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4 Big Mistakes Retailers Make When Implementing Rewards Programs (and How to Fix Them)


By Francesca Nicasio, Retail Expert, Vend

Implementing rewards programs is a common best practice in retail for a host of reasons. These programs can increase sales, encourage repeat purchases, and can provide a wealth of data and insights into the shopping behaviors of customers.

However, as promising as they may seem, the recent numbers surrounding loyalty programs paint a different picture. According to a study by Maritz Loyalty Marketing, fifty-three percent of shoppers stop participating in at least one loyalty program a year. In addition, Colloquy estimates that while program memberships have grown 26.7%, the growth of active members lags behind at only 21.2%.

These findings tell us that while consumers are signing up for loyalty programs, they aren’t participating as actively as retailers would like.

To help prevent your loyalty efforts from suffering the same fate, check out these four rewards program mistakes you should avoid:

Mistake #1: Not having an omnichannel approach

Your customers are now using multiple devices and channels to shop, and if you’re offering rewards, it’s essential that these incentives “follow” shoppers as they switch from one channel to the other. Failing to do so can curb reward accumulation, and in turn lower your program’s enrollment and participation rates.

What to do instead: Enable customers to earn, track, and redeem rewards no matter what channel they’re using. A good example of this can be seen in CVS’ ExtraCare Rewards program. Aside from letting customers earn “ExtraBucks” from brick-and-mortar, web, and mobile purchases, CVS also enables members to track their savings and points by logging in online, using their mobile app, or by asking the cashier at a brick-and-mortar branch.

Mistake #2: Still using cards instead of mobile apps or POS integration

Physical cards are inconvenient, they take up space, and they make the checkout process longer than it should be.

Think about it: a typical rewards card scenario involves the customer finding their card, taking it out of their wallet, scanning it, and putting it back. And if they happen to forget their card, they miss out on the chance of earning loyalty points.

Those barriers add friction, and time, to the checkout process and can lower customer satisfaction.

What to do instead: Opt for a mobile or POS-based rewards system.

Replace those physical cards with a mobile or POS-based solution. They’re faster, easier, and since shoppers almost always have their phones on them, they won’t have to worry about missing out on rewards in case they don’t have their loyalty card.

Going back to the CVS example, the company lets customers store their loyalty cards in the CVS app. This way, instead of fumbling for their card at checkout, shoppers can just scan their phone.

If you’re looking to implement something similar but don’t have the resources to develop your own app, look into solutions such as Collect, SpotOn, or Perka. These services help retailers create mobile-based loyalty programs without the hassle of creating a branded app.

Just set up your program and tell your customers to download the loyalty app that you’re using (example: the Collect app). The good news is, a lot of these services already have users of their own and they can help put your business in front people using their application.

Not too keen on telling your customers to download an app? Some POS solutions come with loyalty functionalities that let you enroll customers and track rewards using the system itself; no apps or cards required.

Mistake #3: Not offering thoughtful rewards

Another common mistake retailers make is failing to add customized features to their loyalty programs. Rewarding shoppers with points that can be used for anything is a good approach, but it can be impersonal.

What to do instead: Give customers personalized perks

Track your customers’ purchase history or have them take quizzes so you can get insights into what they want and need. Then, use that data to provide tailored offers and recommendations. You can also make shoppers feel extra special through birthday rewards, VIP events, and other surprises.

Case in point: Sephora. Its Beauty Insider program offers members an array of perks. On top of the usual points for every dollar spent, the retailer gives away birthday gifts, free beauty classes, and private shopping events. Additionally, Sephora regularly provides customized recommendations based on each member’s beauty profile.

Mistake #4: Rewarding customers based solely on their purchases

Don’t make the mistake of creating a loyalty program fueled by purchases alone. Doing so can limit engagement and make customers feel like the only way they can connect with you is by buying something.

What to do instead: Offer rewards that go beyond purchases

Get creative with your rewards and incentivize non-purchase activities such as store check-ins, social media engagement, and more.

Have a look at Walgreens is doing. In addition to rewarding shoppers for purchases and prescription refills, the pharmacy lets members earn points simply by living healthier lifestyles. Users can link their device to Walgreens’ program and receive points by completing activities like running, weight tracking, testing their blood pressure, and more.

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