• by Mark Friedman , January 20, 2011

Customer rewards programs are one of the best ways to improve customer retention and increase sales, yet many businesses are missing out as their programs do little more than add noise and confusion to this $1.3 billion dollar market.

With 1.8 billion consumers enrolled in an average of 14 loyalty programs, they are being bombarded with offers, mailings and information from all directions. This oversaturation leaves many rewards expired or unclaimed long before customers even notice, taking away any opportunity for retailers to capitalize on the millions of dollars in incremental revenue they can deliver.

To capture customer attention, businesses need to align their communication tactics with evolving customer preferences. Today's mobile world has made fliers and mailings almost obsolete. Do you really know how your customers want to be reached?

The key to standing out in this saturated market all goes back to fundamental marketing. Businesses must better understand how, where and when customers prefer to receive your information - and delivering it based on that demand. Following are five of the most common pitfalls made by companies today with tips about how to overcome them.

• Pitfall #1: Overlooking the mobile channel -- Businesses need to take advantage the popularity of mobile devices for communications. The number of cell phones is expected to surpass the total number of Americans by the end of 2012. Text messaging is proving to be great avenue for welcome messages and reminders. Text and mobile communications are morphing into the preferred communication of choice for a growing number of consumers. According to a 2010 survey from Harris Interactive and SoundBite Communications, 43% of consumers would act upon loyalty program benefits if coupons and promotional codes were delivered to their mobile device. Organizations should adapt to this trend and create active dialogues with customers through text messaging, whether soliciting communication preferences or delivering actionable offers and account notifications.

• Pitfall #2: Keeping it too simple -- Using more than one communication channel will help businesses increase redemption rates and revenue. Studies show that multi-channel strategies result in a threefold increase in redemptions, versus relying on just one channel, equating to millions of dollars. So, make sure you incorporate several customer touch points, such as e-mail, text and social media.

• Pitfall #3: Forgetting to ask customers how you should reach them, and how often -- Consumers are simply overwhelmed, getting bombarded by reward offers from a growing number of retailers. Capturing how each and every consumer prefers to be contacted has measurable results, including improved customer satisfaction and retention, higher campaign results and greater ROI. So too does knowing how often to contact customers. Too much contact can be a turn off. Too little contact can show that you really don't care, taking away millions in potential revenue.

• Pitfall #4: Assuming customers know their preferences -- Many retailers forget to regularly ask their customers one simple question: "How would you prefer we deliver your information?" Retailers should create and maintain a database incorporating all customer feedback to continually honor these preferences and maximize meaningful communications. One way to generate this feedback is to incorporate interactive automated voice messages, which creates a two-way dialogue that yields an accurate read on consumer preferences.

• Pitfall #5: Doing tomorrow what you should have done today -- The moment a customer signs up for a loyalty program is the best time to capture customer opt-in for notification. They are happy. They are eager. And, they are listening. Do not make the mistake of waiting to find out how they prefer to receive redemption notices, reward balances, upgrade offers and other relevant communications.

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