Is There a Right Way to Tweak Your Customer Loyalty Program?

Customer loyalty programs can be a boon for return business. Learn how you can help create or tweak a rewards program that's beneficial for everyone.
February 26, 2016

As a business owner, you most likely know that it can cost a lot more in time and revenue to attract new customers than it does to keep the ones you already have. One method of satisfying your existing clients may be to reward them for their loyalty. An effective rewards program can help ensure that clients keep coming back for more.

Rewarding customers' purchasing behavior by offering store credit or gifts can help encourage loyalty and increase business. Though a rewards program can help make customers happy, trouble can arise. Some companies discover that when they make changes to loyalty programs that appear to benefit the company and penalize the customer, such moves are bad for business.

“When your customers get used to one way of doing things in terms of rewards—especially if it is a perceived or real discount of some kind—changes that seem like they benefit the company rather than the customer can feel like a slap in the face and will make some people angry,” says Donna Cutting, founder and CEO of Red Carpet Learning Systems. “When an airline I use regularly changed their rewards program and I had to spend more to earn status, I wasn’t happy. Your customers could have the same reaction.”

Other challenges of rewards programs include the fact that they can be difficult to manage and expensive to run, Cutting believes. “If you're building loyalty on discounts, you're also possibly cheapening your brand. Are you really building loyal customers? Or are they just customers who are spending more because they want something for free? There's a difference.”

Benefits of Customer Loyalty Programs

Despite their potential risks, customer rewards programs may bring a lot of benefits to your business. “In addition to making your customers feel special, having a rewards program gives you the ability to collect data on your most loyal customers in order to know them better and build better relationships with them,” Cutting says. Loyalty rewards programs can help provide you with information about your customers’ buying habits and likes and dislikes. That way you can attach rewards to those products you want to sell.

When you implement a loyalty rewards program, you also may be communicating to your clients that you’re interested in making your relationship with them mutually beneficial and that you want to make them happy.

“The fact is that customers enjoy incentives, and as a result actually spend more,” says Cutting, author of 501 Ways to Roll Out the Red Carpet for Your Customers: Easy-to-Implement Ideas to Inspire Loyalty, Get New Customers, and Leave a Lasting Impression.

Rewards programs may also help boost business by incentivizing customers to purchase more goods and services, and make it more likely that clients will share the program with their friends and family.

Tips for Tweaking Loyalty Programs

If you do find that your rewards program needs to be adjusted, Cutting suggests keeping your clients as happy as possible by considering the following tips.

  • Involve customers in the solution. Explain to customers that the current rewards program requires adjustment and explain why. Then ask for their help in coming up with a solution that creates a win-win for everyone.
  • Communicate early and often. People tend to swallow potentially unpleasant news a lot more easily if you apprise them of the changes ahead of time. The fact that you're being courteous and giving them a heads up also shows you respect their business. Rather than sending out a mass email and website announcement saying you’ll be making changes immediately or in a day or two, give them a month to adjust. Communicate about the change several times. The first email message is likely to be missed by a portion of your customers. If you have a brick-and-mortar location, also plan on announcing it at the checkout counter and via employees.
  • Explain the why. Customers may want to know why you're making a change in your rewards program. When you do explain why, try to also clarify how you have devised a solution that will continue to reward their loyal patronage.
  • Train staff to react appropriately to complaints. Have a clear script available for dealing with disgruntled customers and try to make sure that all your employees adhere to this “party line.” This can help ensure there's no confusion regarding the change, while also giving clients a chance to vent.

Read more articles about customer engagement.

Photo: iStock