Debunking 13 myths about Customer Loyalty and Loyalty Programs

marketing
June 19, 2023
Categories: Blog
Tags: Loyalty

Here’s the most common definition of Loyalty programs:

a retention strategy initiative that incentivizes customers to keep making purchases from the same brand.

Moreover, a Loyalty program can be regarded as the solution that facilitates this customer journey and effortlessly leads to brand Loyalty. Along the way to make this happen, a Loyalty program involves many steps and strategies, as best and bad practices. This explains the myths and controversies related to loyalty programs throughout these years.

Let’s take and dive and discover what the truth behind them holds, as well as some hard facts that could either verify or disprove them.

#Myth 1. An expensive affair

This has been an ongoing discussion amongst marketers, the so-feared upfront cost involved to set up a Loyalty program. However, if one looks at it closely, one will realize that the benefits outdo the cost involved in setting up a Loyalty marketing strategy, as acquiring new customers comes always at a greater cost than retaining the existing ones, with the latter ones most of the time driving more revenue and sales than the new ones. A recent study by Bain & Company on customer retention revealed that a 5% increase in customer Loyalty can increase the average profit per existing customer by almost five times. Could there be any better myth buster than this?

#Myth 2. No ROI

Good ROI and quick growth are some of the quick wins on top of marketers’ minds when initiating a Loyalty program. However, Loyalty is a long-term journey for any brand, where it must constantly reposition its Loyalty program and make it appealing to customers with newer strategies like gamification, milestone-based rewards, personalized offers, etc., and then the numbers will follow. So, there is some truth here on the absence of ROI early on, to be however confronted soon enough, as the Loyalty program starts getting some real traction.

#Myth 3. A complex process by itself

Yes, there can be complex programs like a group Loyalty program, but a good partner will know exactly how to make it work. A brand that has invested in trusting an established Loyalty platform that has the experience and proven scalability to offer new benefits should get the best of it seamlessly, instead. overwhelming themselves by the pressure of implementing the entire program in one go. Also, a pilot program to a smaller extent always helps to implement better in the future with a different set of products and a broader coverage.

#Myth 4. Loyalty is non-measurable

Thankfully, a myth today, although this could have been a fact some time ago. But not today, as Loyalty is by all means measurable, it’s only a matter of the tools and technology to select, to measure the right metrics as the most indicative ones that follow below, that will help you to either stay away from them or replace them with better ones before it gets too late:

Lifetime value
Average order value
Repeat purchase rate
Enrollment rate
Referral Rates
Net Promoter Score

#Myth 5. Big brands don’t need it

Many big brands feel that there isn’t much more to do, as they are already established in their customer’s consciousness. However, in the Digital Era, market dynamics tell a different story, with a sound example of the COVID-19 pandemic, with many brand loyalists turning into biggest brand switchers owing to the non-availability of products on the shelves. That is exactly where Loyalty steps in and makes these brands resilient in all these extraordinary situations. Also, one should not forget that we live in the times of Experiential Marketing where the right Customer Experience can either make or break a brand, unlike offering a slashed price.

#Myth 6. It’s all about discounts

Many brands already offer discounts outside the Loyalty program, so that’s a clear no here. A brand should use loyalty not for short-term sales and/or stock clearance, but rather to define the right Customer Experience first. Interacting with your customers comes first, then segmenting them to see who needs discounts or not, and then addressing them accordingly.

#Myth 7. You will need a big pool of customers to start with

It is quite obvious that a Loyalty program will see more engagement if there are more customers but, the sooner you set up your Loyalty program, the better it is for your business, as you will start accessing customer data that can be used later to personalize the offerings. But once you have successfully set up the Loyalty program, it’s important to promote it intensively across social media and any other outreach communicational assets, even through marketing emails to your customers, highlighting the merits of joining the Loyalty program.

#Myth 8. It’s not cross-generational

#Myth 9. A satisfied customer is already a loyal customer

Popular brands might feel that they have enough goodwill in the market that is enough to retain customers, but a satisfied customer can soon be a churned customer in the blink of an eye, due to competition and uncertain events like the COVID-19 pandemic. This is why brands must look at their customer behavior and reward them proactively.

#Myth 10. It’s all only about ‘’earn and burn’’

This can be true if you got stuck to a basic Loyalty program that is already a thing of the past. This is why brands need to look beyond simple ‘’earn and burn’’ Loyalty programs to multiple products of Loyalty that arise from the 7 types of Loyalty products starting from base, personalized, tier, social, digital, dynamic, and partner Loyalty, that are cohesively driven by customer behavioral & transactional divergence. Brands need to add more features & benefits to their existing Loyalty program to drive effective results and keep this myth away from becoming a sad truth.

#Myth 11. Loyalty is a profit burner

As a brand the rewards you offer to your customers need not always be monetary. Apart from monetary rewards, a brand could offer exclusive benefits to your loyal customer base like a sneak peek of new products or services, informational content, early access to ongoing sales, etc., as well as personalized benefits like preferential shopping timeslot, new product launch events, free product sampling When a brand rewards its customers; the brand either gets more sales, a new referral, a free download of the app or free reviews, etc. incentivizing the transactional behavior of your customer for their benefit to grow the brand’s goodwill and eventually make them a loyal brand ambassador.

#Myth 12. Customers don’t share their data

Customers that opt-in to a Loyalty program provide businesses with zero-party data such as transactional activity that brands can then use this data to offer personalized rewards and targeted marketing campaigns. Generic rewards will lead to a lack of engagement, so make sure you collect the data you need to personalize and target your customers to suit their lifestyles, preferences, and behaviors. With the help of AI, you could predict what your customers want before they even know it themselves. Make sure not to forget that the way to gather data must not be compromised or ignored, as this is a two-way road; you give rewards to get rich data and insights, which will be of prime importance in a cookie-less world a couple of years from now.

#Myth 13. A Loyalty program works on its own fully

Of course not as, like most business and marketing tools, a successful Loyalty program will require ongoing analysis, tweaks, and proactivity. On the other hand, this doesn’t mean that all the work is down to the brand itself, as Loyalty programs can be empowered using AI modeling and analytics software that enable the ongoing optimization of the program with advanced customer insights.

Conclusion

Many businesses still hesitate to integrate Loyalty schemes into their functions and a great part of this is due to the numerous misconceptions about their purpose, value, and efficacy, especially in the digital world.

We hope that our list has helped you cut off the noise and given you the facts you need to help you understand what they can do for your business, so you can feel more confident in finding the right Loyalty solution for our business.