Risks

The risks for companies that execute poorly or fail to follow best practices for customer loyal and retention programs include:

• Exposing your brand to increased scrutiny as customers will view experience with the loyalty program as being integral to their overall brand experience.
  
• Overestimating the value of the "reward" offering or underestimating the cost or time required to earn those rewards – potentially increasing the overall cost and diluting profitability.
  
• Underestimating the ease of integrating the loyalty program across all brand touch-points – which could lead to customer defections.
  
• Overstretching internal resources and infrastructure by managing all aspects of the loyalty program "in-house" – potentially negatively affecting the core brand experience.
  

Opportunities

The opportunities for companies that execute well and follow best practices for customer loyal and retention programs include:

• Creating a clear competitive differentiation that increases existing customer loyalty, value and profitability but also helps in attracting new customers.
• Enabling the brand to develop more insightful knowledge about its customers to better understand what is affecting not only transactional behavior but also their engagement with other brand touch-points (including marketing communications). This knowledge can be tapped to create a more dynamic customer segmentation strategy.
• Enhancing the overall brand experience and customizing it  to proactively meet customer needs today and tomorrow. This includes not only the product or service itself but also other brand touch-points – for example, customer support and marketing communications.
  
• Offering the potential to create incremental revenue streams through partnering with complementary brands.