Loyalty rewards programs, which have been around since the 1700s, have changed dramatically in recent years thanks to innovations in technology and the emergence of e-commerce. But not all of those developments have actually advanced customer loyalty.
Loyalty Programs Aren't Working Well...
One average, each US household belongs to 30 loyalty programs but 16 of those are inactive. A recent study by Accenture also found that 71% of people claim modern loyalty programs do not create loyalty.
According to another study, by CapGemini, a high percentage of loyalty programs today are failing: In fact, 53% of consumers surveyed said they had abandoned at least one loyalty program within the previous year. That means companies are putting money and energy into programs that aren't generating loyalty—or turning a profit. The key reasons, according to the study, are…
- A lack of reward relevance, flexibility, and value (44%)
- A lack of a seamless, multichannel experience (33%)
- Customer service issues (17%)
...But They're Important
Yet, loyalty programs are still one of the best ways for marketers to reward current customers and keep them interested in a brand and its products.
That's especially important because gaining a new customer costs 5-25 times more than keeping an existing one, according to Frederick Reichheld of Bain & Company.
In short, marketing dollars are best spent on nurturing current relationships with known customers.
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