Why did your Loyalty Program FAIL?

22-Mar-2024

Loyalty programs have become a popular marketing tool for businesses to retain customers, encourage repeat purchases, and foster brand loyalty. While the concept is promising, the reality is that not all loyalty programs hit the mark in achieving their intended objectives.

According to the American Marketing Association (AMA), "Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior—behavior which is potentially beneficial to the firm.”

When businesses figure out why some loyalty programs don't work well, they can learn important lessons. This report looks into why some loyalty programs fail. We'll use real examples and easy-to-understand ideas to figure out why these programs don't always do what they're supposed to do.

Customer Retention: Why Keeping Customers Coming Back Matters?

Customer retention is a critical aspect of any business's success, as it directly impacts long-term profitability and sustainability. Keeping customers coming back is more than just a transactional concern; it's about building lasting relationships and fostering loyalty.

“A 5% increase in customer retention can lead to a 25% increase in profits.”

When customers feel valued and appreciated, they are more likely to return to the same business for future purchases, thereby driving revenue and contributing to positive word-of-mouth recommendations.

“Existing customers are 50% more likely to try new products and spend 31% more than new customers.”

Clearly, customer retention is a cornerstone of a successful business strategy, and loyalty programs are an effective means to achieve this.

Are You Making These Mistakes?

Not Giving Your Top Customers the Recognition They Deserve

While being fair to all your customers is important, but giving them all the same rewards won't make your best customers feel special.

So, what can you do? There are two ways to approach this:

1) Consistency Matters: First, treat all your customers fairly when it comes to your regular customer service. In other words, whether they spend a lot or a little, treat them all well as part of your overall customer service plan.

2) Experiential Rewards: Instead of just giving rewards based on money spent, businesses can offer special and memorable experiences to customers. This might include exclusive events, personalized services, or VIP treatments.

These kinds of rewards make customers feel more connected to the brand emotionally, creating stronger loyalty and making the business stand out from the competition.

Setting Hard-to-Reach Rewards for Customers

Many businesses try to create extraordinary customer loyalty programs, but they make a mistake by setting rewards that are too hard to get. It's important to make rewards unique yet easy for customers to earn and enjoy.

When rewards are too tough to earn, they can turn customers away. To prevent this, keep your targets simple and make sure customers understand them.

When customers put in effort to earn rewards but find the returns don't match up, it can create feelings of resentment and disengagement. They might feel cheated or undervalued, which can erode their loyalty to the brand or program.

Additionally, struggling to achieve rewards can sour the overall customer experience. Instead of feeling appreciated and motivated, customers might feel overwhelmed by the difficult hurdles standing between them and their rewards',

Set Unrealistic Reward Program Goals

When businesses launch a loyalty rewards program, they often get carried away with overly ambitious goals. While it's great to aim high, your loyalty program might stumble right out of the gate if your goals are too far-fetched. So, how can you avoid this pitfall?

The CLEAR Approach:
To set the stage for a successful loyalty reward program, use the CLEAR principle. It stands for Clear, Logical, Engaging, Achievable, and Relevant. Let's break it down:

C - Clear: Ensure your goals are crystal clear and easily understood by everyone involved.

L - Logical: Goals should make sense in the context of your business and customer base.

E - Engaging: The objectives should capture the interest and commitment of both your team and customers.

A - Achievable: Goals should be realistic and attainable, based on past performance or industry standards.

R - Relevant: Your goals should align with your long-term business objectives and the unique needs of your customers.

Using the "CLEAR" framework, you can set goals that are easier to grasp and attain, ultimately leading to more successful customer loyalty programs.

Neglecting Emotional Bonds With Customers

Why focus on customer retention instead of finding new ones?

It's estimated that acquiring a new customer costs five times more than retaining an existing one.

Loyalty rewards programs can be more than just transactional; they can create a profound emotional connection between your brand and your customers. A common mistake is overlooking this critical aspect of loyalty programs, potentially leading to their failure.

To make your loyalty program work better, you should create a warm connection with your customers. Try to understand what they like and care about. Make their experiences special and unique. Share your brand's story, so they feel they're part of something meaningful.

Keep your customers delighted with unexpected treats now and then. Ensure reliability and express gratitude regularly. When seeking their feedback, listen attentively and take action accordingly. By consistently practicing these gestures, you'll retain customers and cultivate devoted fans of your brand.

Final Verdicts

In summary, Loyalty programs fail when you don't prioritize your top customers, set unattainable rewards, and overlook emotional connections. Recognizing these factors and incorporating gamification can boost loyalty and customer retention, ultimately driving business success.