If you have one of the 10 problems with loyalty programs listed in this article, then it’s time to course correct and steer towards success
By Zsuzsa Kecsmar
Running a loyalty program is a long-term endeavor with lots of ups and downs along the way. Still, sometimes you might feel that you aren’t just experiencing a bump on the road but are permanently stuck in second gear. That’s because overlooking important details during the planning phase can handicap your reward program’s true potential. Some problems with loyalty programs aren’t always apparent — and some might not even be your fault. But they can still sabotage your success (and your ROI) nonetheless.
To help you assess your program’s performance in a data-driven manner, here are ten loyalty program statistics that uncover the biggest reasons why your loyalty program isn’t working.
If you feel inspired to revise your loyalty program’s concept, we have good news: this handy little worksheet will help you cover all your bases.
Do Loyalty Programs Work?
Loyalty programs can indeed be a huge value generator for brands. Our Global Customer Loyalty Report 2024 proves this: 9 out of 10 companies claimed to have a positive ROI. Regardless, future and existing loyalty program owners often worry about loyalty issues. In this section, we aim to put their worries to rest.
Why don’t loyalty programs work?
There could be several reasons why loyalty programs don’t deliver the desired results. The concept you’ve chosen might not match the industry you are in. Maybe your math is off, and the cost-to-point ratio feels unrewarding. Or the benefits on offer are unappealing or lacking in variety. However, deleting the program is never a good idea, even if the program underperforms.
What is the challenge with loyalty programs?
There could be numerous loyalty program challenges, but the biggest one is optimization. Once launched with a solid, successful MVP, many program owners get comfy, not wanting to change it in fear of breaking it. This can cause the initial concept to get stale. Companies need to monitor the reports and test new initiatives continuously.
What are the disadvantages of a loyalty program?
Loyalty programs have no concrete disadvantages, but they do require a hefty time, money, and human resource investment. When you decide to launch a reward program, you need to be ready tech-wise and dedicate an entire team to the program — not just tasking the marketing or CRM team to run it part-time.
What are the risks of a loyalty program?
Loyalty programs primarily come with benefits and perks, but they also have downsides that can impact your brand’s reputation. For example, canceling a popular reward can cause an uproar in your community. Still, reward programs more often negate risks than cause them, as you can use points and benefits to compensate customers.
If you want a quick summary of the common mistakes you can make with your loyalty program, check out this episode of Mission: Loyalty, our edutainment video series.
1. Your Rewards Program Feels Unrewarding
One of the most common problems with loyalty programs is that, in the customer’s view, it is either too difficult or takes too long to earn rewards. After all, instant gratification is an important aspect of catering to modern buyers. Dangle the carrot before customers’ eyes for too long, and they’ll join another program.
How to avoid this loyalty program problem: Offer both high-value and low-value rewards so customers can always redeem something affordable. Give new members a welcome gift so they get a taste of the benefits early on. Allow members to earn points for non-transactional activities.
German mountaineering product retailer Bergzeit runs an award-winning loyalty program that integrates a sports tracker to award members with bonus points for climbing to new heights. The results? 95 percent increase in the average frequency of orders per member.
2. Your Reward Portfolio Lacks Variety
Balancing the value proposition of a loyalty program is no easy task, especially because every customer segment has different preferences. Though we don’t recommend spreading yourself too thin with reward types, offering something other than discounts is one way to keep things fresh and exciting.
How to avoid this loyalty program problem: Try to find a healthy balance of rewards — offering only discounts or only experiential rewards leads to an imbalanced experience. Try including partner rewards, which make the reward catalog more colourful, especially when gifts, freebies or merchandise are involved. Offer early access to products, VIP customer service and downloadable content, which are rewards that all have a high perceived value. A rewards catalog centered around experiential rewards, like a fashion shows and gourmet dining experience.
Though expensive and might require a lot of planning, high-end rewards can be excellent additions to a loyalty program. In fact, they can be your main value proposition!
3. You Had to Change the Rules After Launch
Another reason why loyalty programs fail is that companies change the rules after the launch. For example, you change a reward’s cost from 100 points to 150. Though this might seem like a small change in your book, it can upset members or make them feel that you are trying to take advantage of them.
How to avoid this loyalty program problem: It’s always better to start out strict and prudent and loosen the rules later on—not the other way around. Try easing users into changes by communicating them in advance. Granting a one-time benefit (like a couple of bonus points) can also improve the mood.
Managing a loyalty program is no easy task. If you wish to learn how a best-in-class loyalty technology can make it easier for you, check out our Product Release Webinar, featuring our top experts!
4. The Concept Is Getting Outdated
One of the less obvious problems with loyalty programs is that loyalty trends are in constant flux. A decade ago, tiered programs were still considered a selling point, but nowadays, they are more of a hygiene factor. As time passes, it’s only natural to re-evaluate your program and modernize it by adding new features or updating the loyalty logic.
How to avoid this loyalty program problem: Keep your loyalty program concept up-to-date by adding new features every two to three years. Upgrade your tech stack if your current one doesn’t live up to expectations. Before committing to a new tech provider, thoroughly weigh your options and issue RFPs to see each solution in action.
Make sure your loyalty program comes equipped with the right reporting capabilities, so you can keep a close eye on important metrics like engagement levels, reward redemptions, tier distribution, etc.
5. There Isn’t Enough Personalization
The next possible loyalty program challenge is customization. Personalized deals and offers are the secret sauce of a loyalty program. If customers receive rewards and messages that feel relevant, they are more likely to use them. Skipping on personalization and generalizing the experience will leave them disinterested and eager to try a competitor’s program.
How to avoid this loyalty program problem: Personalization only works if you have member data — you need to know how to utilize your loyalty program to collect relevant information. Birthday reward emails are an ideal way to test your personalization strategy because they also have a surprise & delight effect. Use gamified surveys to learn about customers’ favorite types of rewards, then make sure to offer what they want.
If you want to improve your skills as a data-driven loyalty manager, learn from Sara Arecco, our Head of Customer Success, in this episode of Product Espresso.
6. It Lacks the “Wow” Factor
Loyalty programs are like amusement parks. They have to be fun and thrilling across the board, but they also need one definitive spectacle that draws a crowd. Failing to have one major value proposition is one big reason why loyalty programs fail in today’s highly competitive market.
How to avoid this loyalty program problem: Partner benefits can easily spice up your existing reward portfolio for a relatively low price. High-value experiential rewards can be an effective centerpiece for your loyalty program marketing. Invites to community events and influencer parties can be just as effective rewards as physical gifts.
If you are looking to impress your loyalty program members (or give them special treatment, early access or special interest groups (VIP clubs within the program) are an excellent choice.
7. You Are Using “Fake” Gamification
Gamification can mean many things, from friend referrals to prize wheels and even arcade-style minigames. Opting for flashy but static solutions, like a reward carousel, won’t necessarily mean you’ve successfully gamified your loyalty program. If that’s the case, you won’t be able to see the bump in engagement you had hoped for.
How to avoid this loyalty program problem: Prize Wheels, virtual scratchcards and raffles are excellent ways to randomize what kind of reward members would get — and to make the experience more exciting. Social media contests where customers need to write a clever comment or share their images to win a prize are not only a good gamification feature but also increase word-of-mouth. For truly game-like gamification, consider online or offline treasure hunts, leaderboards, or even virtual games
KFC UK & Ireland exemplifies what true game-like gamification should be about. Their arcade-style minigame can be played after making an eligible order to win freebies.
8. No Members-Only Offers
When someone enrolls in a loyalty program, they expect special treatment. Most customers want more bang for their buck or to be part of an exclusive group. It is important to make members feel special through exclusive deals or rewards. Otherwise, they may turn away.
How to avoid this loyalty program problem: If you have tiers, you can combine multiple members-only offers. Investing in offer management and segmentation helps you create rewards that are region or channel-specific. Members-only rewards don’t have to be coupons or discounts — they can also be free content or invitations to exclusive community events. Mockup of a VIP club feature within a loyalty program that provides early access for 1000 points.
Did you know? Loyalty programs where you need to pay an entry fee in points to access certain benefits are called freemium programs – because they are a mix of free and paid elements.
9. You Forgot to Market It
Thinking that reward programs are a “set-and-forget” kind of thing is a huge mistake. If you don’t put any marketing efforts behind your program or don’t give it the spotlight it deserves on your website, then don’t be surprised that enrollment is low.
How to avoid this loyalty program problem: Rely on more than just a welcome gift to carry your reward program. On your website, dedicate enough space, or at least display a banner about the loyalty program — just adding it to the navigation bar is not enough. Invest in influencer marketing and encourage members to become brand ambassadors so they will promote the program in an authentic way.
Referral programs are staples of the industry, but you can still make them more exciting by turning them into a challenge! This way customers receive a greater prize, but they need to invite a set amount of their friends to earn it.
10. You Backed Yourself Into a Corner Tech-Wise
This particular loyalty program challenge usually arises for long-running programs founded on in-house development. Now counting as “legacy tech,” it’s becoming increasingly difficult for owners to add new features to an outdated platform or integrate with modern, third-party solutions.
How to avoid this loyalty program problem: Migrate to another loyalty program platform that comes with out-of-the-box modules and has established integrations. Another sign that your technology has run its course is that reward campaign management is clunky or requires coding knowledge. In this case, search for a no-code solution. Faulty integrations are just as bad as not having any integrations at all, so don’t rush the implementation phase. Antavo’s no-code Workflows module comes with a drag-and-drop editing interface where you can review how specific campaigns are executed step-by-step.
Remember, There Are No Problems With Loyalty Programs That Cannot Be Solved
When you realize that your loyalty program has one of these problems, you can do two things: either introduce a feature that solves the issue (adding gamification elements, for instance) or, if the issue is fundamental, go back to the drawing board.
Don’t worry. Revamping your loyalty program can easily lead to better results, so it’s worth the time and effort. If you want to switch to a loyalty program platform that fully supports next-gen reward programs, then our experts would be happy to hold a showcase. Don’t hesitate to book a demo or send us an RFP.
If you are looking for a guiding light on how to shape your loyalty concept, download our handy worksheet.
Zsuzsa Kecsmar is Co-founder, CMO and Head of Partnerships at Antavo. Zsuzsa is also Chief Strategy Officer and has helped lead Antavo from a startup into a scaleup. Listed by Forbes as one of Europe’s top 100 female founders in tech, Zsuzsa is a former journalist recognized by the European Commission.
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