Poor engagement, high churn, low enrollment rates—what are the key warning signs of a struggling loyalty program? In this post, we'll explore these indicators and offer ways to address them.
From the outside looking in, a floundering loyalty program might be easy to spot. But for those within the organization, the signs can be subtler. After all, loyalty programs seldom make an abrupt transition from full sail to a shipwreck. Instead, they reveal gradual trends – early warning signs – that the eagle-eyed loyalty manager must watch out for.
Each loyalty program is unique and may not have the exact same “symptoms” in the same way an illness might. But if you face one or more of these signs, it’s time to switch things up.
1. Low engagement rate
A loyalty program’s engagement rate is the ratio between members who are enrolled in the program and the members who earn or redeem rewards. In other words, it’s the number of members that are actively engaging with the program.
Why is this an indicator of a struggling loyalty program?
If the engagement rate is low, it’s a sign that members who are enrolled in your loyalty program don’t see the value in participating in the program. The reasons? Well, it depends. The rewards may lack depth, the redemption processes might be cumbersome, or engagement avenues within the program could be limited.
When customers assess the value of a loyalty program, they compare the perceived benefit of the product or service it provides with the cost of obtaining that product or service (Kumar & Reinartz, 2016). If the value that your loyalty program provides isn’t tangible to your customers, it may hurt your engagement rate.
Remember that the only value that matters to your customers is that which they can perceive. Even if your loyalty program is proven to demonstrate value over time, if customers can’t reach this value, they’ll stop engaging with the loyalty program entirely, rather than complain about the program not demonstrating value.
What can you do about it?
This can be tricky if you don’t know your customers well. Fortunately, Web3 is opening up new possibilities for getting to know your customers and providing them with rewards that they actually want. Web3 rewards expand beyond just discounts to experiences, early access to products, community access, and other benefits personalized to your customer’s interests. Check out this short blog post on Web3 loyalty programs to learn more: What is a Web3 Loyalty Program? (A Jargon-free Answer.)
2. Negative customer feedback
Customer feedback can be given either directly to a company or through public review channels or social media. This feedback is directly tied to the public perception of a brand and its loyalty program.
Why would negative customer feedback suggest a struggling loyalty program?
Customer feedback is hugely important to prospects. Today, 98% of consumers feel that reviews are an essential resource when making purchase decisions. Consumers are adept at quickly evaluating the public perception of a brand’s product or service to decide whether or not to make a sale. This applies just as much to products and services as it does to loyalty programs. If a loyalty program has any common complaints, your customers will gladly voice these issues.
Remember that these complaints are valuable and should not be ignored or silenced by your brand. If you set out to improve your loyalty program, common customer complaints should be one of your top priorities to address. Customers providing feedback is a sign that they care about your brand and want to engage with the loyalty program more. Incorporating this valuable feedback into your loyalty program improvements will result in your customers appreciating that your brand took the time to consider and listen to their feedback. To this end, consider building a brand community to encourage two-way communication between your brand and your customers.
What can you do about it?
Prioritize engagement marketing.
Engagement Marketing: Developing a two-way conversation between your business and your audience to create and maintain meaningful interactions.
You can take advantage of Web3 tech to build the infrastructure of an exclusive community for your loyalty program members. Brand communities are designed to combat many of the issues that traditional marketing fails to solve, with the main goal being customer retention. Beyond sharing valuable feedback with your brand, a community space can be a place for your customers to connect and feel a sense of belonging.
3. Low market visibility
Market visibility, in relation to loyalty programs, is how aware your customers and the market are about your loyalty program and its benefits.
Why would low market visibility be related to a struggling loyalty program?
The quality or value of your loyalty program is ultimately irrelevant if your customers don’t know that your loyalty program exists. When 84% of customers are more likely to visit retailers that offer a loyalty program, it’s vital that your loyalty program is visible and accessible to your customers.
What can you do about it?
Proactively talk about it. And set up a referral program.
Visibility can be improved through strategic marketing and advertising. Some brands also provide referral incentives for existing loyalty program members to invite their friends to join the loyalty program.
4. High churn rate
The churn rate is the rate at which your loyalty program members exit the loyalty program or stop engaging with it altogether. While some churn is natural, excessively high rates spell trouble and could be the final straw. Ideally, you should be able to pick up on issues with your loyalty program before your customers start to nope out of there.
What does a high churn rate have to do with loyalty programs?
Retention links closely to loyalty. Not all customers will join your program, but retaining them increases the odds they will. If many are exiting shortly after joining, your program might be overly complex or intimidating.
What can you do about it?
Simplify your program. And offer better rewards.
Web3 can help solve this by simplifying the membership and mechanics of your program. With Web3's smart contracts, you can auto-distribute rewards based on specific conditions, catering to individual customer preferences and purchase behaviors.
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