Don’t be a Cheap Ass and Limit Points Earning!

why you should not limit points
Don’t be a cheap ass! That is one of the most important pieces of advice I can give you when it comes to creating an effective loyalty program. I have seen a lot of programs structured in a way that avoids giving points as much as possible. This just doesn’t work! Limiting earning is taking away from your program and may actually be costing you more in the long run.

 

What Does “Limiting Earnings” Mean?

This is the act of reducing the amount of actions a customer to can earn points for. Most loyalty programs reward points for multiple actions such as account signups, referrals, or social sharing. If you were limiting point earnings you would not allow points to be rewarded for these actions.

In fact some people will limit point earnings even further by creating very confusing ways to earn points like:

“You will earn one point for every dollar you spend on our house brand products for every dollar you spend above $50 before tax.”

 

I understand the logic behind rules like the one above. You don’t want to give customers value unless they are providing you with value as well. You want to reward for profitable actions, trust me I get that, but there is value in creating a repeat customer that is not always immediately apparent. A loyalty program is part of a long term retention strategy and is not a quick band aid fix!

 

Why You Should Not “Limit Point Earning”

As I said before I can see the logic behind creating rules that only allow your most profitable customers to be rewarded, but point limiting almost always leads to a poor performing program. You want your customers to be earning points that get them a reward and keep them coming back.

Dont hijack your program

Here are some things to think about before you try to limit the amount of points you reward your  customers.

1. It is Demotivating

There is a ton ecommerce can learn from video game mechanics, and earning points is one of them. As humans we love to be progressing towards a goal, and that progression is even more powerful if the goal is challenge yet obtainable.

 

That is why games where you are continually leveling up or upgrading your gear are so popular. Just look at the success that Blizzard’s World of Warcraft experienced. These levels in a loyalty program are the next reward. If you make it hard to progress to the next reward you will not be motivating your shoppers to continue to shop and drive value to your store.

You want to make it easy for your shoppers to progress towards a reward. When they claim that first reward is when they truly become addicted to your program. If you want your loyalty program to encourage repeat customers and create loyalty you need to give them something in return.

2. It is Confusing

When was the last time you read the directions for anything you bought? Actually, though think nice and hard. If you are anything like me you don’t read directions, you just expect it to work. This is a common trait in my generation (millennials) but it holds true for most people. If we find something confusing then we tend to ignore it.

Take this example:

“You will earn points on cosmetic products if you have spent over $100 this calendar year and more than 25$ before tax on your current purchase.”

It is very difficult to determine if you will be earning points or not in this example. When it becomes confusing your program engagement and signup will drop and you won’t see the same results that other effective loyalty programs are seeing.

Keep your programs simple and make sure you explain your program in a visual way with what we call an explainer page. We have a ton of resources on explainer pages in our resource center, but below is a video on how to make an effective explainer page.

3. Does Not Fit a Retention Strategy

Limiting points earning does not fit into a total retention strategy! For years online retailers have been focused on acquisition and conversion which explains why many of us have a very nearsighted view of customer value. Today’s ecommerce landscape is much different than a couple of years ago. You cannot compete on acquisition alone, you  need to be retaining your customers. If you want to learn more about the differences check out “Ecommerce Retention vs Ecommerce Acquisition.”

 

points earning fits into a retention strategy

A quick explanation of when to use Retention and Acquisition

If you are trying to maximize the value of each transaction by limiting points you are taking a purly acquisition focused approach. That customer has a high lifetime value if you get them shopping with you again as a result of loyalty points. If you are serious about a retention strategy you should not limit point earning and should also check out the “The Ultimate Guide to Customer Retention” to help you craft a strategy of your own.

 

How to Give Points Without Ballooning Costs

Now obviously I am not recommending you just hand out points … pointlessly (see what I did there). You should be aware of the cost and benefit of giving away points, so here are some tips to help you give customers points in a way that still makes sense for your business.

1. Know What Points are Worth

It might surprise you but a lot of stores have no idea what the monetary value of their points is. If you know exactly what you are giving away in terms of money you can better allocate how many points you can give for certain actions.

This allows you to reward an appropriate amount of points for actions that drive value to your store rather than eliminating them completely. When you know what each point is worth you can make educated assessments of whether to reward points.

2. Know the Metrics you Want to Impact

Everyone starts a loyalty program for a reason. Do you want to increase how often a customer shops with you? What about increase your store’s average customer lifetime value? Regardless of what you are looking to impact you want to be able to measure it.

It is a lot easier to justify the cost of giving away points when you are seeing the results it is generating. Here are three metrics you can look at to see if your loyalty program is impacting your business. I would also recommend reading “How to Measure Customer Loyalty Online.

When you continually check your program metrics you will always have an understanding of how well you are doing. When you see the positive impact your program is having towards your long term store health; it becomes much easier to give out loyalty points.

3. Use Tiers or VIP

This final strategy is used to reward customers different rewards based on the value they provide to your store. This functionality is currently available for Magento programs and is coming soon for Bigcommerce and Shopify loyalty programs.

With tiers you can give different rewards based on certain criteria which puts a customer into that tier. This could be: dollars spent, friends referred, or really anything. When you set up tiers you are encouraging customers to pursue that tier and giving only your best customers your most valuable rewards.

tiers help you set better point earning

 

Tiered programs are great for increasing engagement and are used in many of today’s top loyalty prorgrams like “My Starbucks Rewards” and “Sephora’s VIB.” They also allow you to control costs by only giving your best customers the best rewards.

 

Limiting Point Earning is Risky

Limiting how your customers can earn points might seem like a great way to cut costs at first, but it has longer term impacts. If you limit points your program will have lower engagement and will have fewer enrolls. It is difficult for a customer to get excited about a program is they are not easily earning points.

If you are currently limiting points please read “Metrics that Prove Your Program Isn’t Working” to see if you are already seeing the ill effects of the decision.

Alex authorship image
About the author:  Alex McEachern is a Customer Loyalty Specialist and the primary author on the Sweet Tooth Blog. He blogs frequently on the ecommerce industry, customer retention, and consumer loyalty.

Add him on Twitter – @alexmcea