A beginner's guide to building a loyalty program

Great loyalty programs get results. In fact, 63% of consumers will modify their spending habits to maximize the benefits of a loyalty program. But these programs are potentially disastrous when not approached correctly. If you’re planning on adding loyalty to your promotions strategy, here are some key points to consider. ‍

When planning a promotion of any kind, it’s vital to identify your end goals early on. You need to determine which business goals you’re hoping to serve when building a loyalty program. Loyalty programs can encourage a variety of behaviors so balance is key. 

The success of a vague loyalty program can be hard to measure and improve upon. Clear goals mean it’s much easier to judge success and see how the program should evolve in the future. 

Blue Monday, the 12” single of all time, actually made a loss for its record company because they hadn’t anticipated its popularity and chose to take a loss on its complicated packaging. If the customer benefits and implementation are costing more than your ROI, a loyalty program can be incredibly popular while still being a disaster. Balancing what will incentivize your customers with a realistic budget is all-important in avoiding a loyalty program that doesn’t attract the ire of motivated customers by having to shut down or renege on offers.

In the early 90s, Hoover gave us the most extreme example of risible promotional budgeting.  Hoover ran in the early 90s while iterating on a previously successful campaign. Hoover began offering customers a £600 pair of plane tickets with every purchase of a Hoover, £570 more than the profit generated by the Hoover. Almost immediately unable to meet demand, Hoover refused to provide free flights to customers who had already tried to redeem them. The backlash began a downward spiral that led to en-masse resignations of board members and Hoover’s value dwindling until its European division was sold to a competitor. 

Budgeting is not the only lesson to learn from the Hoover debacle. Adding insult to injury, it emerged they had intentionally made the application process for rewards as complicated as they could, hoping this would reduce the number of applications. This prompted even more outrage on the part of irritated customers. 

In a way, this lesson on what not to do is just as important as the poor budgeting. It can be tempting to cut corners by making loyalty benefits intentionally difficult to use but it will always end in disaster. A bad experience with your loyalty program is a bad experience with your brand, even worse if it punishes formerly loyal customers.

Luckily the reverse is also the case. Offering easily redeemable benefits that make your service even better to use is a great way to boost brand loyalty. 

Amazon can afford to spend $2 billion on Prime a year but chances are your budget might be a little smaller. This doesn’t have to be an issue. Experiential rewards, non financial benefits regular customers can’t avail of like early booking or priority access to new product lines, can often prove more effective than point-driven discounts.

For instance, customers who join Foot Locker’s FLX program are able to purchase items ahead of their street date, access exclusive items not available to the general public and, on the highest level, attend invitation-only events. In each case, the customers benefit from their loyalty while also developing a kinship with the brand. 

Once you begin to explore what motivates the kind of customer behaviors you want to encourage, you’ll be surprised at how many innovations there are beyond simply rewarding customers for money spent. For instance, Beauty brand Pacifica’s Girl Code program rewards customers for mentioning them on social media, creating positive word of mouth, and gives customers an extra reward on their birthday, encouraging them to stick around and prompting them to treat themselves. 

If your loyalty program feels like an afterthought, that’s how it’ll be treated by your customers. Something tacked on, that doesn’t feel as if it developed organically from your brand, risks seeming mechanical and alienating. 

It’s important to realize that when you’re creating a loyalty program, especially one with multiple tiers and context-specific rewards, you’re creating a community. The more you do to foster this sense of community, like a name and aesthetic that fits your brand identity, the more it will encourage customers to feel part of your brand.
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The concept of a loyalty community is also important when considering how to structure your rewards. Communities talk and you’ve created a group of highly-motivated, specialist customers. If the rewards in your loyalty program begin to feel unequal, there are technical issues or you can’t deliver on what you’ve promised, this can backfire. 

Starbucks’ popular loyalty program experienced backlash when trying to incentivize purchasing certain menu items. If one of your core demographics is people who need to greet the day with a pint of black coffee, rewarding latte and cappuccino drinkers could leave a sizable portion of your customer base feeling they’re being taken for granted. Formerly loyal customers are even more prone to giving negative feedback, especially if highly caffeinated. 

Loyalty programs are not one-off, set-it-and-forget-it campaigns. To be truly successful in the long-term, they need to evolve alongside your business. 

To avoid being a promotional Grandpa Simpson, there are three great sources of data to guide where your loyalty program should be going next: the behavior of your most engaged members, the ones who have quit, and customers who have shown no interest whatsoever. Loyalty programs exist to incentivize behavior and if motivations start changing, they need to react immediately. 

This preparation for the future extends beyond strategy. Budgeting is not the only area in which loyalty programs can fall afoul of unexpected success. If your tech stack can’t keep up with the demands of customers joining your loyalty program, you can fall victim to repeated service failures and even be forced to close the program. Scalability is key to ensuring a loyalty program is not a gamble. 

Luckily, Talon.One offers a complete loyalty technology for building a quality, future-proof loyalty program. Loyalty programs built with Talon.One’s rule builder can factor in time, customer data, and session data to easily create personalized loyalty programs with multiple tiers and goals that will engage and fascinate your customers. Even complex tasks like running multiple loyalty programs at once and giving access to premium content and benefits are easy to implement without any developer involvement. ‍

Book a demo today to see how Talon.One can get you started on your loyalty technology journey.