The first thing to remember about loyalty programs is why they exist. The intent is to reward your biggest customers—the 20% that account for 80% of your sales. The goal is to keep your core customers coming back and adding to this coveted base of marketers used to call “heavy users.”

By design, loyalty programs provide rewards based on purchase quantities so they’re not going to please customers who don’t purchase in volume. Category managers need to understand some customers will be disappointed by the reward levels. That’s OK. The program won’t please everyone. It just needs to please your biggest customers.  Some loyalty programs fail because they try to please everyone.

Some loyalty studies analyze and examine rational and emotional drivers, but these have more to do with brand loyalty, not loyalty programs. Your top customers buy your product or service because it satisfies their needs. The rewards program helps to keep them coming back. So when you create a loyalty program, consider what successful ones do.

Keep it Simple

Loyalty programs can get complicated in a hurry. Make it easy to understand and quick to join. Most importantly, it should be really simple to participate.

When Starbucks changed their reward program from a simple 12 Star program (buy any item 12 times and get one free) to the 125 Star program (earn 2 stars for each dollar spent), social media lit up with angry customers. It didn’t help that participants now had to spend more to earn the same reward.

Offer High Value Rewards

Many programs fail because they offer rewards with low value or require a level of purchasing beyond what even their top customers could easily reach. Striking the balance can be tricky. You must reward your biggest customers, but you need to minimize costs to meet profit goals.

For Xbox Live customers, Microsoft sent them a gift reward on their birthday. Good idea, but it was worth only 25 cents — causing more negative backlash than goodwill. Remember these are your core customers who represent the majority of your revenues. Reward them accordingly.

Innovate

Innovation drives growth. Whether it’s innovative new products, services or loyalty programs. For example, why not reward customers who have been loyal for 5, 10, or even 20 years? These customers like to be appreciated, but rarely are. They may not represent the top 20% of your sales, but consider how they’ve contributed over many years. E.G. a bank could offer rewards like free checking (without restrictions) or a free safety deposit box for customers reaching certain milestones. Budget issues? Recognition is free and always appreciated.

Expand your rewards

Keep it fresh. Think of new ways to reward your customers. Originally Amazon Prime offered just free shipping for $99 a year, but added other benefits such as live streaming music, movies and TV shows and more. Remember the CPG adage: If you don’t satisfy your customers (especially your best customers), someone else will.

Category managers need to understand Millennials— who they are, what they buy, how they shop and much more. Why? Millennials are now the largest generation and the largest segment of the workforce. They spend hundreds of billions of dollars a year as most have now graduated from college and have begun their careers.

Much has been written about Millennials, aka Gen Y, the boom echo and the selfie generation. Some of it conflicting. We’ll try to sort it out for you.

Who are Millennials?

There’s no official age range, but the one that seems to be the most acknowledged is from Pew Research who define Millennials as born between 1981 and 1996 — which puts them in the age range of 22 to 37. There are approximately 74 million Millennials. By contrast, baby boom births totaled 77 million, but the number of boomers still living is less than 65 million.

Millennials are now entering their prime spending years as they begin and advance in their careers, get married and start families. They’re buying TVs, cars, homes and like to travel. They currently spend $200 to $600 billion a year depending which study you read. Even at the low end, it’s significant and growing rapidly.

What are their buying preferences?

Everyone knows they’re tech savvy and like to shop online. But there is some debate about whether they prefer brick and mortar or online shopping. Most agree Millennials like to first research products online. Then they either order for delivery or pick up at the store known as BOPUS (Buy Online Pick Up at Store). They like deals. Think coupons, promo codes and free shipping.

Influencers

Peer and general customer reviews strongly influence Millennial buying choices. Generate conversations among your Millennial customers and encourage public reviews of your products and services. Make it easy for Millennials to share with their friends when they choose your brand. Encourage reviews on other sites. They more skeptical of conventional advertising

Millennials are also socially conscious and like to support local companies. They’ve been brought up learning about preserving natural resources and like businesses that actively support and promote a greener economy.

Healthy Appetite

At the grocery store, Millennials with children are showing a strong appetite for fresh fruits, organic and natural items—particularly locally grown. The impact? Produce sales increases have outpaced all other grocery categories nationally over the past few years. Conversely, other categories such as pre-packaged foods have experienced lower demand.

Faster Food

Business Insider’s Akin Oyedele reported that Millennials spend the least amount of time on meal preparation compared with older generations. They’re more likely to eat at restaurants, pick up prepared meals (meal kits), or order delivery. Bankrate data shows that 54% of Millennials eat out at least three times or more each week. As a percentage of expenditure, Millennials spend more than Generation X and baby boomers on food away from home.

Retail

A recent report by Cassandra found that 70 percent of Millennials surveyed dislike loud and busy stores. They prefer brick-and-mortar stores that are relaxed and unfrenzied. Millennial shoppers like to do research online, but also appreciate the opportunity to ask questions with a retail employee.

Millennials like new experiences. With the increasing number of empty store fronts, retailers are have more short term options. This means more pop-ups, more temporary leases, and a wider, more convenient selection for discerning Millennial shoppers. Pop-ups, work in part, because of their spontaneity. The brief, get-it-while-you-can nature of temporary locations excites Millennial shoppers.

To DM or not to DM

There are many reports that show Millennials read and respond positively to direct mail. However, most of the studies we found were prepared by direct marketing companies or the U.S. Post Office so they should be taken with a grain of salt. It may seem counterintuitive, but there is some logic to consider direct mail to reach Millennials as it may help break through the copious amounts of digital ad clutter they encounter on a daily basis.

Spend Time to Save Money

Finally, it’s important to remember that Millennials grew up during a major recession. Many have accumulated large amounts of student loan debt. They are quite willing to thoroughly research products to be confident they’re getting the best quality at the lowest price from a brand that aligns with their values.