77% of programmes that focus on rewards alone fail in 24 months
There is a lot of talk about loyalty programmes and the success that large businesses in Australia, such as Coles and Woolworths, have had with their loyalty programmes. There is no doubt that many loyalty programmes do work, but one study found that 77% that rely on rewards alone fail.
Other studies found that:
- 80% of people have a primary department store, but only 30% participated in that store’s reward programme, and only 23% were activated
- The average American consumer has 22 loyalty cards, only 10 of which they report having used once in the last 12 months
- Businesses that spend more on loyalty programmes have, on average, a 10% lower EBITDA than businesses who spend less on loyalty programmes
- Excessively high costs
- Communicating the wrong message
- Unfocussed programmes
- Failure to create loyalty
- Loyalty programmes tend to create loyalty to the programme, not the brand
- The most effective strategies for building loyalty are trust and customer experience
To be loyal to a brand, people must trust the brand and enjoy the customer experience. Loyalty cards contribute nothing at all to the customer experience.
Loyalty cards do not actually create loyalty to the business as much as to the rewards. Consequently, if someone offers similar or better rewards, the customer will move.
RECOMMENDATION – Build loyalty through trust and customer experience. Look very critically at claims that a loyalty programme will add value to your business, by increasing loyalty.
D. John Carlson – +61 (0) 402 273 350
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