The idea of customer loyalty programs is to encourage customers to come back. There are numerous case studies available on loyalty programs that validate the idea. One of the most popular, in the F&B industry, is the case study of Starbucks Rewards.
Although these case studies do an incredible job at suggesting how loyalty programs can create a lot of value for the brand, but the other side of the story remains that most merchants struggle to get it right.
This article intends to help you identify the challenges your loyalty program can face which in-turn, results in low customer adoption.
When your customers look at your loyalty program they want it to objectively answer two questions: 1—what is the quality of benefit that they’ll receive. 2—what will be the time to realise this benefit. If your program fails at either of the two, you’ll most likely struggle with customer adoption. So, let’s understand the challenges you can face or are facing:
First—”Quality of benefit” from your loyalty program
The first thing a customer would look at is the benefit of the loyalty program.
This is where you can either make or break the interest of your customers.
Now, there can be different types of benefits that you offer to your customers. We’ll look at some of the popular ones:
- Simple Point based loyalty Program
This is the most common type of loyalty program. Here you give your customers points against the transactions they make. These points can then be exchanged for some kind of a reward. If the reward is a discount, then it has to make monetary sense for your customers. If the reward is a freebie, then it has to be tempting to them. Lastly, if it is some kind of a special customer treatment, like OLA gives priority bookings through its Select program, then it should make your customers feel privileged.
- Tier based loyalty Program
These loyalty programs are generally designed with an intention to incentivise your regular customers, as you give them a clear way to climb the loyalty program ladder over time. So in case of a tier based loyalty program, you’ll not only have to give better rewards for higher tiers, but you’ll also need to make them good enough to create an excitement amongst the customers to stay long enough to reach those higher tiers.
- Cashback based loyalty Program
With the rise of mobile wallets, traditional point-based loyalty programs found a new way of packaging themselves into wallet cashbacks. The concept has picked up pretty well with the likes of Paytm, GoIbibo, Myntra, BookMyShow running these kind of cashback schemes. Though it has become one of the most customer-friendly types of loyalty (thanks to its simplicity and transparency), you still have to design it in such a way that your customers get enough cashback that’ll make them feel satisfied.
Second—The “time to realise” this benefit
This aspect defines the time to realise the benefit of the loyalty program. It is often the ignored part, but it plays an equally important role in the success of a loyalty program.
Even the most glamorous loyalty programs fail if it takes a lot of time for the customers to realise the benefits.
To explain this aspect better, I’ll share one of the things that we recently encountered, and how we solved it—
We were doing some internal analysis on the loyalty data of merchants using our platform and discovered an interesting pattern. We found that for a lot of them, who are using a cashback based loyalty program, there was a significant difference between their customer’s cashback accumulation and redemption patterns. Though they were fairly successful in getting their customers enrolled into their loyalty programs, they struggled in making their customers claim the benefits. This seemed quite counter-intuitive, so we started drilling down further to understand why such a difference existed. We saw that the customer journey of realising the benefits was so long that they fail to stick around.
For your better understanding, let’s take an example of a merchant who is running a 5% cash-back offer on every customer purchase through his website. And let’s say that the average ticket size is 250 bucks.
This means the customer journey of an avg. customer will look something like this
As you can see, it’ll take 20 transactions for a customer to realise the benefits of getting a free meal. Which is quite a lot of time. Since, most customer don’t have so much patience, it results in failure of the loyalty program.
So, we devised a way to reduce the realisation-time of the loyalty benefits for our merchants. And we call this Split-payment. It allows customers to use the cash-back credits in their wallets to pay for some part of the order (if the credits exceed the order amount, they pay nothing).
And for the merchants who enabled this feature on their platform, we have seen a lot of improvement in their customer redemption patterns (indicating better adoption).
Now, coming back to the point—No matter what type of loyalty program you are running, it is equally important to keep the time to realise the benefit short for your customers.
So today we saw the two road blocks on the customer adoption journey of your loyalty program and how you can consider to overcome them.