Customer loyalty programs need to be tailored to your business

What are the best practices for setting up a rewards program for my customers?

Almost every business today has some type of rewards program for customers, and it's never been easier to gauge effectiveness given the tracking and reporting analytics available. While test, learn, modify and repeat can eventually get you to an effective program, there are some guidelines to look to when creating or modifying an existing program to make it better.

First, understand that what most programs are trying to do is build loyalty. This is different than a short promotional campaign to spike sales, so whatever you're creating should be done with an eye to develop a relationship that fosters customer longevity. That leads to the first consideration, which is knowing the customer and understanding what's relevant and meaningful to them when it comes to rewards.

Don't assume that just because others in your category are offering travel perks that it's what your customer wants as a reward. Often businesses will duplicate what others in their category are doing because they presume its right, and it's also easier than doing your own research. This is a mistake, and you can create a better program by doing the homework needed to learn what's most relevant and meaningful to your customers.

When in doubt, communicate. Customers might not want a one-size-fits-all approach.

The more you can customize your program to your customers, the more valued it will be to them, but that comes with a caveat. Don't make your program complicated and difficult to understand and use. You might think you have a terrific, customized program, but if your customers can't easily understand and use it, it's not going to be successful.

As not all customers have the same value to businesses, make sure that rewards are scaled in proportion to the degree of loyalty displayed by customer behavior.

Another factor to consider: making it easy to review, comment and recommend products and services. It promotes customer engagement, and at the end of the day, that's the essence of creating a good program.

Glenn Karwoski is a member of the adjunct faculty at the University of St. Thomas Opus College of Business.