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Loyalty Programs and what they have to do with Why Businesses Fail

by Lisa Ballinger
Why Businesses Fail

Loyalty Programs essentialy try to keep a customer spending and returning back to the place of business. This in itself is a good thing. Now more than ever businesses are trying keep customers coming back. This has led to an increase in the number of loyalty programs and varied quality out there. Loyalty Programs in themselves can create more problems than they solve. If they are complicated and hard to understand, people won't use them therefore you are right back where you started except you've lost a whole lot of money in the process.

The absence of programs can also be a problem. The lack thereof, can be an indication that they are too hard to put into place, a view by management that won't generate additional income or that they are not for "our" business. These can all be true if they are not implemented properly.

A successful loyalty program has these attributes:

It is simple for a customer to understand - what they have to do and what the reward is.
The business understands how they have to set aside, in both a resource and financial sense for the benefits to be paid to consumers at a future time
Is an opt-in scheme - consumers still have the right to not join the scheme if they don't want to.
Is easily explainable to employees who are responsibile for explaining the program and the day to day management of it and
Is of a financial benefit to the business and presents value to the consumer. Any program that doesn't do this is a failure.

The reason why businesses fail with loyalty programs is that they are hesitant to use them properly (ie afraid of losing money), have poorly implemented programs (ie losing money) or that they are not important for their business (ie lost opportunity of making money). The important thing to remember when considering a loyalty program is that it is something of benefit to you and the consumer, and should result in increased customer loyalty and higher profits. It is the absence of that that leads to business failure.

Article submitted Monday, May 30, 2011 & read 3 times.

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