I'm reading about a new study on customer loyalty programs from McKinsey & Co. on Forbes: "Making Loyalty Pay: Six Lessons from the Innovators." From the outset, it states that major companies that have higher spend on loyalty programs tended to achieve slower growth and realized 10% lower margins on average. What? Loyalty doesn't pay?

Before we freak out and quell the notion of a loyalty program, make sure and read all the facts this team outlines in the article. Loyalty programs are increasingly expected by frequent customers -- according to this survey the average household already has 23 loyalty program memberships of some kind. We know that the marketing and sales cost of acquiring a new customer versus bringing back existing customers is 3X or more, depending upon the industry. Some companies achieve incredible success through customer loyalty programs. Why are others achieving lesser results and dragging the average down - and what can we do about it?

In addition to the steps outlined in the Forbes column, let's offer some more practical advice that you can provide to your clients when they are starting to consider a loyalty program.

1. Don't overdo discounts. This seems obvious, but the monetary value of any discount you offer comes straight out of your profit margin, and unless the discount is quite large, it doesn't provide much of an incentive. I can offer 5-10% off, but that's not usually going to motivate repeat business significantly. Or I can offer 50% off, ala Groupon and other social discounters, and creates a net loss unless that customer returns for several more transactions. Sometimes discounts are great, but your best customers will not be compelled to return by price alone.

2. Look for positive incentives with lower incremental costs. The savviest loyalty programs add bonuses rather than take discounts out of the expected customer spend. For instance, get a free dessert item that you make in quantity, or a nice carrying case that they might not have bought separately. The same goes for services - take for instance the auto repair shop that offers a free car wash or tune up and inspection, or the spa that offers a hydrotherapy session with the next visit. If you tend to have some extra inventory, equipment or work capacity that is not being fully utilized anyway, maybe these are ideal candidates for rewards.

3. Don't create barriers to entry. Make it SUPER EASY to join, log in and redeem. I recently visited a bowling alley that had a physical kiosk, a QR code reader, and physical cards that the customer would carry everywhere after they created an account. It seemed rather excessive to place another piece of plastic in my wallet, just to check in for points at this business, not to mention the initial investment and taking up that much counter space. Similarly, you should not require every detail of a customer's identity and a new username/password to join. Usually just an email and phone number is plenty -- you can always associate a link from other systems later and categorize members as you go.

A good rule of thumb: If you are overly concerned about security, or expecting that employees or customers would want to "game" your loyalty program for rewards, you are probably setting your reward values and/or enrollment requirements too high. Keep program requirements simple and lightweight so customers aren't turned away at the door.

4. Elite Status is effective and nearly free to offer. How many times have you overheard salesmen bragging at an airport about their Double Executive Titanium status? Let's face it, most of us would like to get special treatment for our hard-earned money. By offering upgrades in Status after certain point levels, you reward repeat business implicitly. You can make a status upgrade include a reward gift, or use it to differentiate your services.

For instance, a Gold status diner might get preferential seating in a restaurant, a customer at the cleaners may get same-day turnaround, and a Platinum status contractor at the nursery gets to skip the line and pick up orders immediately. Whatever you offer elite status members, make sure to instruct your staff to acknowledge this status and treat these customers accordingly -- that perk alone will make a difference.