Skip to content
  • There are no suggestions because the search field is empty.

8 Loyalty Program Pitfalls to Avoid

8 Loyalty Program Pitfalls to Avoid Article Featured Image

Good intentions pave the way for marketers building and launching a loyalty program. Unfortunately, without loyalty expertise and proper planning, brands often make mistakes that put them at risk of falling short—both in the eyes of customers and on their return on investment.

A successful loyalty program offers a brand many benefits, including greater customer engagement, incremental revenue, and increased customer lifetime value. Customers also value loyalty programs. In fact, in a recent survey by Runa, a global digital payment system, an impressive 90% of respondents said participating in rewards programs enhances their overall brand experiences.

To set up your loyalty program for success from the start, avoid these eight common pitfalls.

ROI   Pitfall 1: Take a short-term view of ROI

Building a program that succeeds in the long term demands a significant up-front expenditure. Return on that investment is rarely immediate—it takes time to build as the program matures. Understanding the lead time of program rollout, from launch to profitability, is critical as you develop your program roadmap.

Focusing on costs rather than ROI is a common mistake. Before launching a program, it’s critical to set ROI expectations. In other words, establish internal alignment on when and how you’ll measure success—i.e., what specific metrics you’ll apply and at what intervals.

Learn more about how financial modeling can help forecast investment return. 

Awareness   Pitfall 2: Neglect program awareness

Like a tree falling in the forest with no one there to hear it, if you launch a program and your customers don’t know about it, did a program actually launch? Investment in ongoing, relevant, and preference-driven communications is imperative to driving program engagement and member acquisition.

As part of a rollout strategy, develop member lifecycle communications—specific to the program and integrated within the brand—as part of your short- and long-term marketing plans. Find cross-channel opportunities and integrate the loyalty program within all your brand channels—including at physical locations, in social media, and in your digital ecosystem—to generate customer awareness and drive program engagement.

Marriott does this exceptionally well with its loyalty program. Marriott Bonvoy is prominently featured on the brand’s website, where the program benefits and joining how-tos are clearly displayed. Additionally, benefits are shared at every customer touch point, both digitally and in person at Marriott hotel properties. Members receive ongoing and frequent communications that encompass program updates, special offers and promotions, and inspiration for travel destinations that are highly personalized to each member’s preferences and habits.

member emotion   Pitfall 3: Fail to connect with members’ emotions

Earning and redeeming rewards are the primary ways most programs incentivize customers, but also key are more meaningful emotional connections.

Of course, you want members to redeem for rewards, fueling transactions that will increase revenue. However, if your rewards program doesn’t offer members connections beyond price, it’s unlikely they’ll stick around when a competitor matches or beats it.

Rather than offering a cookie-cutter program with standard promotions, surprise and delight members with personalized rewards, and build upon the affinity your customers already have for your brand. Embed this emotional connection into each communication, interaction, and aspect of your program to deepen brand devotion.

To illustrate:

Lululemon is a brand known for connecting with its customers. In addition to a strong consumer membership program, its Sweat Collective is exclusively for fitness professionals. Pro members are asked to provide feedback on products and designs, and to attend special in-store experiences and community events like yoga classes. These opportunities reinforce community and connection, and are in addition to the robust 25% discount members receive. Sweat Collective is a notable example of how a program with emotional connection at its center can increase engagement and loyalty. 

alignment   Pitfall 4: Overlook alignment between your brand and members

Best-in-class programs unite brand purpose and solutions for customers’ unmet needs. Start by digging deep into customer data and research to identify opportunities for your loyalty program to make the biggest impact with customers.

In addition, all employees—from in-store associates to those in the C-suite—must understand how the program works, be able to articulate its unique benefits, and act as brand stewards for the program. 

To illustrate:

PetSmart does an excellent job aligning brand values within its loyalty program. Every PetSmart Treats communication speaks directly to the pet parent and creatively delivers on brand purpose and personality. The program offers value for each pet parent beyond the register by celebrating pets with a free surprise on their birthday and the ability to redeem points for services like grooming, doggie day camp, dog training, and PetsHotel stays.

sameness   Pitfall 5: Settle for sameness

Nearly every major brand offers a loyalty program, and in recent years, many small companies have launched programs as well. Unfortunately, the sheer number of loyalty programs has created a sea of sameness with many run-of-the-mill, transaction-based programs offering discounts and uninspired rewards. A truly compelling program value proposition requires a unique and meaningful experience only your brand can deliver.

You also can’t “set it and forget it.” The rewards and perks your customers valued most last year may not be the ones they crave now. Because both the economy and consumers’ needs are ever shifting, a successful loyalty program must evolve. Right now, despite some positive indicators, the economy feels unstable to many consumers. In a 2023 survey, 60% of rewards participants said they plan to rely more on rewards to help offset rising costs and economic uncertainty in the next 12 months. This should signal to brands to reevaluate how programs can provide value to customers and retain them in the near future.

To illustrate:

When Amazon Prime implemented two-day shipping for members as its core benefit, it turned e-commerce upside down. By offering a compelling, first-of-its-kind benefit, the mega e-commerce retailer changed consumer expectations, and many shoppers made their go-to for immediate shopping. Amazon continued to innovate with Prime Day—an annual July event that offers members-only deep discounts on select merchandise. Once many competitors followed suit with fast member shipping, Amazon moved from standard two-day shipping to one-day shipping in 2019.

Not every brand will offer an industry-changing differentiator, but it’s crucial to update your program to meet customers’ current needs and preferences. Tap into your brand’s unique offerings and strengthen loyalty with your customers by delivering something competitors can’t easily replicate. 

alienate   Pitfall 6: Alienate members with unappealing (or unattainable) rewards

If customers don’t find your program rewards or benefits appealing, they likely won’t sign up in the first place. But if you win them over initially, once enrolled, they’re likely to disengage if they perceive it takes too long to earn a reward. According to a recent poll, 57% of members in the U.S. have abandoned a loyalty program because meeting the requirements to earn a reward felt unduly lengthy.

A successful program strikes a balance with appealing, attainable rewards while maintaining long-term financial feasibility and scalability.

To illustrate:

Dunkin’ Rewards offers appealing and easily attainable rewards. The first reward is earned after a new member spends just $15. Loyal members who visit a dozen or more times in a calendar month earn at a higher rate. To add to the appeal of rewards, Dunkin’ offers seasonally driven member exclusives and partnership offers.

data   Pitfall 7: Disregard data

To create a program that provides lasting value for your organization and your members, your brand must understand customers’ preferences, behaviors, and values. Use data and research to inform and validate your program structure and evolution. If you’re launching a new program, a pilot launch allows you to gather data and test the program’s value proposition prior to a large-scale launch.

The simplest way to gather data from your customers is simply to ask for it. Interactive communications and surveys provide insights and improve understanding of customer preferences and behaviors. If you ask your customers to provide this information, be transparent and share with them how you’ve applied their feedback to make the program better.

engagement   Pitfall 8: Create barriers to engagement

Whether they’re interacting with your brand in real life or digitally, customers expect to easily engage with your program. In the digital world, your technology platform must be seamlessly integrated and provide easy-to-navigate experiences on desktop and mobile. Programs with easy user experiences—especially those that involve earning and redeeming—succeed. When sourcing a loyalty technology platform, consider the following:

  • How does this technology impact internal timelines for executing and integrating timely and relevant reward opportunities?
  • Will this platform work well with your existing marketing technology?
  • Which teams maintain the technology, and how is this prioritized within your organization?
  • Are you finding ways to break down silos and inefficiencies?
  • Will this platform work with your program road map over the next three to five years? 

Building, launching, and sustaining a successful loyalty program is a powerful way to engage consumers and create lasting, devoted brand enthusiasts. Avoiding these eight common pitfalls will help you design and curate your program for long-term success while creating ongoing value for your brand and your members.

Emily Perry is associate director, Business Development, for The Lacek Group, a Minneapolis-based data-driven loyalty, experience, and customer engagement agency that has been delivering personalization at scale for its world-class clients for more than 30 years. The Lacek Group is an Ogilvy company.