Why Loyalty Programs Fail
- 43% of shoppers say rewards expire before they can be redeemed and 38% of shoppers say they never knew if they had rewards available (CodeBroker)
- 57% of loyalty program members do not know their points balance, and 38% are unaware of their points value. More than 1 out of 5 members of loyalty programs have never redeemed. (Bond)
- 70% of brands with a loyalty program don’t let the customer choose their preferred reward (IBM)
- 53% of U.S. consumers identified “easy to use” as the main reason for participating in a loyalty program, topping “gives me great discounts” (39%) and “easy to understand” (37%), among other reasons. (Colloquy)
- The Ultimate Cheat Sheet for Fixing Problems with Your Loyalty Program
Loyalty programs are an excellent tool for retaining customers and getting new customers. The problem is that many of those customers lie dormant and do not participate in the loyalty programs once they enroll. One of the goals of implementing the loyalty rewards program is increasing sales. If that’s not happening, then your business is missing half of the action. Recent studies have produced dismal statistics when it comes to loyalty program participation. Consumers belong to an average of more than 13 programs, but they are only active in half of the programs that they enroll in.
Related Article: How to Measure Customer Loyalty
The following are six strategies to overcome many of the common challenges with failing loyalty programs.
1. Make it Easy to Participate
One of the most common reasons that customers do not participate in the loyalty rewards programs is that the process is too complicated. Many customers are on the go, and they do not want to sign up for things, pull out cards or visit a kiosk to get a coupon to get a discount. Some customers dislike long processes so much that they would forfeit their rewards rather than perform additional tasks. The program processes should have as few steps as possible.
2. Explain How the Program Works
From your website to email, to your mobile app, social media pages and on-site signs and brochures, focus your communications around how the program will benefit the customer directly: what the rewards are, how they earn them, and how they can join the loyalty program.
During in-store transactions, have the sales associate remind the customer how the program works and how today’s purchase will get them closer to earning rewards. Customers are more likely to want to participate in the program if they know they what’s in it for them.
For example, Shell’s video makes it easy for Shell Driver’s Club members to see how easy it is to earn points everytime they fill up at the gas station.
3. Show Reward Status
Consumers place considerable value in knowing their current loyalty points balance — enough that it would lead to more purchases and visits. However, it’s an area where brands seem to be lacking and could improve for a quick win with customers. 18% of US internet users surveyed by 3Cinteractive in March 2018 said they don’t know how many loyalty points they have for their favorite brand, and another 52% said they weren’t sure. 94% of consumers say that timely updates on points balances would drive more purchases.
Showing customers their point totals on a receipt or a mobile app is a good way to let them know how close they are to the rewards that they desire. You also want to make it easy for the customer to redeem the points across all purchase channels.
4. Offer Incentives
You can initiate a short-term promotion with a special incentive every once in a while. For example, Southwest Airline’s Rapid Rewards members can register to participate in special promotions to earn double points (earning rewards faster) on all their purchases during a specified period.
Another way to boost program participation is by using gamification techniques. Gamification employs the use of game elements to leverage a participant’s sense of challenge, competition, and reward to educate, change attitude or behavior and inspire action. For example, Starbucks’ Summer Game Boardwalk is one such example. Members sign-up to play at starbuckssummergame.com or via the Starbucks App. Members earn a game play every time they make a qualifying purchase with the card that is registered to their Starbucks Rewards card. (It’s easiest if you use the app) Members collect and match either two or three game tickets to win a prize plus there are many instant win tickets, with the top prize being Free Starbucks for 10 Years!
Surprise and delight incentives foster brand awareness by doing things that customers want to tell friends about. A “surprise and delight” is an unexpected reward given to members of the loyalty program to nurture the customer relationship. Panera Bread surprises and delights members of their loyalty program with free perks like free bagels for the month or a free cup of coffee each day. Another important element of this approach is personalization, making the customer feel valued and appreciated.
5. Make Customers Feel Special
Program participants want to feel as if they are a part of a something special and that they get the priveledges and recognition they think they deserve. They don’t want to feel like they have the same opportunities as all the other shoppers have. Forrester research found that 59% of US online adults belong to a customer loyalty program say that getting special offers or treatment that isn’t available to other customers is important to them. For consumers who regularly participate in a majority of those programs, 69% find special treatment important.
You can help your customers to feel special by giving them member-only events, offers, personalized experiences and the like.
“Tailoring loyalty benefits for specific consumers, and using the loyalty program engagement vehicles—be it via an app, email, or instore interaction—all allow retailers to personalize the loyalty program so that it’s not just a discount vehicle. Providing advice, tailored offerings, and other services will delight the loyalty-program member. In this way, there is no one loyalty program—each shopper will have his or her own version of the program, tailored to his or specific needs,” said Louise Keely, executive vice president, Nielsen Global Retail Practice.
For example, Target offers its REDcard members exclusive access to products before they are available to the general public.
Pier 1 Imports sends emails to its My Pier 1 Rewards members inviting them to participate in member-only events like this Destination Style event. These localized events create customer experiences where the customer learns how to use the product and to interact with style experts.
Related Article: How to Improve Loyalty Program Redemption Rates
6. Loyalty Program Research
Always track your program’s participation and conduct both qualitative and quantitative research to find out what works and what does not work. That way, you can tailor the program to meet more of your customers’ needs. Qualitative research will help you see the big picture of your loyalty program’s success, while quantitative research will enable you to get more detailed insight and to quantify by customer segment what is most important to your customers. Consumers are asking for more and expect programs to deliver beyond the points. Use this insight to deliver better customer experiences.
Updated August 15, 2018
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Filed under: Loyalty Marketing