I spent the whole holiday analyzing loyalty programs and talking to their managers. I conducted 36 interviews. Below, I present the conclusions that I gathered. I focus on the question why loyalty programs don’t work and how to deal with it.

Programs burn out

Even the best loyalty programs burn out over time. To keep your customers interested, you have to refresh the formula every few years. Some managers I talked with have just introduced their third loyalty program. In fashion industry, programs change quite frequently – I’d say every 4-5 years.

Customers don’t want cards

Only programs of everyday used brands have the chance for a place in customers’ wallets. This is usually 2-3 cards. All the others have to construct their programs to work without a card. It’s a good idea to base a program on an identifier such as phone number, e-mail or name. Phone number or e-mail are obviously the best, as they allow you to communicate with customers.

Luxury brands customers don’t want to collect points

The customers of luxury brands (but also many everyday brands) don’t want to collect hundreds of thousands of points only to learn that they can’t afford the offered rewards anyway. In best programs nowadays, points are collected implicitly and the program is based on advancing subsequent levels. Customers receive additional bonuses depending on the level they are. Sometimes the levels are kept confidential and the customer is surprised with unexpected bonuses like movie tickets, a private consultant or vip sales.

Discount rates are risky

Offering your customer a discount rate seems like a good idea, but it involves a strategic threat. When a company wants to improve its results for a given quarter or month, sooner or later it will offer discounts to all its customers. It will undermine the legitimacy of the entire customer loyalty program. To avoid this, you should offer values other than simple price reduction.

A systematic loyalty program adds great value to your brand and allows you to not only generate sales directly – it also allows for learning much more about your customers and using this knowledge strategically. Managers of successful loyalty programs speak of them as a natural connector between the off-line and on-line sale. It’s a bridge for customer information that allows you 360 view of your customers.

P.S. If you are interested in loyalty programs, we will be happy to share our experience and present you our Open Loyalty platform.

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Tom Karwatka

CEO at Divante eCommerce Technology Company. Leading industry voice who believes eCommerce can improve our world. Co-founder of Vue Storefront and Open Loyalty, angel investor, and founder of Tech To The Rescue. CEO at Divante eCommerce Technology Company | LinkedIn | Twitter

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    This is interesting – not later than today I’ve an infographic with results of a survey that disclosed that mobile app in general do tend to expect and therefore welcome loyalty programs. So there is a market and there’s some evidence confirming that.

    Another thing – luxury brands’ clients might not want points, but I’m pretty sure they’d value personalization – perhaps a more conspicuous and subtle one.

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      Luxury brands – good point about personalization.