10 Common Pitfalls of Loyalty Program Design

Richard Schenker

Loyalty Programs are critical to fostering effective Customer Engagement strategies for brands. They enable Customer acquisition, onboarding, engagement, retention, and even win back a brand’s Customers. Many strategic brand marketers have made their Loyalty Programs a key business imperative and have invested significant financial and human capital against this important endeavor. We often see many Loyalty Programs underperform or even fail because of poor Program design and planning. When designing or renovating your Loyalty Program, marketers should avoid:

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  1. Misaligned program strategy.

    A successful Loyalty strategy requires thorough understanding of your business requirements, Customer needs and the ability to deliver on your brand promise. Programs can struggle if the strategy is not aligned with the brand or fails to be relevant to its Members. Designing an effective Loyalty strategy requires a combination of research, financial data and insights to guide the strategy and promote the value proposition of your Program. It is critical to seek enterprise alignment on what your Loyalty solution needs to solve for.
  2. Poor Loyalty solution design, mechanics and value proposition.

    Some Brands have the tendency to create elaborate earn and burn structures to meet multiple business goals. When designing a Loyalty solution, it is vital to harmonize the needs of the business and its Customers’ expectations. The key is to keep it simple. When it comes to rewarding your Members, remember, one size does not fit all. There must be an equitable value exchange between what the brand requires of the Customer and what they expect from the brand. Incongruence will result in Member disengagement and Program apathy.

  3. Missing the opportunity for better member experience.

    Failure to enhance the member experience is a critical mistake. Of all the ways in which Members interact with and evaluate Loyalty Programs, the experience matters most. Experience drivers like digital, personalization, and the human touch comprise 64% of what drives satisfaction, and are more important than monetary drivers in achieving Program satisfaction. Plus, your brand representatives can make all the difference. 22% of Members agree that the front line have the power to create positive Member experiences.

  4. Operational challenges.

    You may have objectives set and a rollout plan in place; but, are your employees equipped to support your Program? Ineffective employee training and a lack of adoption by business operators will prevent your Program from getting off the ground. The keys to Program executional success are your Program operators and frontline employees. Your team can help establish a feedback mechanism to take the pulse of the Member’s experience. As you design your Program, involve the operations team early on. They can help find solutions to barriers and side-step operational challenges.  

  5. Technology solutions that hinder program success.

    Technology has changed the very nature of the Customer–brand relationship. It has enabled a two-way dialog between the brand and Customer. Loyalty technology will become an integral part of your technology ecosystem; however, the right technology will allow you to bring your loyalty vision to life. Neglecting to involve the technology team in the design process limits your understanding of existing technical capabilities or limitations to overcome. You would be surprised by how much your technology team can influence your Program design. Don’t think of your technology team as merely enablers of execution; instead, bring them into the design discussions early in the process. 
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  6. Ineffective data collection tools and management.

    The best Customer Loyalty strategies properly reward Customers in exchange for information. Successful Programs will leverage the information to build lasting Customer relationships through relevant communications, rewards, and other personalized experiences. This can only be inspired by the story that data tells.  An ineffective data collection strategy, mechanics, tools, and management will reduce a brand’s ability to effectively leverage this highly valuable data asset across the brand’s enterprise.
  7. Measurement planning too late in the game.

    All too often, we see brands formulate their measurement strategies at the very end of the design process. Keeping measurement at the forefront ensures that what you are building can be effectively and efficiently measured. Brands track and measure Program performance to gauge success and investment return. They also leverage the measurement strategy to adjust the Program and course-correct if necessary. Having measurements in place allows marketers to mitigate financial risk to the organization.
  8. Missing the mark on Program profitability.

    Financial viability is not the goal of a Loyalty Program, but rather the ability to increment financially. There are several critical requirements to attaining this important goal, including ensuring Program KPIs align with strategy and accessing the financial data in a consistent and standardized manner, just to name a couple. Enterprise-wide alignment on key success metrics will ensure that your design is solving for the right set of business priorities. Having proper access to such financial data in a standardized and agreed-upon format will make it efficient to determine the degree to which your design is driving financial incrementality.

  9. Planning a Loyalty initiative without stakeholder buy-in or support.

    Organizational alignment and commitment are critical to Program success. We recommend securing C-suite commitment from the start. When you have their buy-in, other stakeholders in your organization will be more willing to support and secure the right competencies for your Loyalty initiative.
  10. Consulting legal counsel late in the game.

    Like any other major company initiative, it’s helpful to seek legal counsel to ensure that your Program design adheres to all legal requirements. We’ve witnessed companies loop in legal counsel late in the process, only to discover that they need to make sizeable changes to the Program far down the path of development and even implementation.

This is by no means an exhaustive list, but as you can see, there is a lot to consider. If you are considering launching or revamping a Loyalty solution, try to avoid these pitfalls and learn from the mistakes of other brands. The key is to plan and include all relevant stakeholders at the strategic table early in the process. Your Program will have a much higher probability of success. 

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