Why Your Loyalty Program Isn’t Working

Why Your Loyalty Program Isn’t Working

If you’ve been using a CRM-based loyalty program or a punch card to build customer loyalty, you might be sinking money into a low-ROI loyalty program. Here’s why:

Swipe Cards Don’t Work

Many popular CRM-based loyalty programs use a magnetic stripe-based card that people are supposed to carry around and swipe when they make a purchase. These are really popular at the large grocery chains, so I’ve chosen to use them as an example. I routinely drop $100 on groceries whenever I go, and for years I’ve routinely also saved a significant amount through the ‘club’ prices at, for example, Safeway or Jewel Osco. Despite this, I’ve never actually held a grocery store’s “club” membership — I’ve been using their dummy card or a friend’s phone number for years. Safeway thinks my roommate, whose number I use, loves avocados (even though he hates them) and buys both fat-free and 2% milk. Ever since I’ve known this “loophole”, I’ve used it for two reasons: I don’t want to fill out a 2-page form for a swipe card I’ll forget every other week, and I already know I don’t need to. In the meantime, Safeway’s collecting the wrong info, giving me discounts as a free rider, and fails to engage anyone in the brand. This type of loyalty program makes customers loyal to the program itself, but not loyal to the brand.

Punch Cards Don’t Work

In creating a recent loyalty industry white paper, I remember reading a quote that struck me as both incredibly useful and obvious:

“Customers who like a product enough to buy it 10 times would probably pay for the 11th purchase, too.”

So why the popularity of a punch card? Plain and simple: it’s easy to do. The key failure in a punch card is not just that it’s easily forgotten or ineffective, it’s that it does not expand a customer’s product understanding. Instead of introducing your loyal and valuable customer to something new and exciting you offer, she is going to receive something she would usually pay for in exchange for carrying an embarrassing and dog-eared punch card. This type of program gives the illusion of loyalty, but fails to create any more value for the customer or the merchant.

The bottom line here is that if you’re using a regular loyalty “program” and not seeing any results, it’s because:

  • You’re making people loyal to your program instead of your brand
  • You’re collecting weak customer data, or not collecting any
  • You’re rewarding the wrong things, and failing to expand a customer’s product line

Today’s business world means you need to be more involved and participate in a more complex method of building loyalty. You need:

  • To engage us: show us that we visit your business because it resonates with us, even if it means making your own version of Apple’s ‘Mac Guy’ for us to connect with.
  • To collect information quickly and easily: large forms create leakage; a unique key such as e-mail or phone number can be more valuable and easier to collect.
  • Reward well: understand your customers and their behavior, promote their interaction with your products and brand. It starts with being more creative with your business and how it’s portrayed.
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