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Why do most loyalty programs fail?

Loyalty programs

Companies have looked for the best strategies that lead to better customer engagement, willing to make good investments, not only in terms of money but also in terms of marketing efforts.

Studies have shown that up to 80% of loyalty programs fail during the first two years, In addition to this, it has been proven that customers enrolled in loyalty programs are not necessarily more loyal than those who are not part of the community. So the question remains what are the companies doing wrong? These are some of the reasons why some loyalty programs are unsuccessful: 

1. Loyalty programs are transactions

Around 97% of loyalty programs are transactional. This means that only those customers who buy a product or service can enjoy the benefits and rewards. In the beginning, this could be interesting to the customer. However, over time, loyalty programs lose interest. This is due to the fact that it is only those who buy frequently that receive special promotional offers.  

Furthermore, talking about the company’s efforts, it is common to reward customers who will buy anyway but, what about incentivizing customers to spend more? In the end, companies end up spending all their efforts in retaining customers that will buy without any incentive or reward anyways instead of leveraging their programs to incentivize spending.

2. Lack of omnichannel capabilities 

Nowadays omnichannel experiences are essential across all industries and there are still many retailers that fail to offer online and offline experiences. In fact, up to 75% of loyalty programs use mobile channels, but only half of these programs allow rewards to be redeemed through mobile devices. Undoubtedly, this could be frustrating for consumers due to the increasing trend of digitalization.

3. Not meeting customer expectations

Last but not least, another reason why loyalty programs fail is the lack of personalization when it comes to delivering discount promotions. Something important that Retailers should know is segmentation and how it plays an important role in personalizing rewards. So how do they achieve the right segmentation without meaning a great investment in time and resources?

Retailers must look for new ways to improve their promotional offers and rewards, and by using evolving technologies, personalization turns out much easier to do.  Thanks to the automation and optimization processes provided by marketing platforms, retailers can reduce manual errors and time spent. In addition to this, decisions are essential when it comes to:

  • Which clients to select for targeting strategies
  • The level of selected resources to the selected clients
  • Ensuring the relationship between customer strategies and company profitability

A retail manager can take advantage of the analysis of the results to predict the future profitability of the clients, develop strategies and make decisions relative and more appropriate to the clients. The most important thing is providing an objective basis for targeting retention efforts toward high-value customers. 

In short, customer engagement goes far beyond traditional loyalty programs. Companies should take into account the expectations and needs of their customers in order to customize the rewards, and it is the smarter engagement that makes marketers be sure that the loyalty program chosen is successful, building meaningful, lasting, and profitable relationships with customers.

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