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Three Loyalty Program Challenges and How Loyalty Marketers Can Overcome Them

This is a challenging time for loyalty marketers. Not only must they grapple with ever-changing consumer expectations and constantly evolving technologies — those are par for the course in the loyalty marketing world — but today’s marketplace is increasingly saturated with loyalty programs, making differentiation a difficult goal to achieve. So, the question posed to loyalty marketers is an existential one: How can a loyalty program remain relevant and continue to deliver consistent value to members in this environment?

To find the answer, it helps to consider the main challenges facing loyalty marketers from three angles: external perspective of the consumer (particularly in relation to technology); internal financial feasibility, and executive buy-in from an operational perspective. Each of these components are crucial to loyalty program success, and how you address them will go a long way to determining how you can continue to deliver value to consumers in the coming years.

Changing technology and consumer behavior

Loyalty marketers across the world face similar challenges, with some variation by region. In a survey of loyalty program managers conducted as part of our report, The Great Loyalty Reset, Merkle found that irrespective of region, these managers grapple with the fact that consumers are shopping online (and on their mobile devices) more than in stores. A majority of respondents in North America (53%) and nearly two-thirds of programs managers surveyed in Asia (72%) identified this ongoing shift as an operational challenge.

While the movement of consumers from brick-and-mortar to digital storefronts is hardly news, it still registers as a challenge, as loyalty marketers need to continuously adapt their strategies to meet consumers where they are. This technological realignment has had another knock-on effect: that with more familiarity with digital channels and digital interactions with loyalty programs, consumers’ expectations have begun to change at the pace of technology. Consider that just a few years ago, the idea of managing a loyalty program through a mobile app would have seemed novel to the consumer. Now it’s commonplace, and a loyalty program that doesn’t offer its members that feature seems behind the times and out of touch. More distressingly, that consumer may abandon the program due to lack of convenience. That’s how quickly expectations can shift.

Our survey shows that North American loyalty program managers are particularly attuned to this challenge: 41% cite technology and the pace of change as a hurdle they face. Loyalty program managers in Asia are even more explicit about facing this technological headwind, with 52% of them saying that consumers’ expectations change too quickly for them to react.

The solutions to these challenges are straightforward, though certainly not easy. But they all start with an understanding that the pace of technological change is unlikely to abate, and that to remain relevant and to meet consumers’ expectations, programs need to integrate technology into every aspect of a loyalty program. For many loyalty marketers, this will require a partner, so choosing the right technology partner will be instrumental to surmounting these obstacles.

Financial Feasibility

There is also commonality among loyalty program managers in different regions in terms of the difficulty they face in determining the right rewards and pricing levels. Seventy-two percent of program managers in Asia and another 47% in North America report this difficulty. Obviously, pricing and rewards will have an impact on consumers and the value they perceive in a program, but it also influences the viability of the loyalty program itself. Overly generous rewards may be very attractive to current and potential loyalty program members, but they can turn the program into a cost center for the business and undermine its effectiveness in the minds of key stakeholders.

These kind of bottom-line concerns impact executive buy-in, which can jeopardize loyalty programs at any phase of their implementation. Again according the Great Loyalty Reset, 43% of North American loyalty marketers report having to fight the perception of the loyalty program as a cost center, while 40% of loyalty program managers in Asia identify a lack of executive buy-in and support as a drag on program value and importance.

Communication and cooperation is the best remedy for this challenge — getting all stakeholders involved starting at the planning process and continuing through implementation of a loyalty program will ensure the necessary buy-in and the support that makes a good program thrive.

Operating at Capacity

As a loyalty program is implemented, several operational challenges can crop up. In our survey, the specific challenges related to operations tended to diverge by region, with North American program managers expressing difficulty in finding the right tools, technologies and platforms (33%) as well as inadequate training for front-line employees charged with implementing loyalty schemes at the point of sale (28%). In Asia, on the other hand, the chief roadblocks to program operations are vendor-related; 48% complain that loyalty vendors do not communicate or cooperate well, and 44% cite the involvement of too many vendors as an obstacle to optimum loyalty operations.

One commonality was present, however: both North American and Asian loyalty program managers reported difficulty finding personnel with the right loyalty experience and expertise (30% for North America, 48% for Asia). The potential solution for this is, again, identifying the right loyalty technology partner. The right partner can both alleviate the need to hire and train staffers with loyalty experience and limit (or manage) the number of vendors involved. While good loyalty programs can never be completely outsourced, loyalty should be an organizational habit, woven into the fabric of a company’s operations — identifying a partner or adviser that can best meet the objectives of a given loyalty program can solve many problems.

These common challenges — those arising from customers’ expectations and technology, financial and organizational buy-in concerns, and operational difficulties are persistent, but they can be overcome. Indeed, how you approach these challenges will determine how successful your programs will be over the coming years. In many cases, managing the pace of change with technology and the right loyalty technology partner can help loyalty marketers achieve an advantage over your competitors, but most importantly, continue to deliver value to their customers, increase engagement on an ongoing basis, and positively impact their bottom lines.

To learn how Merkle’s Loyalty Services Group can help your brand overcome these common loyalty challenges, contact us here.

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