The main reasons why customer loyalty programs fail
Customer loyalty programmes are an important part of modern marketing strategies. They offer companies the opportunity to build long-term relationships with their customers and strengthen their loyalty.
However, despite their potential benefits, many of these programmes do not lead to the desired success. In this blog post, we therefore take a look at the most common reasons why customer loyalty programmes fail and how companies can avoid common pitfalls. We also give examples of how to do it better!
Problem #1: Lack of clarity and targets
A common reason for the failure of customer loyalty programmes is the lack of clear objectives and a well thought-out strategy.
Without a clear idea of what the company wants to achieve with the customer loyalty programme, there is a lack of direction. Companies need to know exactly which KPIs (key performance indicators) they want to achieve with their customer loyalty programme.
Should it increase customer loyalty, boost sales, increase the frequency of store visits or provide valuable customer feedback? Perhaps a combination of several factors?
It is also important to clarify which key performance indicator takes centre stage or which goal should be achieved first and foremost. An example of this would be increasing the shopping basket value of returning customers by 10% or a higher frequency in shops and branches in the comparison period.
Only then can targeted optimisation take place. In any case, clear goals are the first step towards a successful customer loyalty programme!
Problem #2 - Poor design and complicated structure
Another common reason for the failure of customer loyalty programmes is their poor design or overly complicated structure.
If a programme is too complex or difficult to understand, customers are likely to ignore it. A user-friendly design is crucial in many ways: customers should be able to easily understand how the programme works and what benefits they can derive from it.
Ideally, the customer loyalty programme should be so simple that the key added value - rewarding loyalty to the company - can be achieved in just a few steps.
Long, complicated registration processes are often problematic. If too many data fields are entered, many prospective customers drop out, cancelling the registration process and only returning in the rarest of cases.
A best-practice example would be a simple login in an app with just a few taps and little data entry, a subsequent QR code scan that generates points in the customer account and an easy way to exchange them for high-quality rewards.
Problem #3 - Inadequate incentives and inferior rewards
The attractiveness of the rewards offered is a critical factor in whether or not it is worthwhile for customers to use a loyalty programme.
If the rewards are not attractive enough, customers will have little motivation to participate in a loyalty programme. Incentives must therefore be valuable and relevant to customers. Ideally, there are upstream analyses that find out which rewards and incentives many customers would find attractive.
A branded biros or a coffee mug with the company logo on it will not ensure that customers see clear added value in the customer loyalty programme!
Best practice examples here are voucher campaigns or high-quality merchandise such as drinking bottles, items of clothing or other industry-specific products from the company's range.
VAMED Vitality World demonstrates this in its own app: In addition to vouchers and discounts, points collected by spa visitors can be redeemed for massages, free admission or even free overnight stays, for example.
Clear added value for customers who use the customer loyalty programme. Find out more in the VAMED success story:
Problem #4 - Lack of personalisation
One size rarely fits all, and the same principle applies to customer loyalty programmes. Nowadays - in the age of the internet, artificial intelligence, information overload, etc. - customers expect personalised offers and rewards.
A lack of personalisation can lead to customers feeling poorly addressed or not addressed at all. By using customer data, companies can develop customer loyalty programmes that are tailored to the individual needs and preferences of their customers.
If, for example, a vegetarian is lured in with the latest variety of Leberkäs, it goes without saying that the programme will be unsuccessful...
However, if you turn the tables, you can generate clear added value with targeted, personalised messages - for example, via push notifications sent directly to the consumer's mobile phone.
Problem #5 - Poor communication of the customer loyalty programme
Effective advertising and communication is the backbone of a successful customer loyalty programme. Customers must be actively informed about the customer loyalty programme on offer and its attractive, high-quality benefits. If no one knows that there is a great new programme with exciting rewards, no one will use it.
Poor communication can lead to customers either not knowing about the programme or knowing about it but not understanding it. Companies should therefore use different communication channels to ensure that customers are informed about all aspects of the programme.
L'Osteria is leading the way: The catering giant is promoting its new customer loyalty app - the L'Osteria Amici Club - in its restaurants with napkins including QR codes for download, with displays at the entrances and with flyers and posters. L'Osteria also has a very strong digital advertising presence.
Problem #6 - Technical difficulties in the background
Technical problems can significantly affect the user experience and cause customers to avoid the programme.
Poorly functioning apps or websites can be frustrating and reduce participation rates. Companies should ensure that the technical aspects of their loyalty programme are running smoothly and are regularly maintained to minimise technical difficulties.
To put it in a nutshell: A customer loyalty programme should always function smoothly from a technical point of view. However, this is not the "whole rent", but merely the basis for its use.
Maintenance, app updates or simply extensions with new features should be carried out regularly and without long waiting times for app users.
Problem #7 - Lack of integration into other marketing strategies
Customer loyalty programmes should not be viewed in isolation from other marketing strategies! Without seamless integration into the company's overall marketing strategy, they can be isolated and ineffective.
The holistic marketing and presentation of customer loyalty programmes is crucial, as is the added value that can be generated for the entire company if they are successfully implemented.
A dedicated loyalty programme should be considered as part of a comprehensive strategy that aims to improve the overall customer experience and strengthen the customer relationship. A customer loyalty programme as an isolated solution will not help in the long term!
Problem #8 - Costs too high for the company
A customer loyalty programme can be costly, especially if the costs of implementing and maintaining the programme exceed the benefits achieved.
Companies need to ensure that the programme is sustainable in the long term and that the cost-benefit balance is positive. Careful budgeting and monitoring of programme costs is essential.
Pre-defined KPIs are crucial for measuring the success of customer loyalty programmes, because: You can't improve what you can't measure. You can find out more about this topic in our blog post:
Problem #9 - Lack of analysis and customisation
Another problem is the lack of analysis and adaptation of your own customer loyalty programme. Without regular analysis of programme data and appropriate adjustments, a customer loyalty programme can quickly become outdated and lose its effectiveness.
Companies should continuously monitor the performance of their programme and make adjustments based on their findings to ensure it remains relevant and effective. As previously mentioned, this requires the right KPIs.
Problem #10 - Lack of employee commitment
Employee engagement is crucial to the success of a customer loyalty programme. If the workforce doesn't understand or get behind the programme, it will be difficult to motivate customers.
Training and regular updates for employees can help to boost their engagement and ensure that they actively contribute to promoting the programme.
At Austria's largest hairdresser KLIPP, this philosophy is actively practised: all employees are not only familiar with the app, but also know about the benefits and rewards and actively promote them in the branches. This is complemented by offline and digital advertising materials.
Customer loyalty: Many possible pitfalls, but all the more opportunities!
Customer loyalty programmes can be an effective way to strengthen customer loyalty and increase sales. However, there are many pitfalls that can lead to failure.
By avoiding the mistakes mentioned above, companies can significantly increase the probability of success of their customer loyalty programmes.
Clear objectives and measurability of these are basic prerequisites for success. Innovative customer loyalty programmes have a solid technical basis, are personalised and easy to understand. Above all, however, they come with clear added value for users.
Regular analyses and improvements to a customer loyalty programme as well as a well thought-out communication strategy and employees who stand behind and support the programme are also key success factors.
If these aspects are taken into account, customer loyalty programmes can develop their full effect and be of great benefit to both the company and the customers!
