Why Loyalty Programs Fail: Here’s What Not to Do

The simple premise of most loyalty programs is to acquire more customers to help drive engagement to increase the bottom line.

But some customer loyalty and reward programs don’t move the needle enough for brands, or they seem to bring in flat results that are less than what the company expected.

While there are numerous suggestions and research that lay out clearly what brands should focus on in order to make their loyalty and reward programs successful, not much is spoken about what brands should try to avoid in order to make their program a success and to ensure growth.

(Article originally published by Loyalty 360. Read the full article on Page 22 of the Loyalty Management Magazine or download the PDF here)

Various Reasons for Low Success

Joe Pino, Vice President of Strategy and Solutions at Clutch, says the most limiting factor for a loyalty program is almost always the technology.

“When brands choose a platform that is limited to the current need rather than one that is built to adapt and grow, the program will be stagnant, and engagement will suffer,” Pino says.

Just like any marketing strategy, the demand for different experiences drives new tactics.

“But because changing a loyalty program provider is both expensive and time-intensive, the initial platform can remain in place at the expense of a successful program,” Pino says.

Brendan Boerbaitz, a Senior Manager Monitor at Deloitte and a Loyalty Offering Lead, says the most common issue they see with brands experiencing declining performance is a lack of clarity in the customer behaviors they want the program to drive and how that behavior translates to tangible business value.

“Over time, brands that don’t answer core strategy questions with specificity—which often means saying “no” to potential opportunities—tend to overpack programs with generic features, copycat promotions, or offerings from best-in-class programs that aren’t relevant in their market context,” Boerbaitz says. “It erodes recognition and adoption with their most valuable consumers and diminishes the ability to rally internal support for future investments.”

Steps to Revise a Sluggish Loyalty Programs

When designing a new or refreshed program, Boerbaitz says Deloitte partners with clients to clearly define and align upon the business goals, value drivers, and success metrics that will be driven through loyalty.

“Answering that first question of why you need a loyalty program is key,” he says. “Upon that foundation, we then identify target customer segments and behaviors to be influenced.”

Boerbaitz says only then do they then get to the work of designing a program’s value proposition, features, and go-to-market approach to incentivize those behaviors.

“Our experience has shown that clients who take the time to work through this strategic exercise end up with sustainable, differentiated programs that resonate with customers and lead in their competitive sets,” he says.

Pino says a loyalty and reward program refresh should start by looking at the behaviors of the brand’s best customers — this means both loyalty members and non-members.

“Regardless of status, the role of the program is to find and retain more great customers,” he says. “Understanding what causes desirable behaviors can pave the way for tactics that increase engagement and drive loyalty both in and out of the program.”

Pino adds that sometimes fresh eyes and a new perspective can go a long way. He says involving an agency or strategic partner can help a brand understand what can be done to revitalize your program.

“Go to them with a clear objective and be open to new ideas,” he says, adding that brands should also think beyond their own industry.

“Don’t just look at your competitors, but look at the best brands in the world,” Pino says. “How are they engaging with their customers? What is the experience of being part of their program like? How can you emulate some of that type of personalization in your program? Take this vision and ideas to your program provider and see what’s possible.”

Best Practices to Achieve Greater Success in Loyalty Programs

Pino says the overall success of a loyalty program is about personalization to all customers. An important best practice is to leverage data and insights from the loyalty program to personalize the customer experience across all other customer initiatives.

“Think about emails, the e-commerce experience, e-receipts, mobile programs, mobile pay, wifi sign-in, streamlined coupons, or offer redemption,” Pino says. “These are all ways to identify and personalize the customer experience to increase customer loyalty and amplify business intelligence.”

Boerbaitz says Deloitte has seen successful brands adopt a range of actions to maximize the value of their programs throughout their lifecycles, from upfront design to ongoing measurement and evolution…

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