Why Customer Loyalty Programs Can Backfire
9/5/20231 min read
You love your partner, but when they make a minor mistake, your disappointment seems to outweigh what you'd feel if it were anyone else. Why? It's because you've stood by their side, believing in their potential to do better. It matters little what others do. When they let you down, you get frustrated with them for it and by their inability to navigate the situation effectively, which causes a strain on your relationship.
That’s the con of a customer loyalty program.
Customer loyalty programs offer significant advantages by increasing consumer engagement and sales. Loyalty members tend to buy more, visit the stores or websites frequently, and engage on social media. However, new research reveals a downside known as the "boomerang effect." Loyal members, who shop more frequently, become more upset when encountering service failures like shipping issues, returns, or stockouts. Loyalty members often face challenges in issue resolution, requiring more contacts and time with customer service. Not very “white glove” service if you ask me.
To mitigate the boomerang effect, retailers need to:
Identify the most damaging service problems, focusing on those that erode loyalty, not just frequent issues.
Deliver benefits such as insider access, free shipping, and personalized alerts to protect against defections.
Integrate loyalty programs with overall strategy and processes across operations, technology, and finance to ensure seamless service recovery and process improvements.
As online shopping continues to grow, addressing loyalty program challenges is crucial to retaining valuable customers. It’s the only way for retailers to keep that relationship with their consumers and keep them from leaving them.