3 Loyalty Program Blunders You Can Learn From (and Avoid!)

3 Loyalty Program Blunders You Can Learn From (and Avoid!)

Maintaining a loyalty program has a lot of perks for your business and its customers, but along the way, business owners have learned what works and what doesn’t in the world of rewards. That learning process has created some “loyalty blunders” that every business can learn from.

To make sure our small business loyalty programs runs as smoothly as possible, here are three loyalty blunders that you can avoid.

1. A counterfeit blunder

Subway, home of the footlong sub, had a fan-favored loyalty program going. For every purchase made, Subway customers got a stamp added to a card. Once the card filled up, they got a free sub.

The program was working great until 2005, when the company realized that people were making copies of the stamps at home to get free subs sooner.

Considering how easy it is to copy documents and make adjustments with photo-altering software, it didn’t necessarily surprise Subway owners, until they heard people were making fake stamps and selling them on eBay.

Needless to say, the stamp-collecting program was phased out and replaced by a points system that’s trackable with a plastic card.

Lesson: A lot of businesses still use punch cards or stamps as a loyalty program, and while they do work for some businesses, it’s becoming increasingly easy for customers to take advantage of these low-tech systems.

Consider a digitally savvy loyalty program that allows customers to collect points by providing their cell phone number, or by using an app.

2. Difficulty redeeming points

The premise of a loyalty program is simple. The more frequently a customer shops with you, the more rewards they earn. Eighty-three percent of consumers say belonging to a rewards program makes them more likely to shop with that specific brand unless rewards hard to redeem.

Sofitel Hotels, for example, took heat from its customers for only allowing loyalty members to redeem their points for stays in specific countries. Airlines are getting a bad wrap lately for “blacking out dates” when a loyalty member goes to redeem points.

Lesson: A loyalty program that rewards customers only under strict guidelines, which are usually buried in some legal-sounding Terms and Conditions document, is no way to treat repeat customers.

The best loyalty programs are easy to understand, and easy for customers to redeem the points that they’ve earned. Once a certain number of points are reached, the customer should be notified of the reward and given simple steps to claim it.

3. Rewards that don’t match the money spent

One of the biggest frustrations for loyalty members is earning a lot of points that achieve minimal rewards.

Customers are smart. If your rewards program gives members one point for every dollar spent, and the first redeemable reward happens at 100 points, your customers know that they’ve already spent $100 to get this “free gift.”

When customers have spent that kind of money, they want to feel as though the reward is valuable. Of course, businesses can’t giveaway high-ticket items with every dozen points, but there’s a certain level of expectation that customers have when redeeming rewards.

Sephora, for example, offers its customers one point per dollar spent. Once a loyalty member reaches 100 points they get to select a sample-sized product from a slim list of cosmetics. Some customers aren’t happy about it, pointing out that they have to reach 500 points (meaning they’ve spent $500) to get a free product that’s normal size.

Lesson: Reward customers early, and offer rewards that your customers find valuable.

To show customers that your program is worth their time, reward them early in the process. The reward can be simple, maybe a $10 off coupon after collecting 50 points.

After that initial reward, create a rewards structure that has products, services or experiences that your customers actually want. Keep in mind that more customers are looking for “experiential rewards.” In other words, customers don’t just want products or services, they want experiences like going to a local concert or an outing.

Aren’t sure what to offer? Ask your customers. Do a survey and ask them which rewards they find the most beneficial.

As a business, you have to find a good balance between offering rewards that actually entice your customers to come back, while not giving away inventory that hurts your bottom line.

What have you learned since implementing your loyalty program? It doesn’t necessarily have to be a blunder. Share your lessons – good or bad – with others in the comment section below.

Lisa Furgison
About the Author
Lisa Furgison

Lisa is a writer at FiveStars, a freelance journalist, and co-owner of a media company, McEwen's Media.

3 Comments

  • I offer for every dollar you spend and I find that my customers except something free every time they walk in the door it’s expected. I use to do buy 12 bags get 13 free of the same product but trying to keep track of every bag and size of food was painful then after they received there free bag they would not come back. So the 5 star works but I was giving to much away so now I raised the levels and people are mad but I explain to them that everything you purchase goes on the system now including the sales tax so it’s not a buy 12 anymore it’s a a reward on the more you purchase the bigger the prize. Instead of them waiting for the big prize the take the little one over and over so instead of them getting a free 40lb bag of dog food worth $65 they keep getting the 4lb for free worth $9.99 or a free case of dog food comes up and my customers says can I get that today I don’t have a dog but I will give it to a friend I’m like then you will never get your free bag of cat food if you give your reward away

  • I did send out a $10 off a grooming for 2 weeks and I got 126 people that used it and we asked them if they came because of the text and they never got there dogs groomed there before and now I sent out a $5.00 off a quick bath for the next 2 weeks. I’m ordering store shirts and plan on doing a reward on those and I also got my dog food supplier to give me free 5lb bags of dog food to give as a reward to every groom dog

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