Why Your Customer Loyalty Program May Be a Huge Failure

Last Updated Mar 23, 2011 1:32 PM EDT

ACI Worldwide, a provider of payment systems, recently released the results of a study of U.S. consumers, which shows that many retail loyalty programs leave consumers feeling under-appreciated.

According to the survey:

"the majority of American consumers (62 percent) join retail loyalty programs so they can get discounts on the things they buy most, yet only about one third of Americans (36 percent) received a reward or promotion that made them come back to the store again, and 1 in 4 (27 percent) of consumers complain they have received a reward or promotion for something they would never buy... Whether it was a reward they didn't want or a reward that was too small to take seriously (22 percent), more than 2 in 5 (44 percent) consumers have had a negative experience from a loyalty program."
None of this surprised me in the least, and it got me thinking about what I like and dislike about the loyalty programs I'm enrolled in (a mere fraction of my card collection is pictured at right). Here's what I came up with:

Among the biggest loyalty program failures are those that:

  • Ask you to pay: I love Aveda products, but boy, do I dislike their loyalty program. While paying for some pricey hair stuff last week, the clerk excitedly told me how many points I would earn -- if I paid $10 to renew my loyalty card which had apparently "expired" from lack of use. Excuse me? I'm back in the store after a long absence and you're going to punish me instead of welcoming back nicely. Big fail.
  • Offer discounts that expire in the blink of an eye: I faithfully carry and use my CVS ExtraCare card and am always thrilled when my receipt has "extra bucks" on it. But ten seconds after I shove it my wallet, it's forgotten until I come across it again month later and it's expired. Tell me, CVS, the next time I come into the store, why can't you just apply those "extra bucks" to my total and spare me those pangs of regret?
  • Don't deliver what they promise: I'm a Hertz #1 Club member but I'm beginning to wonder why. Having just received an email from Hertz that I have enough bonus points for two free rental car days, I rushed to reserve a car for an upcoming trip to New Orleans. No cars were available. No kidding. Not a single car, and no help whatsoever from Hertz in finding one. Hello, Enterprise!
  • Offer benefits that are difficult to use. This applies to most airlines. Ever try to book a flight using frequent flyer miles? Need I say more?
  • Aren't clear about the benefits the offer: My local supermarket, which is wildly overpriced but friendly and convenient, issues a loyalty card and I don't have a clue what it does for me. I'm vaguely aware that I get $5 off a purchase after I reach a certain spending threshold, but I don't know what that threshold is, and that last time I asked a cashier, I got a blank look. So, sorry guys, but you don't get to track my purchases until I know how I'm benefiting.
And the best loyalty programs:
  • Are flexible and diverse: AmEx Membership Rewards - I love 'em. They're great for travel (no blackout dates!) and you can transfer them to a number of frequent flyer programs. And they don't expire, although they do provide a constant and horrifying reminder of just how much I've spent with AmEx in the past several years. Still, I pull out the AmEx for big purchases whenever I can because I'm hooked on points.
  • Help you save money on necessities: Both Stop and Shop and Price Chopper supermarkets near my hometown in Western Massachusetts have loyalty cards that track your spending and award points toward significant discounts on gas at local participating stations. With gas prices soaring, why would I shop anywhere else?
  • Keep you emotionally tied to the company: Verizon FiOS? No thanks. I'm an Optimum Triple Play girl because my Optimum card gets me $7 movie tickets at Clearview Cinemas - the small, local movie theaters that I much prefer to big, noisy multiplexes. Because I have a positive interaction with Optimum every time I see a movie, which is pretty often, it's going to take either a huge screw-up on their part, or a very big price benefit from their competitor, to lure me away.
  • Make you feel part of exclusive club: I like getting my Lord & Taylor bill every month because it typically comes with a 15% off coupon that I can use just about any time. And I can use it on items that are excluded from the store's coupons that are available online. It eases the pain of paying the bill (a little bit, anyway) and gets me back to into the store on non-sale days when it's less crowded.
  • Have a larger purpose. I don't live in Dayton, but if I did, I'm pretty sure I'd shop at Dorothy Lane Market (full disclosure: the company was featured in my first book, Alpha Dogs). Dorothy Lane will donate $40,000 to local charities this year, and shoppers will tell the company where the money goes. When they sign up for DLM's Good Neighbor Program, shoppers link their loyalty card to one of several hundred not-for-profits, and a percentage of their purchases are rebated to their chosen charity at the end of the year. Under those circumstance, I'd probably spring for the filet mignon once in a while instead of automatically reaching for the flank.
Does your business have a successful loyalty program? As a consumer, what loyalty programs do you love? Which ones leave you cold?

You might also enjoy:

6 Ways to Stand Out in a Crowded Market
Do You Really Know How to Grow Your Company? Your Customers Do
The 7 Deadly Sins of Customer Service