There are few things more frustrating for a brand than dedicating time and resources into an endeavor only to watch in disappointment as it fails to deliver an ROI. Or worse, creates internal turmoil, customer dissatisfaction, and other issues that now need to be cleaned up.
While you may have been drawn to a loyalty program to raise retention and boost your bottom line, the unfortunate reality is that so many brands never see theirs gain traction. So, why do loyalty programs fail, and how can you prevent yours from becoming a part of the statistic?
There are quite a few common culprits. It could be a disconnect between the rewards you’re offering and what customers actually want. We’ve also seen many brands do a poor job of highlighting their program so customers don’t even know it exists in the first place.
From overcomplexity to unrealistic goals, poor segmentation, and more - we’ll highlight all the reasons why loyalty programs fail so you can avoid these pitfalls yourself. After all, Rivo has helped thousands of brands build successful loyalty programs - we can do the same for you.
The brands that leverage our solutions see up to a 52x ROI, 4% improvement in Rivo-driven revenue, and a 3.1x repeat purchase rate. Discover why setting up your Shopify loyalty program through our platform is the #1 approach today!
Why do loyalty programs fail?
We want to be clear - loyalty programs are one of the most powerful tactics a brand can implement to improve profitability given the cost of acquiring new customers. It’s far more cost-effective to engage existing customers and encourage repeat purchases, after all.
These programs don’t just deliver a tangible ROI, though. They can also help grow your business by turning your most loyal customers into your brand’s biggest advocates.
So why do loyalty programs fail? It’s not because the techniques themselves are ineffective - rather, they’re not used properly. We’ve dug deep into the data and uncovered 8 reasons why loyalty programs fail.
The original goal was unrealistic
Sometimes the loyalty program is only considered a “failure” because a brand didn’t achieve its goals through it. But the question is, were those goals feasible in the first place? Most of the time, they were not.
For example, it’s not realistic to expect to double customer retention within a month without considering the existing customer base, behavior, or resources. We encourage brands to set SMART goals for their loyalty program - specific, measurable, actionable, realistic, and timely.
Otherwise, it’s all but inevitable that you will become frustrated by underperformance, leading to a reduction of the resources allocated to the program or scrapping it altogether.
There’s nothing wrong with having lofty goals, but give the program a legitimate chance. A 10% improvement in retention over a six-month period is still a success in our book!
The program lacks an understanding of customer behavior
Even though they all share the common trait of supporting your brand, your customers are a diverse group of people. They should be treated as such. Unfortunately, though, the vast majority of brands implement a cookie-cutter approach to loyalty.
Without an understanding of how customers behave - whether they prefer immediate rewards or longer-term goals, personalized offers, or points for non-purchase activities - the program won’t resonate. And if it doesn’t resonate, customers won’t participate.
We suggest taking the time to analyze your customer base - better yet, poll them directly. What sort of rewards are they most interested in - discounts or exclusive experiences? Use data to tailor the program to your audience's preferences.
Customers aren’t aware of the program
How can you expect customers to participate in something they don’t know exists? Lack of visibility and education is one of the most common reasons why loyalty programs fail.
It’s not enough to mention the program in an onboarding email, or in a little banner at the top of your website. You should be screaming about it from the rooftops and encouraging customers to sign up at any possible touch point - email, website, socials, etc.
Your loyalty program should have its own dedicated landing page that you can direct customers to for more information and the next steps for getting started. We make this easy at Rivo with an intuitive page builder that anyone can use to create a functional, on-brand front-end experience.
The program is complex and overwhelming
Maybe your customers know you have a loyalty program but the complexity of signing up or redeeming rewards scares them away.
Many brands make the mistake of forcing customers to jump through hoops to get started or take advantage of the program. You need to reduce friction!
Allow customers to sign up in just a few clicks and offer a few easily attainable rewards early on to get them excited and bought into the program.
Poor segmentation leads to a lack of personalization
We touched on a lack of personalization as a common cause for failed loyalty programs earlier, and we see many brands cutting corners when it comes to segmentation.
These loyalty programs are doomed from the start because they don’t speak to the individual needs, experiences, and preferences of different customer segments.
There are a number of ways you can segment your customers - RFM segmentation (Recency, Frequency, Monetary value) or lifecycle segmentation are great starting points for creating personalized experiences.
From there you can tailor your messaging and reward systems to those specific groups. For example, you might offer first-time buyers a welcome bonus to encourage a timely second purchase. Meanwhile, you might reserve more exclusive perks for VIP customers.
The rewards are too difficult to attain
If the process of attaining rewards seems insurmountable to customers, they might not be motivated to ever start. Forcing customers to spend thousands of dollars to earn a $10 reward is a bit of a slap in the face. It will discourage participation.
This is why it’s worth offering low-hanging fruit for your customers early on to make it worth engaging with the program. You can still save the more enticing rewards for customers that show loyalty over time. Balance immediate gratification and long-term incentives.
Brand incentives don’t align with customer rewards
You probably have your own reasons for starting or bolstering your loyalty program. It could be increasing sales across the board or pushing specific products, growing a certain social media channel, re-engaging a dormant customer segment, etc.
There are countless reasons to invest in loyalty programs. But if you focus too much on your goals and not delivering value to your customers, the program won’t be the smashing success it otherwise could be.
A common mistake is offering rewards that only benefit the brand, like discounts on slow-moving products or services the customer doesn’t value. Failing to provide meaningful incentives can make customers feel unappreciated, leading them to abandon the program altogether.
That doesn’t mean you can’t use the program to your advantage - you just need to prioritize mutual benefits for you AND the customer. Speaking of which…
The program focuses on the wrong type of rewards
It’s easy to assume you know what your customers want in a rewards program. Surely they just want discounts on their purchases, right? Not necessarily. Some customers are more motivated by exclusivity - like early access to the next product drop.
It’s important to do your due diligence and think carefully about what your customers actually want. This will likely vary from segment to segment, which goes back to the importance of properly categorizing different customer groups.
From the brand’s perspective, make sure you’re focusing rewards on the behaviors that matter most. If repeat purchases are the goal, offer points or incentives that encourage additional sales. If you’re looking to build engagement, offer rewards for referrals, reviews, or other non-purchase activities.
Avoid these pitfalls and set yourself up for a successful loyalty program with Rivo!
Knowing why loyalty programs fail empowers you to avoid the common pitfalls. But the specific platform you use to create the program also influences how successful it is. That’s why brands choose to build on Rivo.
Whether you’re trying to create a thriving loyalty program that increases retention and profits or a Shopify referral program that lowers your cost of acquisition (CAC), Rivo can help. More than 7,000 brands trust our solutions and you can too. See how we stack up to the competition:
Or, get started today and see for yourself what’s possible with Rivo.
