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What stops customers from using loyalty rewards?

16th Aug 2017
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Businesses use loyalty programmes, free gifts and other benefits to reward customers for their loyalty – but consumer behaviour is evolving, and sometimes these programmes clash with new expectations.

We all know that consumers want a satisfying retail experience and rewards that reflect who they are and what they love. They don’t want to be bogged down with cards and forms. They don’t want to be treated like generic customer number 867,390.

And of course, we know that when they work, loyalty programmes have a significant ROI, but they have to resonate with consumers. They have to make customers want to shop with the business and have them be excited about earning their loyalty rewards.

So why don’t customers use their loyalty rewards?

Low cost-to-benefit ratio of rewards

Spend £1 get 1 point is still the way that many businesses reward their customers. On the face of it, this seems fair. If I spend £15 with a retailer, I get 15 points – if I spent £200 I’d get 200 points.

But is this rewarding? Our experience indicates that it doesn’t necessarily encourage the behaviour that the business wants (getting people to buy big-ticket items). It doesn’t take into account that customers who invest more in your business deserve to get relatively more back in return.

This widely-used reward method could mean businesses are missing an opportunity.

Offering generous rewards for higher-margin products doesn’t just encourage people to spend more money, it makes them feel more appreciated, encouraging loyalty to the brand.

Of course, businesses will use the 1:1 ratio in loyalty programmes, but it’s more likely to be a passive relationship – where the customer just happens to collect points and they do the shopping they were going to do anyway. Proactivity requires motivation, and motivation requires a different reward structure.

They know the programme isn’t really for their benefit

Successful reward programmes have the customer at their heart. They don’t assume what the customer wants, they use data generated by the customers to find out.

People know what they want from a loyalty programme, if businesses would just ask them. But many programmes are based on assumption. The result can be a set of rewards that aren’t engaging and fail to motivate the customer.

Giving customers a range of rewards to choose from, and showing how close they are to achieving them, helps to build anticipation. It also makes people feel like they are in control of what they receive.

When customers see a range of rewards that are standard for everyone they know that the business hasn’t put any real thought into what their customers want as individuals. It starts to feel more like a series of transactional promotions than a long-term reward programme. There’s no added excitement about the reward, and people find it easier to forget to claim those rewards they have earned.

The programme just isn’t engaging

Loyalty programmes require constant tweaking and refreshing to keep them engaging and relevant to the changing needs of customers.

When a loyalty programme isn’t proactive (when it just runs in the background), it’s easier for customers to forget it even exists. When the whole point of a loyalty programme is to foster engagement and long-term loyalty, that’s a problem.

The longer businesses take a hands-off approach to their loyalty schemes, the harder it can be to get people’s attention back.

People don’t think in terms of platforms

Customers think about experiences, not the tool they use to get the experience. They expect to get the same level of service on a customer service hotline as they get on social media, and if they don’t get this, they get angry.

Loyalty programme interaction works in a similar way. It should be seamless across different touch points, and available to the customer, whenever and wherever they engage with the brand.

It should be easy for customers to view their points balance in real time and redeem for rewards whether on mobile, in store or online. If it’s not, this is a significant barrier to customers using the programme.

Redemption is a frustrating process

It should never be a struggle to claim a reward. It should be something that’s both easy to do and exciting. There should be a clear balance between reward value and the time it takes to earn the reward.

If customers have to jump through too many hoops to claim a reward they have earned, or if they have to wait too long to win the reward they want, their loyalty programme experience can end up more frustrating than rewarding.

Lack of awareness

Promoting a loyalty programme is important – but so is making it easy to understand. The more complex it is, the less likely it is to be used. If a customer knows what rewards they can aim for, and when they might achieve them, they’ll be more engaged. Otherwise, there’s a good chance that they lose sight of the reason for participating.

Successful loyalty programmes start with a clear concept and strategy. They begin with a good understanding of the customer and continue to augment that understanding as the customer – and the businesses relationship with them – grows.

 

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