7 Mistakes to Avoid When Building Customer Loyalty
Shooting from the hip. In the quest for competitive differentiation, it is common to start a loyalty program for customers. But unless these programs are well-planned and well-executed, they become costly to manage and ineffective at driving loyalty.
The benefits structure of poorly designed programs can be particularly problematic. There is a fine line between offering valuable rewards and protecting profit margins. High-value rewards such as ongoing discounts can stimulate short-term purchase behavior but quickly erode profits. Programs that center on advance notice of sales or vaguely defined members-only events protect profits but fail to spur desired behavior.
Not shooting at all. A common misconception is that building customer loyalty depends on reward cards. For this reason, budget restrictions often trigger procrastination when it comes to implementing a loyalty strategy.
However, a structured rewards program is only one of many effective loyalty-building tactics. Remember that true customer loyalty is emotion-based. It is the bond with a company that is developed through a combination of strategic initiatives, not just offering rewards. Delaying the implementation of any loyalty-building strategy increases the vulnerability of your customer base to attrition.
Monkey see, monkey do. When developing the model for a loyalty program, a common mistake is to copy the design of successful programs in the marketplace. If it is effective for one company, it should be effective for another, right?
A major piece missing from this thought process is that companies have vastly different business objectives and very diverse customer bases. What works for one company very seldom works for another. Your strategy must be uniquely developed to address the individual needs of your company and designed to appeal to your customer base.
The best place to start is within your customer data. Analyzing customer information will help you identify behavior in need of improvement and provide direction on developing the optimal loyalty strategy.
Ignoring indifference. The opportunity to build loyalty lies at every customer touch point. Capitalizing on these opportunities requires buy-in of the program across the organization. Employee indifference toward customer loyalty is a top reason for program failure.
For a loyalty program to succeed, all employees must embrace it, from executives to buyers to operations to field personnel. Each of these departments touches the customer in some way. If your employees do not believe in your program, neither will your customers.
Launch and languish. Often a program gets launched, then after some initial measuring, it gets placed on autopilot. But a program's ability to drive long-term customer behavior can wane over time. For continued success, loyalty programs require ongoing monitoring and regularly scheduled assessments and updates.
Comparing measurements against pre-established benchmarks and periodically soliciting feedback from customers will help prevent your loyalty program from growing stale and ineffective.
Treating customers unequally. A common mistake is to undervalue the loyalty of customers with smaller wallets. Many companies are so focused on driving revenue today that they fail to recognize the potential of tomorrow's revenue generators. High spenders receive the majority of communications and reap most of the program rewards.
But customers have different spend potentials as they progress across the life-stage continuum. Young adults typically lack the wallet size of established career people. Though they may have minimal potential today, young adults should not be ignored or alienated. Start building relationships with them now so that when their spend potential grows, you already have their loyalty.
Building loyalty on a one-way street. For a customer to be loyal to a company, that company has to be loyal to the customer. Being loyal goes well beyond offering point cards and rewards. Loyalty to the customer means recognizing and meeting your customers' needs and making it easy for them to do business with you. You bring value to every transaction and exceed customer expectations at every touch point. It means that customer service is more than just the name of a department, it is the commitment of every employee in your organization.
The road to customer loyalty starts with one entity: the customer. Using customer data to understand and monitor their ever-changing needs, behavioral motivators and emotional drivers is a key starting point. This knowledge is the foundation on which successful loyalty strategies are built.
Failure to keep your customers at the center of your strategy will result in wasting time and money languishing in one or more of these loyalty pitfalls. In a tight economy, you can't afford that mistake.