Top 5 Mistakes Made In Rewards Programs

Rewards are only rewarding if they are perceived to be of value by your target market. There are so many around and one of the oldest and most widely used is really quite ineffective for business growth.  I’m going to go against popular opinion and state that I believe the free coffee card-type rewards programs suck. There. I said it!

Rewards for rewarding’s sake?

One free coffee as a reward for buying nine coffees? Big deal! That would be like if my mum had said to me as a kid, “Good on you for eating all your dinner Mel. For doing that, I’m going to treat you with more dinner!”   For doing what I wanted you to do, I’ll now reward you with more of the same.  Not really much of a reward is it?!

As adults we’re even harder to impress and delight.  The perceived value of the reward you give must feel like a genuine ‘thank you’ to your customer for choosing your business over all the others.

Loyalty and rewards programs are now well and truly commonplace in the hospitality and retail landscapes. There are so many apps to download and cards to collect that we’re stockpiling them in a variety of locations because, let’s face it, there’s really only room for a few (at best) in our wallets.  And while we say ‘Yes, I’ll join your rewards club’, we soon realise that for many of them, the rewards are not as rewarding as we would have liked.

Here are the Top 5 mistakes businesses make in their rewards programs:

1. Use rewarding as an opportunity to offload old or excess stock.

2. Unclear on why to incorporate a rewards program other than ‘everyone else is doing it’.

3. Give away their core product.

4. Fail to test reward options and track the return on investment.

5. Make it hard for customers to use or understand the rewards process.

Give to get back dollars and sense

It’s not wise to give away old stock nor is it to give away your core product. The phrase ‘it’s the thought that count’s’ doesn’t apply in the world of loyalty marketing. If coffee’s what people come to you for in the first place, why not use your rewards program as a tool to create awareness of the other items you sell?

Generous or thoughtful gift-giving is essential. As long as it’s not to the detriment of the business, your rewards initiative will then stand out from the crowd and ensure it’s used.

Not every business owner will feel confident to completely move away from the old ‘free coffee reward’ system, so here’s what I suggest:

Create a rewards strategy

Set a specific goal as the objective for your rewards program. It might be to invite every customer to belong to your program or more specific like setting a desired increase in your average customer spend. Choose a small and realistic goal to begin with and adjust as you become clearer on which rewards work best for your business. If your product is good and your reward is worthy of customers’ attention, word will spread, bringing new customers to your door.

Add reward alternatives

Offer something of equal value that complements the product they come to you for.  Maybe a muffin or breakfast wrap. Choose something you are confident your customers will love as much as your great coffee and are likely to want to buy along with their coffee purchase in the future. The idea is to add value for your customer while introducing them to an alternative product. Change the offer from time to time so it doesn’t get boring for your customers. What might work for the first few months might not forever so you’ll need to…

Test and measure

Determine the most claimed reward and importantly, determine which directly correlates to an increase in customer spend. Drop anything that doesn’t benefit both your customers and your bottom line.

Keep it simple

The one thing that is great about the free coffee card system is that you know what you need to do to get rewarded. Loyalty and rewards programs with confusing point systems don’t breed customer confidence. 1 point for every $15 spent? What does a point get me? How many points do I need to get a reward? If your loyalty program requires customers to ask lots of questions it will slow down service rendering it unhelpful. Your loyalty program needs to be easy to understand, simple to use and require minimal staff interaction.

The last word… Any rewarding needs to bring about a win-win situation for both the customer and the business. Try these tips and let me know your progress. Don’t be afraid to drop the free coffee reward. Be sure to let me know your thoughts!


Mel Telecican.

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