Top Loyalty Program Myths: Debunking 10 Misconceptions In Customer Loyalty

There’s a common myth that loyalty is just a promotional gimmick, but that’s far from the whole story. Loyalty is really about building deeper connections with your customers and understanding the customer journey. When used correctly, loyalty programs can nurture brand loyalty.
 
But let’s be honest, there are plenty of loyalty program myths out there clouding our perception of customer loyalty. In this comprehensive read, we’ll dive into the real world of loyalty, bust some myths, and set the record straight. Let’s get to the facts and uncover how loyalty programs really work!

Top 10 Loyalty Program Myths

Myth 1: Loyalty is an expensive affair

A lot of marketers often dread the upfront cost involved in setting up a loyalty program for their brand. However, if one looks at it closely, they would realize that the benefits outdo the cost involved in setting up a loyalty marketing strategy. If acquiring new customers is anything to go by, then retaining old customers’ drives more revenue and sales. A recent study by Bain & Company on customer retention revealed that a meagre 5% increase in customer loyalty can increase the average profit per customer by almost five times. Isn’t it a great statistic to vouch for and frame your next marketing strategy? In fact, what could in turn be expensive is trying to build a new team from scratch to create an in-house loyalty program. This wouldn’t only be time consuming exercise but it will also mean stepping into a new territory with no experience.

Myth 2: Loyalty doesn’t generate ROI

What I can be assured of when you enroll for this program? How soon can the growth be seen? These are some of the questions on top of loyalty managers’ minds when enrolling for a loyalty program. But remember, loyalty is a long-term journey for any brand. Expecting instant results from a loyalty program isn’t fair as the brand must count both tangible and non-tangible benefits that are involved in it. When a brand ventures into loyalty marketing, a new journey starts. And in this journey, the brand must constantly reinvent their loyalty program keeping abreast with the market changes. It is thus imperative to make your loyalty program appealing to your customers by innovating with newer strategies like gamification, milestone-based rewards, personalized offers, etc.

Myth 3: Loyalty is a complex setup

While there can be complex programs like a group loyalty program but a good tech partner like Capillary will know exactly how to make it work. As a brand, working with on an already established loyalty platform will help you transition swiftly. A technology partner who not only has experience but also a proven scalability to offer new benefits. Brands shouldn’t overwhelm themselves with the pressure of implementing the entire program in one go. A quick pilot run in a smaller geography to test and learn always helps to implement better in the future with different sets of products and more territories. Get in touch with our Loyalty Experts to explore how our loyalty platform can take your loyalty strategies to newer heights.

Myth 4: Loyalty means discounting

No, no, and no! Loyalty is not just giving discounts. Many brands deviated from the loyalty path as they already offer discounts. Most of the finance teams of brands strongly believe in this. As a brand, your journey and relationship with customers need to be defined first. Identify which set of customer segments need discounts and which do not. Accordingly, communicate and send targeted messages to win your customers back.

Myth 5: Loyalty is non-measurable

And the good news is that loyalty is measurable. At Capillary, our experts have created a value-delivery model known as Loyalty Delivered Sales (LDS) framework that assures up to 20% topline revenue. This scientific framework to measure the potential of loyalty programs is a robust approach designed through an in-depth study of 100+ programs from 5 industries across 20+ countries. You can read more about this in our joint whitepaper study with BCG here.

Myth 6: Well-known brands don’t need loyalty

Another loyalty myth looming in the minds of many noted brands feels their goodwill is enough to pull customers or sustain in the competitive market. However, market dynamics are such that sometimes even the most admired brands lose their loyal customers. The pandemic is one good instance, with many brand loyalists turning into the biggest brand switchers owing to the non-availability of products on the shelves. Customer loyalty comes to the rescue, preparing brands for many such situations. We live in the times of experiential marketing where building experiences is far superior to offering a slashed price. At one point, even Starbucks didn’t have a loyalty program because everyone loved the coffee but eventually the brand ventured into a robust loyalty program.

Myth 7: Gen Z don’t relate to loyalty programs

Although GenZs who comprise a major share of today’s active shoppers, love to experiment with different brands, it is equally true that this socially active generation loves rewards and offers. One of the surveys by KPMG in the US market stated that 87% of US Millennials are enrolled in at least one loyalty program and are the most actively engaged with that program while referrals work faster and better with GenZs. When done right, loyalty programs have the ability to capture this segment well with engagement-based loyalty programs that are not tied to their overall spends. Rewarding them for non-transactional elements like referring friends or family, consuming content, or writing product reviews could be a huge boost in driving Millennials and GenZs to engage more.

Myth 8: Loyalty means giving a share of your profits

Your rewards don’t always have to be monetary in nature. It could involve offering exclusive benefits to your loyal customer base like a preview of your new products or services, informational content, early access to ongoing sales, and much more. Personalized benefits like preferential shopping timeslots, new product launch events, and free product sampling could be the levers, enterprises could implement using loyalty programs. Marketers must understand that through offers and rewards, their brand either gets more sales, a new referral, a free download of the app or free reviews. As a brand, you simply incentivize the transactional behavior of your customers for their benefit to grow your brand’s goodwill and eventually make them a loyal brand ambassador. Gathering data must not be compromised or ignored. It is a two-way road, you give rewards to get rich data and insights and this will be of prime importance in a cookie-less world.

Myth 9: Satisfied customers are your loyal customers

Simply sharing reviews or spending more isn’t enough. As a brand, you must be aware of your competitors in the same space and strategize accordingly. Uncertain events like COVID-19 pandemic definitely had many consumers shifting their loyalties to other brands. No one ever imagined but it happened. Hence, as a brand you must look at your customer behavior and reward them from time to time.
 
Simply sharing reviews or spending more isn’t enough. As a brand, staying ahead requires understanding your competition and strategizing effectively. Unexpected shifts in consumer preferences can quickly change the landscape, as we’ve seen when customers switch allegiances even without major prompts. Therefore, it’s crucial to continuously analyze customer behavior and offer timely rewards to truly foster loyalty.

Myth 10: Loyalty means only earning and burning points

Having a simple earn-and-burn strategy is definitely not enough. Although loyalty has evolved, unfortunately, it is the least evolved dimension in a business’s marketing and growth strategy. There are multiple products of loyalty that brands are unaware of. The 7 types of loyalty products starting from base, personalized, tier, social, digital, dynamic and partner loyalty are cohesively driven by customer behavioral & transactional divergence. It is thus imperative for brands to continue adding more features & benefits to their existing loyalty program to drive effective results.

Put Your Loyalty Program Myths To Rest With Capillary

Now that we’ve debunked various loyalty program myths, the next step to driving customer engagement and retention strategies is building and implementing comprehensive loyalty strategies.
 
Explore how Capillary can put your loyalty program myths to rest, driving actionable insights leveraging our robust Loyalty+ Solutions. Talk to our Loyalty Experts to explore more.
 

FAQs

Are loyalty program myths really a thing?

There’s this notion amongst enterprises and customers alike that loyalty is just a promotional gimmick. These myths can stem from outdated information, oversimplified understandings of customer behavior, or misconceptions about what loyalty programs can and cannot do.

Why is it important to bust some of these loyalty program myths?

Customer loyalty has a lot going on for it with the recent boom in AI, ML, customer data analytics, and mobile apps. But it also comes with its misconceptions attracting skepticism to it from marketers and loyalty managers alike. Debunking these myths helps shift the focus from merely transactional relationships to building genuine, long-lasting customer loyalty based on value and mutual benefit.

How can Capillary put these loyalty myths to rest for your enterprise?

Capillary Intelligent Loyalty offers a suite of creative and cutting-edge software solutions designed to fully support your customer loyalty strategy. This platform places you in complete control of your business, enabling you to plan, make decisions, manage, execute, and monitor your tailored strategy. It’s crafted to meet your specific business needs, ensuring that you can build and run your loyalty programs your way.
 

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Writer, traveler, and a cold coffee addict, precisely in that order, Aditi Jindal is a storyteller. Whether it is slicing brands and their content marketing strategies or dabbling different genres of book writing; her keen interest in finding the unique idea for brands to deliver compelling stories keeps her on her toes.