Welcome to Loyalty-Matters – a blog discussing the good, the bad, the highs and the lows of customer loyalty.  Thanks to a soft economy and consumer apprehension, loyalty has been getting quite a bit of press lately.  Recently, I was reading an article in DM News that indicated some retailers have responded to skittish customer spending by sweetening their loyalty programs with more discounts and rewards than ever.  I screamed in horror when I read that news (okay, a bit of an exaggeration, but it was disconcerting, at best!)

Think before you sweeten the pot

Sweetening the rewards pot across the board is not only unhealthy for your program, it’s expensive.  Businesses with a loyalty program in place have access to a wealth of customer information – so if any bump in benefits needs to occur; it should at least be done in a targeted manner.  Otherwise, you’re just throwing margin out the window while you create rewards-loyal customers – which is very unhealthy for any business.  Sure your sales will experience a burst of energy but like all sugar rushes, it’s short-lived and the crash can leave your sales more lethargic than before.   I get that a key barometer for retailers is same store sales, and the ripple effect of declines can be huge, but piling on the rewards, willy-nilly is not the answer.

Please don’t misunderstand; I’m all for tweaking loyalty programs.  In fact, I would venture to guess that many programs out there have become tired and unproductive and should definitely be tweaked – but in a proper and well-thought manner.  Here are some tips:

Loyalty Program Check Up

1.  Objectively assess your program’s performance.  Key word is objective.  When doing a thorough assessment of your loyalty program, you may find that it’s not working optimally.  Are you objective enough to determine whether or not your program has become saggy and outdated? If not, let a professional do it for you.  It’ll cost you a little bit but it’s definitely worth it – you’ll spend more money funding an unproductive program than you will on a professional assessment.

2.  Make tweaks.  Chances are, you’ll find that the program is no longer fully supporting your evolving business needs.  If so, don’t be afraid to change it.  Blanketing the member base with greater rewards is probably not the way to go, but you can let the performance assessment be your guide.

3.  Sweeten the pot with co-marketing partners.  Consider hooking-up with a few relevant, non-competitive marketing partners to offer rewards.  They can help shoulder the financial burden and will likely provide a fresh source of new customers.

Keep the big picture in mind.  It’s fine to bump up promotional discounts to stimulate incremental spending during leaner times, but make sure you keep it separate from your program.  Loyalty programs are a long-term initiative.  Don’t let short-term promotions undermine the long term strategy.