5 Mistakes To Avoid When Building Your Rewards Program

5 Mistakes To Avoid When Building Your Rewards Program

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As 2021 continues to unfold, the retail, restaurant, and professional services industries have continued to strengthen despite the lingering aftereffects of a pandemic that has greatly impacted every corner of the economy.

Though small business owners aren't out of the woods yet, there are many reasons to be hopeful about the future of retail. The economy is stabilizing, restrictions are relaxing, and consumers are eager, at least in spirit, to resume in-store shopping where the overall experience of browsing and buying in-person has the power to brighten their day.

Right now, retailers of all industries have an opportunity to win customer loyalty. According to a recent consumer survey conducted by the Harvard Business Review, shoppers that prefer in-store shopping plan to use one-stop shops rather than purchase from multiple stores. It's clear that consumers are committed to remaining conscientious to limit their exposure to "new unknown environments" where COVID-19 and its growing number of viral variants could be lurking.

This is good news for retailers who provide a wide array of products or services. The more you highlight and play up the broad variety of goods available at your store, the easier it will be for consumers to categorize your location as a one-stop shop.

Even if your business operates within a niche market, such as the beauty industry, you can still accentuate a variety of products and services in your advertising, marketing, and promotions. Instead of only promoting your services—haircuts, hair coloring, and hair styling & blowouts—try using your digital marketing to also feature the shampoos, conditioners, hairsprays, mousses, hair gels, and other hair products & accessories that you sell at your location. By amplifying the diversity of your products and services, you can persuade shoppers to purchase their hair care products from your salon instead of the local drug store.

If smart rewards program marketing in 2021 is all about convincing consumers that your retail business is a one-stop shop in its own right, then the opposite side of the 2021 marketing coin has everything to do with avoiding common rewards program mistakes that turn customers off.

There are five major mistakes to watch out for, which we'll cover in this article. So long as you avoid the following mistakes, your customer loyalty rewards program, as well as your business, should see engagement, growth, and ROI increases during the remainder of 2021.

The mistakes to avoid are:

●     Launching Haphazard, Disorganized Campaigns

●     Forgetting to Market Your Loyalty Program

●     Offering Worthless Rewards Schemes

●     Failing to Recognize & Reward the Loyalty of Current Members

●     Overlooking Fraudulent Activity

We'll examine each mistake and provide alternatives to help your loyalty rewards program succeed. Without further delay, let's get started!


Listen, no retailer would ever consciously launch a loyalty rewards campaign that's haphazard and disorganized. That being said, this mistake is known to happen mainly because retailers can't necessarily tell the difference between a well-organized, consistent rewards campaign and one that seems more chaotic and incomprehensible than the final season of Game of Thrones.

If you answer "yes" to any of the following questions, your loyalty members probably think your rewards program is haphazard and disorganized:

●     Do your active loyalty members represent less than 10% of the total number of enrolled members?

●     At least 50% of the time, do earned points expire before members use them?

●     Have your loyalty members contacted you with program questions that you thought your business, website, and / or employees had already answered?

The fact of the matter is that consumers will not continue to use a rewards program that they find confusing. The biggest indicator of this is a lack of program engagement. If the majority of your enrolled members do not use your rewards program, something is very wrong with how you're presenting the program to them. Equally eye-opening are the questions that members ask you and your staff. If you're scratching your head as to why members are asking about program aspects that you've already explained, the fact of the matter is that you haven't explained your program properly. 

What Can You Do If You've Made This Mistake?

If you've accidentally launched a haphazard, disorganized rewards program or campaign, here's what you can do about it:

●     Clarify Your Entire Program

●     Schedule When, Why, and How You Will Contact Members

Clarity & consistency are key when it comes to presenting a rewards campaign that loyalty members can latch onto.


The structure of the rewards system must be clear. The rules of the program must be clear in terms of the number of points a member must earn before they can start redeeming rewards. And the restrictions, if any apply, must be clear, such as if earned rewards will expire in the future. 


In this instance, the term consistency refers to the frequency and regularity to use to contact your loyalty members. The implication here is that, yes, you should regularly contact your loyalty members to keep them engaged, keep them informed about where they stand in the points-earning cycle, and keep them excited about the rewards they're eligible to receive.


Customer loyalty rewards programs have the power to actively and effectively market your brand to engage customers, boost revenue, and build your brand. Now more than ever before, loyalty rewards programs are considered digital marketing tools. These rewards programs come with built-in automation, mobile apps, swag shops, and email marketing capabilities—you name it, there's a rewards program that can do it! But that doesn't mean that your loyalty rewards program can function completely autonomously from you. It can't! 

Don't forget to market your loyalty program! How can you tell if you've dropped the ball in this department? If you answer "no" to any of the following questions, then it's safe to say, you've been neglecting this critical aspect of your program:

●     Have you sent out an email marketing campaign to members within the last month?

●     Does your website landing page, as well as your storefront, clearly advertise your rewards program?

●     Are your current loyalty members in the habit of signing up their friends & family in order to receive bonus rewards points?

Your customer loyalty rewards program equips you with several methods to contact your members, so don't be afraid to use them! The most common communication method is email, however, nowadays you can reach out to members using in-app push notifications, SMS text messages, and even via shout-outs and hashtags on social media, though social media engagement typically occurs outside of the program itself. Establish good habits and start new relationships with enrollees on the right foot by automating a series of "welcome emails" that thank new members for joining while explaining to them how they can get the most out of your loyalty rewards program.

What Can You Do If You've Made This Mistake?

If you've accidentally neglected to market your rewards program and the specific promotional campaigns you're running, here are two easy steps you can take today:

●     Create & Launch a Personalized Product Recommendations Email Campaign

●     Create & Launch a Rewards Points Balance SMS Text Message Campaign

Personalization, recommendations, and information are all key when it comes to keeping loyalty members engaged in your program and ensuring that they feel rewarded for it.


Devise and commit to an emailing schedule for your personalized product recommendations campaign. We advise contacting your loyalty members with personalized recommendations via email once a month. If you email them more frequently than that, you run the risk of recipients unsubscribing to your emails. But if you don't contact them at least once a month, you probably won't see the desired result. 


In order to make product or service recommendations that your loyalty members truly find relevant, you'll have to do a little research using the customer data that your loyalty program has been compiling and storing from the start. In addition to recommending products or services that are similar to ones that a member has purchased in the past, you should also make sure that your recommendations match the price points that each member typically spends. For example, if loyalty member X typically buys products that are less than $20 per item, then it's probably not a good idea to recommend a $200 product.


Nine times out of 10, a loyalty member simply has no clue about their points balance, the items they're eligible to redeem today, or how many more points they need to earn before they can claim pricier rewards prizes. This is where a points balance SMS Text Message campaign can come in handy. Members will appreciate receiving a short text message that contains pertinent information about their points balance, the upcoming points expiration date, and how many more points they might need to earn.


No one does it on purpose, but it happens. In a retailer's zeal to boost profits, they inadvertently design rewards schemes that simply aren't worth it as far as members are concerned. For example, a rewards scheme that awards 1 point for every dollar spent might seem generous at first blush. But if members need to rack up 100,000 points before they can redeem low-value rewards like swag shop coffee mugs, then they're going to roll their eyes and start shopping elsewhere.

You know you've inadvertently offered your loyalty members bogus rewards schemes if you answer "no" to any of the following questions:

●     Have you ever calculated the real-world dollar value of a single "point" in your rewards program?

●     Do more than 35% of your loyalty members regularly spend their entire rewards points balance?

●     Are your in-store employees in the habit of encouraging loyalty members to use their earned points at the registers during the checkout process?

Consumers quickly discover whether or not a customer loyalty rewards program will be worth their while or not. In fact, most shoppers are so keen to the common pitfalls of poorly executed rewards programs that they're able to determine whether a program will be a sham even prior to signing up! If your rewards program places too high a premium on customer spending, then loyalty members will eventually regard your brand as one that "gets" more than it "gives." The first step to help you assess your rewards program involves reviewing the customer data of your loyalty program to see what percentage of enrolled members are actually earning and burning points in a healthy cycle. If the percentage is very low, then you have a problem.

What Can You Do If You've Made This Mistake?

If your current rewards scheme is essentially worthless to members, meaning that your members aren't cashing in their points, it's safe to assume that the rewards structure itself is flawed. Here's how you can fix it right now:

●     Offer a tried-and-true—and trusted—rewards scheme

●     Provide non-transactional ways for members to earn additional points

Trust is everything. You can't build customer loyalty without it. The fastest way to earn the trust of your loyalty members is to offer them fair, rewarding, and fun opportunities to earn and burn points. Remember, when members experience the delight of the "earn-and-burn" cycle, they will become hooked, and the result will be authentic customer loyalty.

Try This Trusted Rewards Scheme

If you're unsure what an appropriate points value should be for your specific business, try this trusted rewards scheme as your starting point. For every dollar a member spends, they earn 1 point; but the redemption exchange should be that 20 points equal $1. Once you offer this rewards scheme, keep an eye on program engagement. You can always modify and make adjustments.

Bonus Points Ideas

In addition to making sure your rewards scheme is actually rewarding your loyalty members at a return rate they appreciate, you really can't go wrong by offering members bonus points for completing specific non-transaction actions, such as writing a customer review, following your social media accounts, and successfully referring their friends and family to your program.


Loyalty programs are designed to improve customer retention. That being said, these programs also have the power to attract brand-new customers. Who wouldn't want to sign up for a customer loyalty program that offers a freebie for enrolling and all kinds of fun ways to earn bonus points within the first month? Creating irresistible incentives in order to acquire new loyalty members is perfectly alright unless showering new members with special rewards unintentionally offends your current loyalty members. If your enrollment rewards are better than the rewards that your long-term members receive, then sooner or later, members are going to call you out on it.

If you answer "yes" to any of the following questions, you may be unintentionally punishing your current loyalty customers for having shopped with your brand all these years:

●     Do you offer new loyalty members a rewards incentive that assigns a greater points value than the points value your current members have access to?

●     Have you assigned more rewards points to "fancier" items than you have to "everyday" items, such as valuing a latte at 10 points while a regular black coffee is only 1 point?

●     Do you offer quick earn-and-burn rewards opportunities to the lowest tier of your program structure, but the highest tier members have to spend a lot of money in order to gain rewards?

Don't lose sight of "retention." If you're not focused on retaining your loyalty members, then you aren't doing yourself any favors, and sooner or later your program could fail. We would never suggest that you pull the plug on the rewarding enrollment incentives you've implemented. Keep them in place! But you may need to analyze the rewards incentives that are available to your current members and make sure that the actual rewards and points values reflect the level of loyalty those members have shown you over the years.

What Can You Do If You've Made This Mistake?

Have you accidentally snubbed your current loyalty members in your effort to wow and woo new enrollees? It's not the end of the world. Here's what you can do about it:

●     Create & Launch a Special Loyalty Promotion for Long Term Members

●     Restructure Your Rewards Tiers So That Top Spenders Receive the Greatest Rewards

A great way to show your long-term members' you value their loyalty is to create special loyalty incentives and rewards just for them.

A Special Loyalty Promotion Campaign for Long Term Members

This strategy will work best if you review the customer data within your loyalty program. First, segment the program members by how long they've been in your program—3-5 years, 6-10 years, and 10+ years. Then, design and launch an email campaign for each group, thanking them for sticking with your brand. The email can include information about the brand-new rewards incentives you've designed just for them. Be sure to personalize the emails as much as possible.

Offer Better Rewards for Bigger Spenders

By examining the specific rewards of the higher tiers of your customer loyalty rewards program, you can make note of what's working and what isn't. Does the highest tier of your program offer the biggest rewards? If not, simply make the necessary adjustments. Once your revamped rewards structure is locked in, send out a special email campaign to members within the higher tiers that explains the improvements and thanks them for their loyalty.


In general, consumers love customer loyalty rewards programs for the countless benefits these programs offer—valuable points, discounts, exclusive deals, bonuses, freebies, fun swag, measurable savings, and the list goes on. But unfortunately, loyalty programs are vulnerable to hackers and fraudsters who are looking to either game the rewards system or outright syphon cash from it. If you haven't been paying attention to the unused points in your rewards program, it's time to start monitoring them. Otherwise, they could become a prime target for fraudsters to steal for their own use.

Recognizing fraud within your rewards program might not be so easy to do. Here are the telltale signs that your loyalty program could be vulnerable to fraudsters:

●     Has a specific loyalty member successfully referred an impressive number of new enrollees, but those enrollees appear to be "shell" or "sock puppet" accounts that have zero engagement with the program? The referring member might be a fraudster.

●     Does your program offer enrollment bonus points as well as the ability for one member to "gift" their points to another member? This combination of rewards program benefits could spell trouble and attract fraudsters who create countless new loyalty accounts just to rack up enrollment bonuses that they can consolidate into one account and use to redeem big-ticket rewards items.

Sadly, fraudsters tend to take advantage of loyalty programs that are both generous and trusting. Don't be too trusting! Your loyalty members won't fault you for implementing stricter security measures and identity verification processes if it means keeping their rewards points safe.

What Can You Do If You Believe Your Program Is Vulnerable to Fraud?

There are two precautions you can take right now to help safeguard your loyalty program against fraud:

●     Educate Your Loyalty Members About Fraud

●     Implement a Secure Identity Verification Process

At the business enterprise level, customer loyalty program fraud will not only negatively impact a company's bottom line but could easily damage the brand's reputation among consumers. In both the short and long runs, the latter could be far more detrimental to a business than the former, which is why we strongly recommend that you put security measures in place now before disaster has a chance to strike.

Educate Loyalty Members About Fraud

Loyalty fraud occurs in the same manner as card-not-present fraud. Fraudsters gain access to a loyalty member's account through a mixture of phishing scams, identity theft, and loyalty account hacking. Once a criminal breaches a member's account, they can spend or sell the points. The best way to educate your loyalty members is to periodically remind them to monitor their loyalty accounts and double-check that the activity is correct.

Implement a Secure Identity Verification Process

Multi-factor authentication systems have the power to deter and stop hackers from breaching into your loyalty program. Be sure that your loyalty program platform comes with multi-factor authentication and a secure identity verification process for all members.

If you would like personalized, hands-on assistance launching your customer loyalty rewards program in such a way that avoids the 5 mistakes we covered in this article, then contact Loyal~n~Save to speak with an experienced loyalty strategist today. Our loyalty specialists know which loyalty campaign strategies work best for each industry—Restaurants, Bars & Nightclubs, Coffee Shops, Salons & Barbershops, Tattoo Parlors, Convenience Stores & Gas Stations, Gyms & Fitness Centers, Pet Supply Stores & Pet Retailers, Clothing & Other Brick-and-Mortar Retailers, Office Supply Stores, Automotive Repair Shops, and every business type in-between, including B2B enterprises. We help you custom tailor a program that reflects your brand. Whether your customers will prefer a loyalty card or modern app, we've got you covered at a cost you can afford!

This article was written by Loyal-n-Save, an omni-channel customer loyalty solution for retailers looking to increase customer retention and new customer acquisition.
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Douglas Nolan
Written by Douglas Nolan

He believes in solving real problems with realistic technological solutions that stand the test of time. Seeing his clients struggle to retain consumers, Douglas decided to help his clients by offering affordable and top-class loyalty solutions. Doug loves transforming the lives of his employees by assisting them to develop a solid blend of TQ (Technology Quotient) & SQ (Spiritual Quotient) to excel in their professional & personal lives.

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