How many loyalty cards do you have?
Go ahead and check your wallet. I’ll wait. (I have 9).
While I like to think I’m special, that’s exactly the number that most U.S. adults have, according to research from Forrester.
Now how many loyalty programs do you think the average household belongs to? Would you have guessed the average U.S. household belongs to 29 loyalty programs? That seems like a lot, right?
You would think that with over 3 billion loyalty program memberships out there in the U.S., things would be looking great for retailers, but that’s not necessarily the case.
Do Loyalty Program Memberships Benefit Retailers?
Out of all those loyalty memberships, studies show that those households are active in just 12 of them. What happens to the other 17 membership cards? They probably just sit around and collect dust.
While consumers do tend to use their favorite and most valuable loyalty programs, the other programs tend to fall by the wayside.
Retailers are seeing more incremental revenue and engagement coming from members who do use the programs, but why aren’t more people taking advantage of and using loyalty programs in general?
Loyalty Program Members Are Tired
According to a recent survey, 77% of all consumers interviewed admitted they now retract their loyalty more quickly than they did three years ago. With that quicker retraction, retailers are now prone to missing out on those valuable customers that provide brand advocacy and increased purchasing.
So why are they retracting so quickly?
Say hello to loyalty fatigue, a condition that occurs when members just don’t see that much value in their loyalty programs.
The causes vary, but typically members lose interest because they either don’t understand the benefits, or the incentives aren’t worth the purchases they must make to get them.
How many times have your coupons expired? How many times have you left your membership card in another wallet? How many times have you been offered discounts that just aren’t that good or unique?
Many people don’t even sign up for loyalty programs in the first place for the reasons above. The present state of loyalty is bleak and that’s why we need a better program.
We need a program that is immune to loyalty fatigue.
The Prescription To Cure Loyalty Fatigue
Traditionally, loyalty programs have always been focused on acquisition. While we all need to attract new customers, why aren’t we thinking more about retention?
Amazon has proven that their Prime members are much more valuable than non-members.
Once you’ve gotten a customer into your loyalty ecosystem, how do you keep that customer engaged?
Here are five treatments that when used together can beat loyalty fatigue.
1. Differentiate
Doesn’t the fact that consumers belong to so many different loyalty programs say something in of itself?
Most free programs are super simple to sign up for, but there is little that sets them apart from each other. If you implement a loyalty program that is like that of your competition, your customers will simply be swayed by price and not your loyalty program itself.
Points programs are repeat offenders here. They simply reward members for spending money, but this is not true loyalty.
Requiring members to spend a lot of money over time for small monetary rewards does nothing to discourage your customers from shopping elsewhere.
In fact, research has shown that roughly one-third of each retailer’s loyalty members cross-shop at another key competitor within the same channel, and nearly half of consumers believe that it would be easy to replace a retailer’s loyalty program with a competitor’s program.
On the other hand, if your program offers something valuable that really fits in with your customers’ lifestyle, they will continue to be invested in your program.
2. Offer Real And Relevant Value
A loyalty program is only as good as what it offers. Think outside the box. Rather than forcing someone to spend a lot to earn points on future purchases, what are some other rewards that people might find value in right away?
SELF used our platform to launch SELFStarter, a program geared towards fitness and beauty-minded consumers. Members regularly receive meal plans and cash back offers on health and fitness related purchases which directly relate to their interests.
Look at Amazon. Prime offers not only fast, free shipping to its Prime members, it also gives them access to shows, music, movies, and more and the benefits are constantly expanding.
What rewards could you offer your members to enrich their lives other than points or a free sandwich after they buy nine?
Really great loyalty programs focus on their customers first and foremost and offer real value that is relevant to the brand.
3. Close the Experience Gap
In the age of the customer, there is no place for disjointed brands.
Your customers are constantly evaluating your brand to determine whether it’s worth their money, support and time. It’s more important than ever to offer a seamless experience across all channels.
Because of that, it’s important for companies to realize that that their loyalty programs need to embody the best of the brand across all touch points, not just onboarding.
Ninety percent of consumers expect that their experience with a brand will be similar across all platforms and devices. They expect a seamless transition between desktop and device-native applications through color, flow, and overall quality.
This takes a step further than just UI/UX design, marketing, and social.
Have you ever thought about how customer service plays into the omnichannel experience? This is especially important if you’re working with a loyalty partner on customer service and not managing it in house.
Whether by email, phone, or yes, even snail mail, your program members should not doubt that they are talking to your brand.
Whoever is answering the phone must be properly trained to stay on brand even if they’re in a remote call center. And hopefully they’re answering most of those calls in 30 seconds or less.
Track all of these interactions with the brand so that you can gather meaningful metrics about your program members.
4. Collect Data… And Use It
You must put your customers at the center of everything and you need data to do that.
How did your customers find you initially? When do they visit your website and from where? Do they behave differently on different channels?
As soon as someone starts interacting with your brand, you can start collecting that data. If you have a great loyalty program that you’ve enticed them to sign up for, you can start collecting valuable data about your best customers.
A lot of marketers collect data but fail to apply it. GameStop does an excellent job with this, however.
Their premium loyalty program, PowerUp Rewards, has more than 40 million members and those members drive three times the sales of non-members.
The data acquired from the program is used to drive personalized recommendations. It has even helped the company decide the most effective demographics for new store openings.
5. Build a Paid Loyalty Program
Paid loyalty programs naturally fight the causes of loyalty fatigue.
When members pay to join a program, even a minimal amount, they are immediately more invested than someone who joins a free program. That means they’ll be less likely to shop with a competitor and they’ll be more engaged because they will want to make sure they are getting their money’s worth.
Let’s look at Amazon Prime. Psychologically, Prime members want to make additional purchases to justify the membership cost.
Just as importantly, Amazon has made sure they are committed to running a program that’s increasingly valuable to their members. In this way, their paid program is very much differentiated from other retailers.
Of course, with more valuable benefits come more costs. While free program rewards are usually considered costs, and have even earned loyalty programs the reputation of margin killers, this isn’t true of paid loyalty programs.
A paid premium loyalty program, like Prime, creates a steady additional revenue stream which can be used to enhance member benefits continually.
This also equals better data. Just like in the GameStop example above, more engaged customers provide more data which is used to drive business decisions.
As a result, Amazon Prime members spend $1300 per year as compared to non-members who only spend $700.
This shows just how valuable a paid loyalty program can be as part of your overall marketing strategy.
Don’t Succumb To Loyalty Fatigue
Competition in the retail space is increasing every day. At the same time, customer loyalty is decreasing.
Create a loyalty program that stands out from your competitors and offers real value to your members. Close the experience gap and collect great data to drive your business. Consider all of the benefits of a paid loyalty program.
Make it your priority to beat loyalty fatigue.
If you would like to discuss loyalty fatigue and how to cure it, contact us anytime. We’d love to hear about your experience!
Paul Wolfer
Paul is our Senior Manager, B2B Marketing. He works closely with the leadership team on strategic positioning, messaging and branding. When he's not posting on LinkedIn or working on the newest data study, he can usually be found adventuring to breweries or attempting to learn a new song on his guitar.
