Loyal to a Fault? Tips to Make Your Loyalty Program Shine

A successful loyalty program can be a boon to a business. It helps to stem customer attrition, maintain or increase market penetration and, most importantly, improve bottom-line profits. Yet for many consumers, they’re a source of frustration and anger. In a recent webinar, “Best of the Worst: Avoiding Loyalty Blunders, Missteps and Disasters,” copresenters Bill Brohaugh, managing editor for customer loyalty firm COLLOQUY and Kelly Hlavinka, director at COLLOQUY, provided tips and examples to make loyalty programs a source of pride, not headaches. Here are some of their best tips:

1. Set tiered bonus levels. Referencing COLLOQUY’s recent study of 2,000 loyalty programs, which encompassed all verticals, all regions of the world, and included consumer and B-to-B companies, Hlavinka shared results in which many businesses struggle with loyalty programs.

Fourteen percent of loyalty programs disappeared without any prior notice, and 45 percent had to retool or be disbanded. Of the companies whose programs failed, more than 85 percent of them had set a flat funding rate for their loyalty programs (a consistent earn rate for all customers). “Just because they’re all loyalty program members,” Hlavinka said, “they’re not all of the same value.” She suggested the following:

* Vary total funding with targeted bonusing;

* Use a lead tier; for example, make customers only eligible to qualify for the loyalty program benefits on their second purchase;

* Reward and recognize for all transactions, just not at the same level;

* Give higher reward funding rates to customers who spend more money; and

* Avoid “overfunding” high-value customers who have more wallet space to spend.

2. Include soft benefits. Referring to the same study, Hlavinka noted that 77 percent of the failed loyalty programs offered no soft benefits to their customers. Soft benefits are special privileges with no monetary value, such as special access to information, events, scheduling and service upgrades, among others.