The Reasons Why Loyalty Programs Fail

A measurable loyalty program can have a massive impact on your bottom line. But if you don’t give it the necessary time and energy, even a great loyalty system can bomb.

This post will show you exactly what you need to avoid if you’re about to launch your program, or what to change if you’re already running a program but not getting the results you expected.

Here we’ve compiled a thorough list of the most toxic mistakes that ruin good loyalty programs and simple solutions to preventing them.

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1. Small Rewards Don’t Excite Customers

One of the main reason loyalty programs fail, is because they don’t offer enough value to customers. If your customers aren’t excited about earning rewards at your store, chances are they won’t even take the time to swipe their card or open your app to earn points on their purchases.

Offering customers 1% cash back on purchases, oftentimes does little to excite customers enough to change their buying behaviour.

We’ve found the sweet spot when it comes to balancing business goals with high value rewards is around 5%. For preferred clients, 10% is often more than enough to motivate loyalty.

2. Complicated Loyalty Programs

When it comes to lasting customer loyalty, simplicity is key. Customers need to get your program instantly when they read about it on your signage or hear about it from your staff or a friend.

Customers need to understand exactly what they’re signing up for when they take part in your loyalty program.

This is mostly a communication issue. You need to focus on keeping your messages simple, customer-focused, and to-the-point.

Oftentimes it’s easier for customers to understand actual item rewards, or points that equal a rand or dollar value than badges.

The plain truth is that people prefer tangible rewards over abstract ones.

3. Fraud

Fraudulent loyalty card swipes is an issue that most South African businesses have struggled with in the past.

Loyalty programs like The Loyalty Box are built by default to flag more than 5 swipes per card per day. But if you’re using another loyalty provider, you’ll need to regularly review your data to make sure your managers or staff aren’t trying to take advantage.

Aside from fraud prevention, keeping an eye on your data is essential to get a feel for how your best customers are spending at your stores.

4. Irrelevant Marketing Communications

When customers sign up for your loyalty program, they’re giving you permission to market to them. Opting in to receive emails and SMSs from you.

If you use this permission to send them spam, or any message that doesn’t directly benefit them, they’ll not only quit your program, they may even start looking at competitors who won’t take advantage of their loyalty.

A good loyalty program will give you the ability to automate the sending of highly targeted promotional messages to specific customer sets based on their purchase frequency, products bought, and amount spent.

When done right, relevant promotions are extremely effective. When done wrong, promotional messaging can do serious harm to your brand.

5. One-Size-Fits-All Models

Treating all your customers the same way is a mistake because it means they get the same reward percentage whether they shop at your store once a week or once a year.

The best loyalty programs offer customers better rewards the more they buy with a tiered (silver, gold, platinum) model.

This gives customers a clear goal when it comes to purchasing at your store and makes shopping at your store a game in which they need to reach the next level.

6. Not Enough Attention

Very few retailers have the time to sit and watch their customers’ every purchase on a day to day basis. So they set up their loyalty programs and never give them another thought unless something goes wrong. This is huge mistake.

Great loyalty programs are catered to the unique and often changing buying habits of specific customer segments. Recognising these segments requires an in-depth look at the data.

Taking some time each month to log in to your loyalty software dashboard to identify buying patterns, will give you powerful insights for new promotions to drive repeat customer visits.

And testing promotions on particular products at particular times, is how the best retailers take control of their revenue during the quiet periods of the day/week/month/year.

7. Not Getting The Staff Involved

If your staff aren’t actively promoting your loyalty program, customers are a lot less likely to find out about it, even if you have good signage around the shop.

By making it mandatory for your staff to ask every customer whether or not they have a loyalty program when they purchase, you can dramatically increase your sign up rate.

Your staff need to be telling your customers about how many points they have or how close they are to getting a free product.

To Run An Effective Loyalty Program You Need To:

  1. Offer tangible rewards (5% or more)
  2. Keep your program simple and easy to understand
  3. Prevent fraud by keeping an eye on your data or setting a limit on your daily loyalty swipes (flag anyone swiping more than 5 times a day)
  4. Send relevant messages based on buying habits
  5. Reward your best customers with better deals (using tiered programs)
  6. Test and refine promotions for effectiveness
  7. Get your staff on board and actively promoting your program

The Loyalty Box offers a platform that supports all of the above tips and makes launching and maintaining a powerful program simple and cost effective. Sign up for a FREE 14-day trial of our software today or read more about creating your own loyalty programme.