For the average retailer or restaurant, 66% of sales come from the top quartile of customers. Regulars are the lifeblood of any growing business, which is why many businesses have turned to loyalty programs to identify, engage, and retain these loyalists.

When done right, loyalty programs can be hugely profitable for the business—a 5% increase in customer retention can result in an 80% increase in profitability.

However, done wrong, rewards programs aren't generating loyalty at all. They can be disastrously costly and add too much hassle for the customers whose lives you want to make better: your VIPs.

If you're planning to implement a customer loyalty program to help drive sales and improve ROI, steer clear of these five common errors:

1. Asking customers to carry around plastic cards

There's a reason 60% of loyalty memberships are inactive. Just think of your last experience. You signed up for a new rewards program and were immediately handed a plastic loyalty card. Sigh.

Stop asking customers to jump through hoops, such as carrying yet another stupid piece of plastic around with them. We are lazy as consumers; we don't like doing extra work, especially when the reward feels so far into the future.

And when your customers are forgetting about your rewards program, asking employees to prompt them is often a lost cause. In fact, for many established rewards programs, only 26% of plastic cardholders remain active after six months. When you add in the fact that these old-school cards also cost up to $1 per, the cost of the program can get out of hand quickly.

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image of Zach Goldstein

Zach Goldstein is founder and CEO of Thanx, a company that enables merchants to effortlessly identify, engage, and retain their best customers.

LinkedIn: Zach Goldstein