Are Loyalty Programs on Their Way Out?

It’s likely you don’t need to be sold on the efficacy of loyalty programs. But, just in case you need a little reminder, a recent study found that just a 5% increase in customer retention can boost profits anywhere from 25% to a whopping 95%. Clearly, loyalty and retention are still exceedingly important parts of your business. 

But, at the same time, another study has found that active loyalty program members—those who are engaged and regularly participate in a program—has decreased 2% over the past few years.

And while 2% isn’t a huge number, there are a couple things to note. First, that tiny little 2% can represent millions in the industry and perhaps even hundreds of thousands of dollars to a restaurant or convenience store business.

Next, that 2% only reflects the recent trends. If it’s the sign of a downward trend moving forward, it could spell big trouble for loyalty-dependent businesses.

So why are customers becoming less active in the loyalty programs they signed up for?

The first consideration is that fully 75% of people are active in at least one and at most 5 loyalty programs—and 12% belong to six or more! What that means is that you have multiple loyalty programs competing for your customer’s attention. And that also means its harder and harder to break through other brands’ messages.

Second, 43% of customers say that carrying a card is their top frustration with a loyalty program. But…there is still a significant number of people that like being “card-carrying members” of a program. Catering to one set of preferences above the other alienates a large group of your customers, no matter which medium (physical or digital) you choose.

Third—and most shockingly—a whopping 74% of customers don’t use rewards when they earn them! This is obviously a huge problem since the rewards are the main tool you can use to keep customers engaged and interested in your program.

Now, this low redemption rate could mean that the customers don’t value the items they’re earning as rewards. But there are also three other significant problems in the industry: customers don’t know that they have earned rewards, customers aren’t aware that their rewards have expired, and customers forget their cards at home and are unable to redeem their rewards.

Any number of these alone is a problem, and there’s a good chance that a customer will experience at least one at some point. And, from the customer’s perspective, if they don’t value the reward, they don’t know they have it, they miss the redemption cut off, or they can’t redeem it because they forgot the card…what’s the point of being in the program?

All of the above are significant problems and reflect the current decrease in active membership—and point toward a steady continuing decrease.

So, what can a business do? Luckily, the solutions are much easier than you might think.

We’ve put together a free, streaming webinar to dive even further into these problems and also give you step-by-step ways to overcome each and every one of them.

The 30-minute, on-demand webinar goes into exactly why each problem is on the upswing, as well as gives you the surprisingly simple tactics for addressing each one and actually using those tactics to increase loyalty and activity.

Click here to watch our free, streaming webinar, “The Problems with Loyalty Programs and How to Fix Them” right now.