Why (some) loyalty programs fail?

by Loyalty Point
16.09.2022
Why (some) loyalty programs fail?
by Loyalty Point

The question of why some loyalty programs fail should be answered by all managers who are working to implement a loyalty program. Transferring mistakes from the market can save new loyalty programs from failure. In fact, there are many variables that determine the success or failure of a loyalty program: unattractive rewards, lack of communication, complicated membership rules and many others. What most often fails, however, is the execution of the loyalty program on the part of the organizer and its partners. A loyalty program that is mediocre in terms of attractiveness or innovation with perfectly run execution will bring much better results than a project that is great in its assumptions, whose execution will be inadequate.  In this article we will present the most common and egregious program execution mistakes.

Employee is not an ambassador of the program

  1. Employee is not an ambassador of the program

Some of the mistakes are due to the specific market in which the loyalty program is available. Other difficulties will be encountered in e-commerce-only programs, and others in programs aimed at stationary stores. In loyalty programs in stationary stores, the role of salespeople is very important. After all, they are the ones who have direct contact with the customer, and whether the customer joins the program and shows the card depends largely on them. Employees must know about the program, understand its rules and preferably like it. That way they will recommend it to consumers on their own initiative and with a clear conscience. And one of the key measures of the success of a loyalty program is the knowledge of the customer resulting from the work of the staff.

The best way to involve employees in promoting a loyalty program is to involve them in the pilot process. If employees can, before the official launch of the project, enjoy the benefits, collect points, receive rewards and in the process learn about the real benefits of membership, they will definitely be more likely to recommend the program to customers.

The loyalty program is not the responsibility of two or three people in the marketing department. Hundreds or even thousands of people are the face of the program, especially those on the front lines – salespeople and consultants in stationary stores – who have direct contact with customers. With comprehensive training and involvement of employees at the pilot stage of the program, they will become its ambassadors.

Poorly established rules for working with the program at the point of sale, franchisee level

Companies often run incentive programs for employees to help them achieve certain sales goals, including those related to loyalty program registrations. These types of activities obviously produce results, but usually in the short term, only for the duration of the incentive. It is important to build a cooperative environment so that everyone cares about the success of the program and, most importantly, not periodically or acutely, but over the long term.

For obvious reasons, it is easier to influence your own outlets. It is much more difficult for franchisees. In this case, it will be most beneficial to secure the presence and support of a loyalty program in the franchise agreement, so that the businessman understands that having employees remind customers of the loyalty card will simply pay off. The easiest way to explain this is through a push & pull strategy. The push element, pushing the franchisee towards working with a loyalty program, is the variable margin, which ensures that when certain assumptions are met, they will get a higher % on store turnover, bonuses, premiums, etc. Pull, on the other hand, is the activities that attract customers towards the brand. If the program has attractive offers and customers see that they actually gain a benefit by showing the card, they will come back, spend more, buy more often and redeem rewards at a given point of sale.

It is also a good idea to show the effects of the program on the basis of stores that are functioning well and working with the program. Such an example best illustrates what benefits a properly implemented and used loyalty program brings to a store.

With such actions, recommendations and referrals to the program, as well as reminders to show the card and assistance in registering for the program will naturally become part of the good practice of each customer’s service process.

Loyalty as (not) a core

The implementation of a loyalty program should be based on an interdisciplinary approach. The entire company should understand the idea of running a loyalty program – from salespeople, to consultants, project managers, developers, administrators, to the board of directors itself. Everyone should work toward a common goal – that the club member should always have a better deal and be treated in a special way.

Loyalty activities must be central to the company’s strategy, and not just one of many projects carried out as part of marketing and sales promotion. A loyalty program improves customer value over time (spends more, comes in more often), so it is essential that all employees are aware of how much the company earns from a loyal customer and how attracting quality clubbers affects meeting sales targets.

It is essential to understand the phases of development and set the goals in the loyalty program relative to the current stage the program is at. In the initial phase, everything must be done to gain clubbers and make the program massive. For only on a sizable base can you create selective promotions and highly personalized offers. Only when you build scale will niche, selective benefits make sense.

Lack of consistent communication about the loyalty program

When preparing the strategy and delivering offers, the team responsible for the loyalty program cannot compete with the sales team. Unfortunately, often, within a single brand, there are offers aimed at all customers, and those available only to clubbers do not stand out. A company that has a loyalty program, on the one hand, encourages customers to sign up for the program with the idea that “the clubber always has it better,” and on the other hand, fails to deliver on that promise, as it makes offers available to all consumers, sometimes even more attractive than the offers in the loyalty program, for fear of lack of interest. A brand that guarantees better offers outside the loyalty program is actually competing with itself.

Consistent communication that always conveys information about the loyalty program is essential if the company really cares about the long-term success of the project. Believing that a loyalty program will promote itself and that customers will inquire about joining and remember to show their card every time is a misconception. Loyalty program information should be readily available to participants. In addition, the lack of consistent communication reminding of the existence of the program and its benefits in all advertising messages of the brand reduces the chances of its success.

In implementing the objectives of the loyalty program, it is necessary to act from the detail at the level of the employee, through each individual point of sale, to the whole, i.e. all departments, management and partners responsible for the implementation of the project. This is the only way to effectively implement the objectives of the loyalty program.

LOYALTY POINT is implementing a project with Contribution from European Funds. Learn more