Ten common mistakes: discounting people who would buy anyway, over-complicated rules, no measurement. Each has a warning sign and a way to fix it.
A loyalty program rarely fails because of one big mistake. More often ten small ones pile up: rules are more complicated than needed, the discount goes to people who would have bought anyway, nobody measures the results. Below are the loyalty program mistakes seen in retail and how to fix them. If you are wondering why loyalty programs fail, or why yours is not working, go through the list like a checklist.
"Let's build a program like everyone else." A goal must be measurable: they come back more often, spend more per visit, fewer leave. Without a goal nobody knows what success means. How to fix: write down one goal and one indicator for the next quarter.
A regular who comes once a week gets 10% although they would have come without it. The money went out with no effect. How to fix: aim the discount at those who have started to drift away, and reward regulars with a bonus or attention.
A new customer, a regular and a lapsed one need different things. One percentage for everybody is rarely optimal. How to fix: split customers into at least three groups and choose an offer for each.
If a cashier cannot explain the terms in half a minute, the customer will not understand or remember them. How to fix: start with two or three clear mechanics and add more one at a time.
A card discount, a product promotion and bonuses in one receipt give an unpredictable result. Decide in advance what applies and what does not, and make it visible why this one fired. How to fix: check a few typical receipts and write the outcome in a cheat sheet for cashiers.
Bonuses without a term pile up like a debt. Expiry without a warning angers customers. How to fix: set a term and remind the customer before it expires, not after.
One person with three cards, phone numbers with missing digits: any analytics on such data lies. How to fix: check the phone when issuing a card and merge duplicates once a quarter.
Nobody compares customers in the program with those outside it. The result is judged by feeling. How to fix: create a control group and review the result every quarter. How to calculate it is covered in the article on calculating payback.
Learning half a year later that a customer is lost is too late. Watch the gap between purchases against the customer's own usual rhythm, not one threshold for everyone. More in the article on lifecycle segments.
It was launched and then faded: nobody changes offers, reads reports or trains new cashiers. A program needs a person for whom it is part of the job. How to fix: name an owner and give them weekly time for reading reports.
These mistakes are linked. No goal means no measurement. No measurement means nobody sees that the discount goes to the wrong people. That is why the order of fixing matters: first the goal and the indicator, then the rules, then the data.
Answer the questions and see where the "no" appears.
A good habit: a short one-hour meeting once a quarter. The marketer, a representative of the tills and the person responsible for data take part. The agenda is simple: what changed in the indicators, what complaints came from cashiers and customers, which one change we make next quarter. Such a meeting costs less than any ad campaign and keeps the program alive.
Do not try to fix everything at once. Start with the one that costs more.
What should change and over what time.
Run the new rule on part of the customers; the rest serve as the control.
Keep what worked and drop what did not.
Example (made up). A store gives a 10% discount to all cardholders. The marketer keeps it for new and lapsed customers, and offers regulars bonuses for every fifth visit. After a quarter they compare visit frequency and discount spending with the previous figures and decide whether to keep the change.
Sometimes a program has grown historically: dozens of rules, different card groups, and nobody remembers what something is for. In such a situation do not add anything new; do a review. Write down all active rules, name the purpose and the owner of each, and then switch off the rules that have neither. If after switching off, sales and visit frequency have not changed, the rule did not work. If they changed, you have proof and can bring it back deliberately.
Some of these mistakes are handled by tools. Rules are set up without programmers, and mechanics are chosen per segment. Lifecycle analytics shows who is starting to drift away and why a segment was assigned. The promotion control group helps judge the real effect. The rest depends on an owner and the habit of measuring. Request a demo to see how it looks.
Not measuring. Without a comparison with a control group any program looks successful or unsuccessful depending on mood.
Start simple. Add each new mechanic once the effect of the previous one is clear.
Watch visit frequency, customers returning and the share of receipts with a discount. If they do not change while discount spending grows, it is time to review the rules.
Not necessarily. Often it is enough to change the mechanic: narrow the discount or aim it at another segment.
A discount and a bonus look alike, but they affect margin, purchase frequency and the cashier's work differently. We compare them on one receipt and give a rule for choosing.
Read more →A step-by-step launch plan: from the goal and mechanics to cashier training and first measurements. No promised timelines: they depend on your chain.
Read more →R, F and M explained with a store example: how scores are calculated, who sits in the corners of the matrix and what to do with each group. The method is simple, but it has limits.
Read more →A 30-minute conversation about your loyalty program, with no generic slides.