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Why Should You Consider Customer Privacy Before Launching Your Loyalty Program?

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By: Wise Marketer Staff |

Posted on December 18, 2022

Customer loyalty programs are promotional tools that businesses use to build ongoing relationships with customers. In return, loyalty program members receive discounts, exclusive deals, occasional free items, and other perks.

Businesses use these programs to encourage existing clients to continue spending with their brand and to discourage customer churn (customers taking their business elsewhere).

When well-executed, loyalty programs are an effective way of growing a company and brand through relationship building. They are also an excellent indicator of how a customer engages with your brand.

When poorly executed, loyalty programs can actively harm a brand’s reputation. Customer data security and privacy should, therefore, be top priorities.

The #1 customer privacy and security concern in loyalty programs

There have been several high-profile cases where loyalty programs have gone wrong, often because of apps that threaten users’ privacy. For instance, the Starbucks app. In this article, we will take a look at data breaches and how to ensure your loyalty program doesn’t make headline news for all the wrong reasons.

Data breaches

Loyalty programs and associated digital products collect and retain a certain amount of customer data. Depending on the business, this data may include email addresses, phone numbers, physical addresses, and credit card details.

A data breach is a security incident resulting in confidential and sensitive information falling into the wrong hands, as was the case in the highly publicized Marriot hotel passport number breach. Speaking to the New York Times, Kevin Lee, a risk expert at digital security firm Sift, noted that rewards programs are “almost a honey pot for hackers” and often “the path of least resistance.”

In the Marriot case, the passport number data was unencrypted, meaning once the threat actors had gained access, they were immediately able to use the information. Besides robust encryption, there are other things you can do to protect customer data.

Collect as little data as possible to protect customer privacy

A Spendgo report shows that 76% of U.S. consumers prefer loyalty programs that require only their name and phone number for membership. If you create a program that collects minimal customer data, you stand to gain from this trend while minimizing the heightened risks of retaining other data, such as credit card information.

Make sure customers use a good password

Many customers rely on poor password choices, and they are often more relaxed when it comes to loyalty programs than they would be with other accounts, for instance, their banking or email credentials. Requiring a complex and unique password of 12 characters can help prevent individual attacks on accounts. These attacks have become more frequent over the past several years, as witnessed by the sheer number of airline loyalty points being sold on the dark web.

Hire security experts to test your digital loyalty products regularly

Updates to a digital product, changes to code, and many other small tweaks can lead to security issues that put your customers’ data at risk. To avoid this, hire security experts to test your app’s security and your database systems regularly.

Data breaches discourage customers from starting a relationship with a brand and erode trust among existing customers. Build your loyalty program on a foundation of trust and respect for your customers’ privacy.