to help inspire your 2016 New Year’s resolution of losing those few extra pounds of bad practices.

Buying the wrong size: I know someone who cannot figure out why Target continually gives her coupons for a brand of clothing she never purchases. This one-size-fits-all type of recognition can be explained in a compelling data point: Only 11 percent of loyalty programs offer rewards that are personalized based on a customer’s purchase history or location data, according to recent research by Capgemini. Holiday offers that lack relevance aren’t only ignored; they are evidence to the customer that the merchant isn’t trying hard enough to know them.

Checking the list only occasionally: Consistent recognition of a shopper’s engagement is especially crucial now, during the holidays, when gift giving can be a stressful affair. Every small effort to ease the process will likely be remembered. Rather than require the customer to accumulate a certain number of points before receiving a reward, the program could recognize each purchase with a tailored offer to encourage her return or, in the case of Macy’s, an on-the-spot surprise discount at the register.

Mix-matching the giftwrap: Lots of companies have enabled mobile purchasing, but not all mobile experiences are lined up seamlessly with a brand’s other purchase channels and experience. The customer does not particularly care that she is buying Aunt Rita’s earrings via mobile vs. iPad. She just wants to be able to track her purchases, view the offers and redeem reward points easily, regardless of her purchasing device. At Nordstrom, employees merchandise the stores based on input from its Pinterest page. Digitally, in addition to ongoing mobile enhancements, it launched a text-to-buy feature for its associates, so customers can buy products via text.

Sending annoying holiday letters: When it comes to communicating with customers, one simple rule of thumb should apply: If the email, text, direct-mail or phone call is not creating value, then do not send it. When shoppers provide their personal information to retailers, they are not extending an invitation to be annoying. Instead, retailers should see this as an opportunity to establish trust through pointed messages that address shopper preferences and needs. I know someone who gets DSW emails every single day, sometimes twice. They are clearly not targeted. (Why send her a Gucci promotion when she has never purchased a luxury brand from DSW?) Now, a brand she used to browse regularly has become irksome, and she rarely visits its site.

Hurting Santa’s reputation: Even programs with the best intentions can find themselves carrying a big bag of promises they cannot fulfill. Sephora’s Beauty Insider did so in August after enticing members to spend more so they could cash in on “epic rewards” ranging from trips to Paris to hundreds of dollars in cosmetics. But on redemption day, most of the best rewards disappeared. Sephora issued $50 make-up gift cards to angry members, with reportedly mixed results. Perhaps Sephora promoted the offer too long, or maybe it should have made the best rewards part of a contest. Regardless, loyalty program promises should not rest on asterisks and tiny type; the program should offer only what the retailer can shout from the rooftops.

Tarnishing the silver bells
: As loyalty gamification expert Gabe Zichermann puts it: A classic mistake of loyalty marketing is revealing too much of the program too soon. This is particularly damaging when the program has not been thoroughly tested to deliver. I know it is competitive out there, and the sense of urgency to introduce the Next Best Thing can be palpable. However, when a program is introduced too soon it risks collapsing under the weight of its loyalty following, by not being able to manage the data, to use that data to deliver meaningful recognition and parlay that customer understanding into significant experiences.

Being a Grinch/Scrooge: It is an incredibly competitive loyalty landscape, as households have on average signed up for 29 programs each, according to the loyalty researcher COLLOQUY. Retail is a thin-margin business, but if one wants to participate in the loyalty business, it can’t afford to be stingy. The opportunities through which members can earn should be broad and creative – not only through purchases but also through social interactions, gamification, participation in brand events or volunteer work to causes the brand supports. The key is to reward for actions that demonstrate brand loyalty, and then make the redemption options accessible enough so the company is not carrying a fortune in points on the books.

Lastly, let’s not lose our heads. As the holidays near, there will be pressure to clear inventories that might not be moving as quickly as predicted. Consider each loyalty program promotion or concept as if it is one cookie on a platter of many.  Size them all up and choose the best few, or risk starting the New Year carrying the evidence of a few bad choices.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.

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