19% of marketers listed loyalty acquisition at the top of their list as as a primary objective for 2017 and 57% of brands indicated they will increase their loyalty program budgets. Loyalty programs are now common among retail brands, but that doesn’t mean they’re all successful. Here are 4 reasons customers fail to or stop participating in loyalty programs, and more importantly what you can do to prevent it.
1. Overly Complicated Registration Processes:
Convenience reigns in today’s e-commerce and retail world. If your program isn’t easy and quick to sign-up for, customers will lose interest. Exhaustive registration forms and unfriendly mobile environments are a guaranteed way to drive customers away from your loyalty program before they even get started. In fact, 70% of consumers fail to sign up for a loyalty program due to the inconvenience and the time required to complete a registration process. Not only are lengthy registration forms a pain for customers to fill out, but for many customers, this can seem invasive. Loyalty programs are of course a prime source of customer data, but it’s important to build a rapport with your customers before asking them for extensive information. Initial loyalty sign-up forms should request a minimum necessary to create a profile for your customer. Over time as you build a relationship and a foster trust with your customers you can request more information. In this way, a loyalty program can be an excellent tool to collect more customer data. Create a campaign and offer customers special rewards for their participation in a survey. But, never forget to double check the mobile friendliness of your forms, no one likes spending 5 minutes trying to navigate from one field to the next.
2. Complex (i.e. Convoluted) Rewards Structures:
The objective of any rewards program is a reward. So, naturally, if the rewards structure or the communication about redemption is vague, ambiguous, unclear or complicated, customers will lose interest quickly. The glitz of rewards will lose its shine if customers can’t quickly understand what they have to gain. Chiptopia, Chipotle’s much-awaited loyalty program, is a great example of this kind of failure. Chiptopia Summer Rewards used a combination of plastic cards, QR codes, and convoluted rewards redemption logic.
It had a labyrinth structure with too many layers, too many conditions, and too many calculations. It took a decent amount of brain power to break it down and come to the conclusion that you would have to buy 11 burritos to get 3 free ones, as long as you only buy one per day within 30 days.
Not only was Chipotle’s rewards structure complicated, but it failed to communicate thoroughly and effectively with customers. Loyalty programs need to be easy for customers to understand because interest and engagement are driven by clear calls to action about what a customer can get and how to get it. Chipotle would have benefited from simplifying their rewards program and implementing more thorough communication. Utilizing targeted marketing is a great way to boost loyalty engagement. Send customers alerts when they’re close to earning rewards and notify them when their rewards are about to expire. According to Mick Burchfield, Director, CRM and Digital Marketing at Murad, sending a triggered reminder once a customer had reached a reward threshold generated a more than 300% participation rate.
3. Frequent Or Poorly Communicated Changes:
A real challenge in implementing a loyalty program is creating a program that offers novelty and excitement, without being too disruptive. It’s true that certain changes are unavoidable to maintain the appeal and differentiation of a program. But the frequency of changes may put customers in the lurch. Just when customers are getting a hang of your program’s functionality or rewards’ diversity, a sudden change may catch them off guard, and discourage their continued participation. The key to finding a balance is to maintain the integrity of your loyalty structure while finding ways to mix up the actions you’re requesting and the prizes you’re awarding. You can’t change the point threshold needed to earn rewards, but you can fluctuate the number of points you offer. Running special point campaigns such as double point events, surprise and delight opportunities, and limited-time rewards for specified purchases continuously refreshes your loyalty program and keeps your customers excited without disrupting their expectations about when they will earn their next reward. Clear and thorough communication around these campaigns is also vital to boosting engagement. After all, if your customers don’t know they can earn double points for purchases on Thursday, they won’t go out of their way to buy something on Thursday.
4. Lack of a Goal Gradient Effect Strategy:
In 1984, Locke & Latham demonstrated that when humans and other animals are closer to a goal, their efforts toward that goal increase. Kivetz, Urminsky, & Zheng put this behavior in the customer perspective by stating that humans increase effort as they approach rewards such as gift certi?cates. This is called as a goal-gradient effect. This concept that people move faster or work harder when they see a success or a finish line in front of them can be used effectively in points-based loyalty programs. By showing members that they are just a few points away from earning a reward can push them towards more purchase actions. Remember that 53% of rewards program members stopped actively participating in at least one program over the past year, with only 7% officially opting out. This happens mostly because they lose interest in the program. But putting a prospect of tangible rewards in front of them all the time through displaying customer status and frequent email communication will motivate them to stay active in the program.