Your Loyalty Program Sucks

I get it.

You heard somewhere that a loyalty program can lead to more sales, and higher spend from your customers.

You aren’t wrong. A recent BCG survey found that businesses with a strong loyalty program can see an average 35 percentage points greater share of their customers’ wallet. That’s staggering. When margins are thin, and options seem to know no limit for consumers, a loyalty program could be the difference between surviving and thriving.

 Let’s be real though; a “buy 9 get your 10th free” punch card, although cheap and easy to implement, probably isn’t going to get you near that bump in sales and spend you want to see. Not only that, but you aren’t even going to be able to tell if its your loyalty program that’s having a positive impact on your business. Punch cards are just paper, and can’t tell you anything about your customer’s habits, decisions, or sentiment towards your business.

So, let’s talk about how you can set up a loyalty program that can hit that 35% greater share of your customers’ wallet, that costs less than your point-of-sale monthly subscription.

What is a loyalty program supposed to do?

At its core, a loyalty program is designed to keep your business top of mind for a customer next time they are making a purchasing decision through built up exclusive value.

For example, Bobby is looking for a place to eat. Bobby remembers he is a member of American Pie Pizza’s loyalty program. He checks his loyalty account and sees he is one purchase away from a free pizza. Bobby wants that free pizza. He chooses to go to American Pie Pizza. 

A loyalty program continues to dangle rewards in front of customers to encourage them to keep coming again and again. The closer the reward, the more a customer is willing to spend to get that reward.

My loyalty program does that, why does it suck?

I am sure your loyalty program in some way, shape or form reminds your customers of the value they bult in your business, but how effective is it?

Is it a punch card that’s left in the console of the vehicle that gets seen once a year when you your customer cleans their car? Or is it a custom app that sends email reminders once a week about how close your customer is to earning a reward?

Going further, are you measuring your loyalty program effectiveness through comparison of sales pre and post launch and members versus non-members? Or is your loyalty program telling you exactly the return on investment you are seeing?

If you have a loyalty program that’s attracting and retaining customers, and has the receipts to prove it, it may not actually suck.

Chances are, though, if you are single location small business that your loyalty program you invested in is not the loyalty program you deserve (unless you are paying an arm and a leg).

 What makes a loyalty program suck?

Many things can make a loyalty program suck. Here are just a few of the ones that will really drive down the return on investment you will see from launching one.

Friction: Friction is the number one killer of loyalty programs. If you have ten steps to join a loyalty program, its hard to verify purchases, or an employee simply doesn’t want to deal with the added step of dealing with the loyalty program system, your program will fall apart.

I’ll give you an example. For the sake of protecting my favorite fast food, I will redact the name.

WENDYS launched their loyalty program and I was excited. I downloaded their app and the experience went downhill from there.

First, the app never seemed to work. When you went to order online, it would freeze. I tried to cash in on some of their limited time offers and promotions through online ordering, but their system would always crash before I could complete the order. Guess I am going to have to go in person…

On a long drive home, I stopped by a Wendy’s and went through the drive thru. After completing my order, I drove to the window. I showed the employee my custom QR code that would award me points for the purchase. The employee looked at me confused, and then looked at me and said “Yeah, I don’t do that”. I checked my phone to make sure I was on the actual Wendy’s app, and when I confirmed I was, I asked for some clarification. Apparently, the employee just didn’t want to deal with the loyalty system.

Ok, I guess. Maybe there’s a post purchase receipt scan. No big deal.

Turns out, the process to validate a purchase was a little too involved for me. I gave up and never went back to their loyalty program again.

Friction throughout that entire program caused me to churn.

Solution: Make it easy for all parties to earn and redeem rewards

I am not the kind of person to tell you what the problem is without offering a solution.

Too much friction in the process? Reduce it.

Yeah, I know; easier said than done. But put yourself first in your customers’ shoes and think about how they proceed through the loyalty program process: onboarding, earning, redeeming. Think about what the customer must do through each of those steps and make it as simple as possible.

Then look at it from your side. How do you go about onboarding, allocating points, and giving away rewards. Make it as easy as possible on yourself, while still getting the information you need to extract as much value as possible out of your loyalty program.

Hard to track loyalty progress: If your loyalty program is just a phone number punch at checkout that occasionally gives a free item or discount, just go to the punch card and drop your $60/month subscription. If you are paying for technology to run your loyalty program using customer’s phone numbers, it should at least be able to send them text message receipts with the reward points they have in their account and notify them how close they are to the next reward. If a customer is not reminded of the value they built at your business, how strong is that pull for them to come back?

Your loyalty program needs to be a mechanism that can remind the customer of that value they built in your business as often as possible, without becoming annoying.

Solution: Communicate with your customers

I know, “Wow! How did you come up with that? They teach you that at business school?”

Again, another thing easier said than done.

Communication can span across multiple mediums depending on your business’s capabilities. Maybe you have an email list of your loyalty program members that you can send an automated email about how many points they have after each purchase and how close they are to their next reward. If you have one of those cookie-cutter point-of-sale loyalty program add-ons, it’s your employee reminding the customer how many points they have in the system. Or maybe, if it’s a punch card, its an employee giving an extra punch with a wink and telling the customer they are very close to their next free build-your-own six pack (Thanks Molly’s!).  

Whatever system you set up, its about doing everything in your power to remind your customers about the value they built at your business and making the message special. If you can only do it on business grounds due to your loyalty technology, do it in a memorable way. If you have ways to reach your customer off business grounds, do so in a personalized manner and tailor your message in a way that drives home how valued they are at your business and how close they are to earning rewards, and other things your business has to offer that’s not common knowledge.  

Uncreative: “Buy 9, get the 10th free” and “Spend $100, get $15” will work, but man is it boring. It isn’t differentiated. So many businesses use these models. There’s a good chance your customer will forget if they are 5 deep into your business, or your competitors. Maybe I’ll just aim for a $100 dollar check to drive it down to $85 and not come back. If its not memorable, its not going to have the effect you want.

Solution: Differentiate your loyalty program

This requires some effort. There are only so many ways to structure a loyalty program without breaking the bank; however, there is always some way to add an extra layer to your loyalty program (no matter what system you are using) to differentiate it from your competitors.

For example, if you are using a punch card system, you can add an additional layer to your loyalty program where completed punch cards can be exchanged for swag (ex.  1 card = mug, 2 cards = hat, 3 cards = shirt). That additional layer differentiates your business from your competitors and has customers chasing a greater reward each time they complete their punch card.

I love looking at mug clubs in the brewery space because it seems each one has some unique reward they offer members to keep them subscribed beyond cheaper and bigger pours of beer. Great examples are first tastes on new brews, voting on the next seasonal brew to be offered, and exclusive meetups with the owners. Brewery mug clubs are a great place to get ideas of what you can add to your loyalty program that will differentiate your business without breaking the bank.   

No customer insights generated: If you can’t identify you loyal customers through the program, or identify when a loyal customer hasn’t showed up in a while, your program has a problem. A loyalty program should not only help you identify your star customers, but let you know what may be going on in your industry, community, or business.

Solution: Generate data to attract and retain your customers

This is probably the hardest thing to do with your loyalty program. Depending on your system, you may gain access to emails and phone numbers, maybe a birthday, but that’s all base level. When was the last time your customer showed up to your business? What is their typical spend? Has their spending habit changed at your venue? Have they churned? What do they think of certain menu items or your business in general?

 On top of all that, how do you get a customer to volunteer the information to answer these questions?

If you want to see a stellar example of how to generate this data, look at Crumbl cookies loyalty program. They give away free crumbs (their loyalty point system) if you follow them on social media, refer friends, leave a review, tell them your birthday, and rate their app on the Appstore. I gave them pretty much everything so I can make sure the next two cookies I bought were free, and I know I am not alone. In exchange for the cost of two free cookies, Crumbl can send personalized messages to customers through a variety of channels, find out what they are doing right and wrong, and increase their messaging reach on all social media platforms (love seeing cookie advertisements on LinkedIn).  Going further, I know through the data they have access to, they know my spending habits and will quickly recognize if I churn and send a promotion or discount to bring me back (Crumbl, don’t worry, keeping doing what you are doing and I will keep my end of the bargain up by visiting once a week).

That data is hard to generate, analyze and act on without a technologically advanced (read as expensive) loyalty program platform, though.

So, what can you do?

There are some tedious low-tech ways to do something similar through spread sheets, having customers show employees reviews or fill out surveys for a reward, and diving into your point-of-sale purchase information. The friction and time requirement to do it in this manner is rarely worth it and is not sustainable.    

DropIn is working on a solution to this problem right now.

Why DropIn?

DropIn can provide the same customer intelligence and insights that a top tier loyalty program software can provide at a fraction of the price. Through our hyperlocal focus and data aggregation, DropIn can ensure your loyalty program is reaching its full potential.

Contact us today to learn more!