Your business needs a loyalty program, and its not because you need an added novelty to keep customers coming back; You need a retention program that pays dividends in customer information, customer interaction, management and yes…. Revenue!

But have you considered that the rules of customer engagement have changed in recent years with the introduction of technology and the “I Want Everything For Nothing” millennial mindset that is adopted by All Age Groups & Demographics when shopping?  This Article reflects the 5 most common MYTHS of Customer Loyalty programs and will guide you to success.

#1 – Customers Only Value Discounts – NOPE!

Saving money is a priority for most customers.  I don’t remember the last time a conversation around shopping did not involve a savings or something amazing during the days experience.  Rewards programs are super appealing to most customers and it’s not hard to see why so many customer retention programs simply offer transactional discounts.  Rewards like dollars off, percentage off, free items or even free shipping on larger items can have a significant impact on whether a customer chooses to complete a purchase at your store or not.

Extending Value with Diversified Rewards

DON’T BE FOOLED! As more and more businesses offer discounts, look for something that can give your business an edge BUT do not underestimate the power of promoting your local support and networking opportunities that major stores cannot offer.

For every customer hoping to save a few dollars on their next transaction there is an equal number looking for new and exciting ways to engage with your brand & the local network you support!  These customers want to build a genuine relationship with your store and community, the foundation of which is true customer loyalty.  After all, loyalty is an emotion – not something that can be bought – and is influenced by a complete customer experience – Have you Considered that a Local Network could start an Experience for you?

#2 – Program Breakage is Saving Money – NOT EVEN CLOSE!

As a business owner, it’s always nice to save money.  Between advertising, overhead & wage inflation it can feel like you’re constantly spending more than you’d like, making a high rewards program breakage rate so appealing.  BUT FIRST; What the heck is Breakage? Breakage is offering Punch Cards in hopes they get lost, Breakage is offering Points with unreasonable expectations, Breakage is just how it sounds…. Breaking the hearts and motivation of a customer coming to your store, you may as well have a “Just Kidding” sign on the exit.

As a number, Breakage is the percentage of Points Not Spent over Points Issued (Consider a similar theory of unused Gift Card Value). Simply Put – The amount of Points/Value that is not being spent!

customer retention program myth breakage calc

At a glance, a high breakage rate looks like great news – if customers aren’t redeeming their points, it means less financial liability for you!  However, what looks good on paper is extremely bad for the health of your program.

When it comes to customer engagement, a high breakage rate means that customers aren’t motivated to spend the rewards they’ve earned as a member of your program.  This in turn means they’re unmotivated to earn more points in the future, which is very bad for your store’s bottom line.  With customers disinterested in both earning and spending reward points, your store is left open to the Competition, putting your Customer Retention hopes on the ropes. Truth is, lost cards and high breakage drops customer Engagement by over 67% while Doubling customer turnover…

Repairing Your Program’s Breakage by Engaging Customers

Customers are only going to redeem rewards if they believe their points are valuable.  Having a large number of points means nothing unless the customer understands what they have to gain, and proper program education and promotion is a huge part of that.  Make sure your customers understand the mechanics of how to earn and spend rewards & Educating your staff so they buy into the program goals.  If its not important to you, it will not be important to your customers.

Send your Customers updates, letting them know they have a “value” residing in your store and pair it with a Sale. For many shoppers, seeing is believing, and these small nudges could be the difference between them actively engaging or passively ignoring your program.

#3 – Once a Customer is Satisfied, They’re Yours Forever. – IF ONLY….

I don’t know about you, but I don’t think I’ve ever met a single person who has never changed their mind.  Whether it’s regarding the food they like to eat or the type of music they listen to, customers are bound to change their minds, and this “evolution of taste” can have a profound impact on your business.

As your customers’ behaviors and purchase motivations change, they’ll begin to reassess whether your brand is actually the best-suited to meet their needs.  This means it’s unlikely that none of them will start looking at your competitors, especially when a competitor includes giant retailers that offer everything in one location.  The prevalence of social media advertising only makes this more probable, as crowded news-feeds make it almost impossible for customers to ignore competitive advertising.

With a new reality on the horizon, pick a program that give your brand an advantage worth more then the discount in store.  Networking and offering bonuses in local/neighboring stores allows you to become a force to be reckoned with!

 Customer Satisfaction with Your Rewards Program

Although your program had enough appeal to entice shoppers to try your brand, assuming it will continue to keep them satisfied on its own is foolish.  The best way to keep them happy is to monitor, reassess, and update your program to improve your overall customer experience.

customer retention programs myth preserver satisfaction

This can take any number of forms, such as revamping your email marketing strategy, reorganizing your program’s structure, or improving your explainer page.  No matter how you choose to do it, actively investing in your rewards program will improve your customer experience and keep shoppers interested, keeping their eyes on your brand.


#4 – Constantly Reward your Customers – PAUSE FOR A MOMENT!

I’m not the only one that Remembers Oprah.  It was rare that the audience didn’t get a prize like a vacation, cash or car!  What if you saved money for a trip to see her show, bought tickets and ….. Nothing was given away, not even a CD.  Needless to say, you’d be pretty disappointed, and might actually tell others not to watch the show as a result of your horrible experience.

With the possibility of this bad press on the horizon, you might be tempted to run a customer retention program that makes it extremely easy for shoppers to earn rewards.  After all, more is more, and what customer has ever complained about receiving more?

The problem with this line of thinking, however, is that it grooms unprofitable customer behavior.  You are not in the business of giving money away; so be careful that your program is not to expensive to run. DO THE MATH! If your Margins are 5% don’t give away 5% to make customers happy.

Offer Less, Expect More

Most people are enrolled in 12 Loyalty Programs, so it’s important to remember that your customers understand how these systems work.  In fact, most of your customers likely expect to have to earn their rewards so don’t give that fact away!

You started a rewards program to thank your best customers for consistently choosing you over your competitors.  By making purchases with your store and sharing their experiences with their friends, they are completing profitable actions that benefit your store in both the long- and short-run.  These are the actions that allow you to define them as “best”.

In the End, your programs rewards are intended to complement and encourage visit often, spend more habits; But don’t tighten the noose to hard where a customer feels they can not meet the point redemption limits. Consider having a Point Program that allows customers to spend when they like giving them value with every visit & Offering another level of value when reached they can take Multiple $$$ off of purchases that generate revenue!  Consider Cardlis as an example; Cardlis builds a network for small business that allows the business to manage their own program, points and advertising to harness their competitive edge.  Uniquely Cardlis also matches small business points with Community Cash to be used towards discount gift cards (at no expense to the business) essentially giving customers 2X the points everyday!


# 5 – If It Ain’t Broke, Don’t Fix It – THAT MY FRIENDS IS CALLED COMPLACENCY!

Launching a rewards program can be a lot of work.  However, while taking a step back after starting yours isn’t an issue, getting complacent is.  Loyalty Programs were never meant to be a build and forget method of retaining or increasing a customer base.

This means that letting your program stay stagnant simply isn’t going to cut it, and for good reason!  Just because something worked in the past doesn’t mean it’s the best solution, and choosing to ignore the changes around you isn’t going to solve it.  Change does not need to be drastic or time consuming, Offer short term points increases or emails to customers that maybe have not been to visit in a while.



Cardlis – For Locals, By Locals



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