A Poorly Executed Loyalty Program Will Cost your Brand Image

9th Feb 2017

Modern woman shopping looking at smartphone texting or talking smiling happy in clothes store. Beautiful young mixed race Asian / Caucasian young woman shopper.

An enterprise derives 80% of future profits from 20% of customers. It costs a business nearly five to six times more to sell to a new customer than to an existing one. Existing customers spend as high as 67% more than a new one.

Customer retention is not something brands can ignore. Loyalty programs that focus on retention are one of the best ways a brand can say thank you to express gratitude to its esteemed patrons for their unflinching support. The prospects of earning rewards, points, discounts, free merchandise or perks, saving a little extra money, and being acknowledged by the brands for their association, is motivation for your customers to return. 

Loyalty Programs Gone Wrong

Loyalty programs are seen as a befitting answer to retaining customers and curtailing brand switching. According to the 2015 Colloquy Customer Loyalty Census, American households on an average are members to 29 loyalty programs but only use less than half. The Experian Data Quality survey revealed that from 91% of respondents who indicated to have a loyalty or an engagement program, 81% agreed to be facing challenges related to such programs. What’s going wrong with such a staggering number of loyalty programs? A bad loyalty program runs the risk of turning a brand’s loyal customer into its loudest detractors, costing the company significantly in terms of money, effort, time and brand equity.

Explore some of these questions to find out if your loyalty programs are matching customer expectations.

Is your loyalty program customer ready?

Well begun is half done! And, a great start needs meticulous planning and a high level of preparedness before executing. Customer interest and awareness is built up with momentum, but also increases expectations. Any failure to deliver on the promises made can boomerang the entire initiative and tarnish brand’s image. So while the marketing team must design engagement strategies with a risk evaluation and anticipate critical aspects such as time frame, customer segment, sustainability, value quotient, customer expectation, etc. the rest of the team must be prepared to handle any last minute changes and most importantly keep their customers posted.

Are you communicating proactively?

Even though the marketing department is at the forefront of designing engagement strategies to keep customers satisfied and coming back, it’s finally the overall experience across the departments such as customer service, in-store experience, grievance handling, etc. that make customers value the brand and establishes a long-term loyalty. A fragmented customer experience makes customers question a brand’s potential to provide a wholesome, comfortable and convenient shopping experience. Often we are so focused on marketing initiatives that we tend to overlook other critical communication aspects, which disrupt customer’s connectivity with the brand, leading to disillusionment. A proactive approach in communicating with the customers be it in handling a simple query, or notifying a delay in a service or walking an extra mile explaining the nitty gritty of a loyalty program to provide clarity is as much important in retaining customers as accumulating reward points in their membership cards.

Is your loyalty program stuck in time?

Companies at times are so focused on designing loyalty programs that they fail to realize the strategies behind them have turned obsolete and do not reflect the expectations and sentiments of the new age customers. These loyalty programs still tie to points with an intent to mostly boost transactions. They fall short of providing any substantial or contextual relevance to customers in their purchase journey, limiting their association with the brand to a number and frequency of purchases. This narrow approach gives brands an image to be less on the emotional quotient; failing to value and understand customer’s emotional loyalty and devotion to a company, product, or service. Such programs designed to stimulate future purchases usually provide offers, points, and coupons, etc. that can be redeemed only against future purchases, thereby postponing the loyalty benefits to a later part of a customer lifecycle. Such an outdated marketing approach hurts the customer’s sentiments.

Is your loyalty program high on frills and low in value?

Customers are intelligent and they don’t waste their time on anything that adds zero value. This explains why the customer engagement rate with loyalty cards stands at a meager 42%. Marketers continue to offer predictable, one-dimensional offers relegated to points and rewards which fail to impress customers. Customers expect loyalty programs to move beyond points and rewards accrued in their cards to adding real value to their shopping experience. And with brands’ loyalty depleting and brand switching becoming the norm, marketers must get innovative and design loyalty programs that cater to new aspirations. Creative paybacks like early access to a highly anticipated sale or random surprises at checkout can make these programs a lot more interesting.

Amidst depleting brand loyalty and brand switching, loyalty programs seem to be the best bet to strengthen customer-brand bonding. So go ahead, take insight from customer data, throw in a little bit of creativity and design a loyalty program that is motivating and compelling enough to keep customers coming back. Last but not least, plan and execute it well, prepare for any exigency, and don’t forget to communicate amidst all engagement activities.