A new global study has found loyalty programs are failing to engage digital consumers. Participation rates in loyalty programs are at an all time low, whilst negative feedback continues to rise (up 89% negative feedback on social media!). So why are they failing?

As it turns out, lack of reward relevance without a rigid reward structure is one of the main reasons why consumers are pulling away from loyalty programs. Consumers do not believe that what they receive in terms of reward actual gives them anything of value. If they’re earning “points” purchasing one thing, why should they then get discounts on something else that they don’t want? So many companies’ loyalty programs belong to the purchase/point category that there are actually very few companies that earnestly reward consumers for engaging with their services or products. Surprisingly, it’s the hotels and airlines who are the leaders in terms of loyalty programs that engage consumers, and (unsurprisingly) it’s the banks who are lagging behind (only 3% of banking companies actually reward customers for engaging with services/products).

Consumers are also pulling away due to overly complicated or poor customer service when trying to claim back these reward points. You can’t really blame consumers for being disenchanted with loyalty systems when businesses make them nigh on impossible to use. Companies get the bonus of retaining and gaining customers with the promise of a flashy loyalty program, and then save bundles when none of the consumers actually use it.

However in the age of digital transformation, companies can no longer get away with this kind of practice, as it is too easy for consumers to switch providers. The use of loyalty programs now needs to be integrated into the whole consumer purchase path to be of any effect; otherwise it will become redundant in the long run. In fact, companies that have basic transactional rewards-only programs (with rewards based on purchases made) tend not to last very long at all. A study by Capgemini Consulting classified these programs as ‘sub-optimal’ and discovered that 77% fail within the first two years. There is a need to reward engagement with a brand rather than just a simple transaction. The best way to do this is by “offering advanced levels of customisation. A quote from Mark Tayler (a global leader for customer experience transformation at Capgemini Consulting) sums it up quite nicely “…these tailored experiences will enrich loyalty programs and further encourage customer engagement.”

The key for loyalty programs is consumer listening. There are so many ways for businesses to do this that there really aren’t many excuses left to us to use. Social media for example, is a huge opportunity for businesses to learn about their target markets. Delivering personalised customer experience, conducting ‘social listening’ to understand customer needs, and rewarding customers for social media engagement are great starting points. These kinds of moves will see consumers become more “loyal” as they interact and develop a relationship with not only the company, but the brand itself.

https://www.marketingmag.com.au/news-c/loyalty-programs-failing-keep-digital-age/

Written by Alex