Loyalty programs began to harm brands. How to avoid it

Customer loyalty programs are believed to provide tremendous benefits to a brand: its members are more likely than other customers to follow a chosen brand on social media, visit its website or store more often, regularly purchase goods and services from it, and recommend family and friends.

But a new study by Wharton School professors has highlighted an important flaw in loyalty programs. When loyal members are faced with service issues – shipping, returns, out of stock, and the like – they become far more frustrated than non-member customers. Since they make purchases from the brand more often than other, occasional and casual buyers, then, accordingly, they face these problems much more often. The pandemic’s surge in online shopping has made service disruptions more common, which in turn has exacerbated the problem to the point that loyalty programs have begun to harm brands.

Researchers surveyed more than 5,000 U.S. retail consumers in February 2020 and another 2,500 in May after the pandemic stabilized slightly. The results showed that loyalty program members were not only more uncomfortable with service than other customers, but were also more likely to try to solve their problems. For example, loyalty members surveyed in May required an average of four contacts with the company before arriving at a decision, a process that took 5.1 days. It took regular customers just 2.8 contacts and 3.3 days.

These highly valued customers move between different departments and struggle to find a solution. Part of the problem is that loyalty program members often start by calling a special number with a complaint, only to find out that the loyalty department is not authorized to help them. This is especially detrimental to the brand, since the expectations of a special service among loyal customers are broken by reality.

Take advantage of the benefits that can protect against customer loss

Here are some loyalty program bonuses to help reduce service disruption dissatisfaction both before and during the pandemic: insider access to information such as limited-time offers or invitations to exclusive events, free shipping and returns, cash back on purchases, notifications about the appearance of desired products, access to purchase history, and Alexa or Google Assistant notifications about order and delivery status. These benefits tend to make loyal members feel valued and alleviate shopping frustrations, researchers say – just as frequent flyer benefits can mitigate travel disruptions.

Integrate loyalty programs into your overall strategy and processes

Retailers should integrate disparate marketing loyalty programs across operations, technology, and finance to ensure fast and streamlined service recovery. For example, a seamless return is not possible if the loyalty program does not use loyalty recognition technologies. Disruptive service disruptions, such as rudeness by reps answering phone calls, also cannot be corrected if the loyalty department is unable to make changes to operational processes – in the case of rude responses, for example, insist on re-evaluating personnel and training priorities.

The online shopping boom is likely to continue after the pandemic dies down, and while some of the associated service issues should iron out as companies adjust to the new volumes, they will still need to monitor and manage any backlash. from their loyalty programs.