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Loyalty Programs

5 Common Misconceptions About Loyalty Programs

Written by 
Brad Davis
January 20, 2020

When it comes to loyalty programs, be it a mobile app for an international company or a paper punch card system at your local coffee shop, the principles are the same. And yet, countless brands still fall victim to these five loyalty program myths.

So for anyone who is still on the fence as to whether or not they need to implement a loyalty program for their business, we encourage you to read these five common misconceptions about loyalty programs.

1. Loyalty programs are a way for customers to show their loyalty to brands

server waiting for customers at a market
A local food stand

We’re starting you off with a big loyalty myth here, but for good reason. If a business owner misunderstands the key concept behind customer retention and brand loyalty, how is that business owner ever going to create a successful loyalty program?

For example, if your local car wash offers a free air freshener with every 20th visit, what’s your first instinct? Not only is this reward nowhere near valuable enough to justify the effort required to redeem it, but it’s actually insulting.

The program has clearly been created with the goal of acquiring more business and repeat customers while offering the smallest amount of compensation in return. The car wash is expecting loyalty without reciprocating, and customers instantly recognise this.

Software developer Kitewheel conducted an in-depth study regarding consumer-brand relationships, and found that while two-thirds of marketers perceive loyalty programs to be a way for customers to show loyalty to a brand, three-quarters of consumers see loyalty programs as a way for brands to show loyalty to their customers.

The same study unearthed some other interesting revelations, such as the fact that more than half of marketers are failing to acknowledge or utilise mobile apps as a consumer touch point. This is despite 76% of consumers comparing prices and reading reviews via mobile device before committing to a purchase.

Consumers aren’t stupid – of course a business’s loyalty program is striving to take more money from their wallet. But a business can’t survive without customers – you need to be loyal to them, in order for them to be loyal to you.

Make sure your loyalty program sufficiently rewards them for their engagement, and that it reflects your value for a positive customer experience.

2. Loyalty programs only work for large-scale commercial businesses

big brand shops on a highstreet at night
Big-brand shops

It’s common for smaller businesses to think of loyalty programs as a customer retention tool that’s only within reach of Starbucks, Target, Nike, Sephora and other worldwide corporations.

Although some of these businesses are brilliantly optimising loyalty programs, this couldn’t be further from the truth. Any business, from world-wide fast food chains to your local family-run barbershop, can (and should) create a powerful loyalty program.

It’s got nothing to do with the size of your customer base, or the reach of your marketing strategies. It’s simply any system that rewards customers for their loyalty and ongoing engagement with a business.

What works for McDonald’s might not work for your business; but that doesn’t mean your business won’t benefit from a loyalty program.

There’s no limit to the ways in which a brand can encourage repeat spending and increased engagement – you just need to design the right system that suits your particular business model.

At Stamp Me, we can help with that.

3. High-spending customers are loyal customers

hands holding money
High-spending customers

“Why give a customer discounts and rewards if they keep coming back anyway?”

This is a recurring attitude among many merchants or business owners in regards to loyalty programs, and it boils down to mistaking repeat customers for loyal customers.

Put simply, a “repeat customer” is someone who makes purchases twice or more from the same business. A “loyal customer”, however, is someone who feels an emotional connection to a brand and wants to support that business over its competitors.

Let’s say you relocate your premises. A repeat customer will start shopping with another business near them for convenience, while a loyal customer will go out of their way to continue shopping with you.

See the difference? You should… because when you crunch the numbers, it’s a big difference.

A loyal customer that is engaged by a brand makes purchases 90% more often, and spends 60% more per transaction than customers who aren’t engaged (many of which might be “repeat customers”).

Turn repeat customers into loyal customers, with a well-structured rewards program.

4. Customers don’t like sharing their personal details with the businesses they interact with

getting personal details from a customer
Customers' personal details

In an era where spam mail and unsolicited promotions are a fact of life, it’s perfectly natural for a business to be hesitant about asking customers for personal details.

And yet, numerous studies conducted in recent years suggest that (when used for the right reasons) the average consumer is more than happy to offer their personal information and previous transaction data to a brand if it means a more personalised shopping experience.

It’s no secret that, when a consumer shops for something online, they drop a whole bunch of cookies along the way that allow for targeted marketing. Digital loyalty programs facilitate the same kind of tailored customer experience that ensures every customer enjoys unique offers, personalised to accommodate their specific needs.

For example, a coffee shop can offer two of its most loyal customers completely different rewards that incentivise ongoing engagement in different ways. For the customer who buys a coffee on the way to work every morning, the loyalty program can offer perks like “skip the queue” service and “order before you arrive via mobile app” functions.

As for the customer who likes to enjoy their coffee in-house every day while they read their book by the window, your loyalty program can automatically connect the dots that rewards like “a free muffin on us” and “unlimited Wi-Fi access 24/7” are more likely to appeal to that customer.

People are increasingly accepting of these methods for offering enticing rewards that are directly targeted to each individual consumer’s needs, and a “one size fits all” loyalty program no longer cuts it.

If you’re contacting your customers directly, have a read of this article to understand how frequently you should be communicating with them.

5. Loyalty programs are expensive to set up and maintain

cheap loyalty programs
How much does a loyalty program cost?

It used to be that even your run-of-the-mill paper punch card “Buy 6 and Get 1 Free” loyalty system carried a lot of overheads. Printing costs alone can be enough to send a small business bankrupt!

These days though, there are so many convenient and affordable digital loyalty app providers on the market that handle all the logistics and programming side of it for you, so it’s a breeze.

As an example, Stamp Me Loyalty Solutions offers a simple and efficient subscription-based loyalty platform that allows your customers to accrue points and redeem rewards via their mobile devices in a simple and straightforward manner.

Business owners can boost customer retention and gain access to invaluable customer data that assists in effective targeted marketing as a result of affordable and hassle-free loyalty solutions from Stamp Me.

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