Customer loyalty has become crucial nowadays. 72% of people agree that all other factors being equal, they’ll buy from a retailer with a loyalty program over one without. What’s more, it’s easier to sell to an existing customer, than gain a new one.
But oftentimes it appears that your loyalty program doesn’t work. Why is it so?
During our everyday work, we talk to many managers responsible for loyalty programs. We’ve talked to people from more than 100 companies. Based on these discussions, we have created a list of 7 reasons why loyalty programs fail.
Programs burn out
Even if you figured out a loyalty program that works, it doesn’t mean it will work forever. After some time, you’ll probably see the drops in your statistics. That’s why you should modify or even change your program. How often? Mostly, it depends on your industry - some of them are more dynamic than others. For example, in the fashion industry, you should change your loyalty program every 4-5 years.
Customers don’t want cards
Think a while - how many loyalty cards have you got in your wallet? And how many of them do you actually use? Not many, right? Cards are reserved for programs of, let’s say, everyday use. It is usually 2-3 programs. It’s better to base a loyalty program on an identifier such as a phone number, email or mail.
Luxury brands’ customers don’t want to collect points
Collecting points can be frustrating, especially if at the end you’ll only learn that you can’t afford the offered reward anyway. It’s a good idea to collect the points implicitly and base the program on advancing through subsequent levels. Then, you can reward your customers depending on the level they have. The levels can be kept confidential and the customers are surprised with unexpected bonuses like movie tickets, a private consultant or VIP sales.
Discount rates are risky
Offering things of value is better than simple price reduction. Why? When a company wants to improve their results at the end of a given quarter or month, sooner or later it will give discounts to all its customers. This can undermine the legitimacy of the entire customer loyalty program.
Loyalty programs can’t be run just by marketing
Running a loyalty program requires changes in the whole organization. To create an effective loyalty program, you should involve a cross-functional team with representatives of finance, merchandising, strategy and marketing.
Simplicity is the key
This is mostly a communication issue. You need to focus on keeping your messages simple, customer-focused and to-the-point. Customers need to understand what they're signing for, what the rules of the program are, and when they take part in your loyalty program. It’s also about rewarding - oftentimes people prefer tangible rewards over abstract ones.
When designing your loyalty program, you need to think about the segmented or tiered model. Treating all you customers in the same way is a common mistake. Also, using tiers or segments brings the elements of gamification - and this is a trend in today’s loyalty programs’ world.
A well-done loyalty program is not only about gaining more revenue. It’s also about learning more about your customers and using this precious knowledge in practice. That’s why it is crucial to design the program properly. To inspire you, openloyalty.io team has prepared a report with loyalty programs’ benchmarks from 8 Industries: Beauty/Pharmacy, Food, Services/B2B, Apparel/Fashion, Sport, Home/Decoration, Automotive/Petrol, Entertainment. Enjoy!