Why do so many people say ‘no’ to retailer loyalty programs?

Discussion
Photo: @south_nostalgia via Twenty20
Dec 09, 2019
Matthew Stern

A significant number of customers are just not interested in joining loyalty programs, according to a new study, a fact that to some suggests how retailers might engage that cohort.

A full 38 percent of consumers are not interested in joining loyalty programs due to their lack of perceived value, according to a study conducted by CFI Group and Radial. 

The study suggests that to get hesitant customers on board, retailers should offer faster delivery, personalized customer service options and more flexible returns. In the study, 63 percent of survey respondents said that the option of speedier delivery influences them to sign up for a loyalty program, 41 percent said that recognition as a loyalty member from a customer service associate would incentivize them to buy more and 55 percent said that multiple exchange options made them more likely to repeat purchase.

Incentivizing loyalty membership based on shipping and service-related perks offers an alternative to more traditional deal-oriented programs, which give customers discounts on specific products in return for membership. 

Restricting such perks merely to loyalty program members as the study suggests, however, might require a more nuanced approach. Many customers now see free shipping, easy returns and personalized customer service as table stakes for doing business with a retailer and would balk if a membership price was attached. Amazon.com extends its liberal and convenient return policy to all its users, for example, even though it has Prime, one of the most popular loyalty programs in retail. 

Getting customers on board with loyalty programs should be a priority, according to the study. It indicates that loyalty members have a greater rate of satisfaction and willingness to recommend a business.

In the case of Amazon Prime, loyalty membership also demonstrates a willingness to spend more, with members parting with more than double that of non-members, according to Fortune.

DISCUSSION QUESTIONS: What do you think are the reasons why many Americans choose not to join loyalty programs? What are your recommendations for getting people who are skeptical about these programs to join them?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"These kinds of value exchange relationships need to be perceived as a good bargain, just like deals on merchandise; they are evaluated the same way."
"Loyalty programs, led by loyalty marketers and CMOs, have failed to innovate after nearly four decades."
"Sometimes that simple concept is hard to execute, but now is the time for retailers to invest further, not regress back to price-based strategies."

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41 Comments on "Why do so many people say ‘no’ to retailer loyalty programs?"


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Mark Ryski
BrainTrust

The key reasons people don’t join loyalty programs are because: 1.) there is low received value to the shopper, 2.) it’s too onerous/inconvenient to sign-up and 3.) it’s poorly executed, spamming customers with unwanted offers. There’s no question that effective loyalty programs can have a significantly positive impact on the lifetime value of customers and increase satisfaction, however a poorly conceived or executed program can have the exact opposite effect. The keys to an effective loyalty program are: simplicity for the customer, meaningful rewards and just the right amount of communications – preferably something the shopper can regulate.

Dick Seesel
BrainTrust

I can think of a few reasons:

  1. First, if the retail brand itself is not compelling, no amount of perks or extra discounts will provide an incentive to join a loyalty program;
  2. Many shoppers would rather concentrate their “perk collection” on a smaller number of loyalty cards already in their wallets, including reward credit cards;
  3. The more loyalty programs, the more complexity … some consumers would rather simplify the number of retailers they need to track and manage.

Maybe the most important reason is the first one. If retailers think that loyalty is generated just by price incentives (instead of added service and other benefits), they are making a big mistake.

Mohamed Amer
BrainTrust

Spot on, Dick!

Carol Spieckerman
BrainTrust

Oddly enough, the tool that would seem to take loyalty programs over the finish line may be inhibiting participation. Shoppers only want to use so many apps and retailers need to find ways to clearly articulate loyalty program benefits within the mobile environment and outside of it. As the article pointed out, with so many convenience capabilities becoming table stakes these days, retailers need to be honest about, and get creative with, value-add loyalty benefits. I’m not sure that all Amazon Prime members regularly think about the fact that they are paying for the benefits that Amazon offers to them. Yet receiving them sets the bar high for other retailers that may not get away with charging for them.

Nikki Baird
BrainTrust

When the programs are too complicated, or it’s difficult to track the benefits, I think that’s when people are more likely to just opt out all together. I think it’s also important to remember the “rule of seven”: people in general can’t hold more than seven things in their mind and that translates to loyalty programs too (as well as credit cards). If every retailer has a loyalty program, and consumers are only willing to participate in up to seven of them because that’s about all they can keep track of, then there are going to be retailers who are going to lose no matter how straightforward their benefits are. Rather than asking, “how do I get more consumers to sign up?” retailers need to ask “how do I make sure my loyalty program is the most important loyalty program to the consumers I care about having the most?”

Bob Phibbs
BrainTrust

Shoppers are on to the trick: join our loyalty program so we can mine your data. Those benefits to the retailer far outweigh the perceived value to the shopper.

I’m a United 1K loyalty member for one reason. If I get stuck in a snowstorm I know they’ll do anything possible to get me to my destination which they won’t do for non-loyalty customers.

A recent example was them paying over $400 for a cab ride to LAX for a different flight. Until retailers can give that much value, I’d say it’s an uphill climb to get shoppers to join when benefits are so unbalanced.

Richard J. George, Ph.D.
BrainTrust

As I have stated before in this space, loyalty programs per se make no sense. Let’s call them continuity of purchase programs. How do you become successful with continuity of purchase programs? Simple, be loyal to your promises to your customers. The article notes several factors that customers believe are important before they seriously engage in a long term relationship with a seller. These represent the ante. If you want loyalty in life, get a dog. If you want customers for life, meet their needs better than your competitor does and you’ve got a shot.

Liz Crawford
BrainTrust

Consumers are hip to the fact that loyalty programs benefit the retailer. Some are wary of feeling “used” to fuel the profitability of the business. Others feel that the benefits of the loyalty program simply aren’t worth the hassle of getting spammed.

These kinds of value exchange relationships need to be perceived as a good bargain, just like deals on merchandise; they are evaluated the same way.

Bob Amster
BrainTrust

Lack of exclusivity! People (not just customers) like to feel special. The loyalty programs that make the consumer feel special are the programs that will thrive. Special can mean a free gift, an invitation to a VIP event, a limited-offer product, etc., etc. Airlines offer different levels of loyalty members and that is yet another way to sell a program. Paid-membership has worked successfully for a small number of retailers as well. Paid membership also can make customers feel exclusive.

Gene Detroyer
BrainTrust

Paid loyalty programs have worked well for one large retailer, too. Amazon Prime accomplishes exactly what loyalty programs are designed to accomplish. People pay for it and it has 101 million members.

Evan Snively
BrainTrust

#1 is trust, plain and simple.

Customers won’t open then door to a deeper relationship (especially one that requires them to provide more data) if they don’t trust your brand.

That said, trust can manifest itself in different ways – from having an alignment on social views, to having provided a past track record of good experiences, to simply making it abundantly clear what the value prop is of the loyalty program.

Rob Gallo
BrainTrust

There are all sorts of reasons why consumers don’t join in addition to privacy issues: Too much loyalty clutter in their “wallets” already, not enough value from the program, it’s tied to a credit card they don’t want, it’s not a retailer they plan to shop often, etc. Retailers and other companies with loyalty programs need to design (or redesign) programs that offer compelling value and do an excellent job at quickly and clearly communicating that value. Sign up needs to be simple, fast and not intrusive. Then they need to (over) deliver on that promise.

Cathy Hotka
BrainTrust

The biggest turnoff is a loyalty program that requires a customer to literally buy in. What could be more off-putting than sale signs in Whole Foods advertising discounts for people who have paid for Amazon Prime?

Georganne Bender
BrainTrust

That’s me with Barnes & Noble. You want me to give you $25 to get free shipping and discounts? I can get that anywhere for free.

Dr. Stephen Needel
BrainTrust

Maybe the question should be reversed – why do retailers seem to automatically think shoppers care about their loyalty program? And in many categories, everyone seems to have a program, which either negates the value for the retailer (it becomes a cost of doing business) and is not more or less likely to attract shoppers than a competitor. As everyone will say here, make it valuable and unique to the shopper or don’t expect them to care.

Neil Saunders
BrainTrust

The reluctance to join loyalty schemes is twofold: there are too many of them and signing up and managing them can be a hassle and, alongside that, the perceived benefits are not good enough to persuade consumers. The fact that so many retailers seem to use loyalty membership as an exercise to build an email list which they then spam is not helpful either!

Shep Hyken
BrainTrust

Let’s start with three reasons:

  1. First, there are too many loyalty programs. It can be overwhelming for consumers to keep track.
  2. The loyalty programs offer minimal value. Often the loyalty program is a way to get an email address or mobile phone number to promote to. Consumers are overwhelmed with too many emails and messages.
  3. The loyalty program isn’t really a loyalty program. It’s a marketing or discount program. Big difference.

If retailers are to get more consumers to join their programs they must offer true value. And the best loyalty program of all is to create an experience that offers so much value that the customer wouldn’t want to do business with anyone else.

Jeff Sward
BrainTrust

I used to join by default. Then I discovered that meant I was signing up for one or several spam emails per day. Ludicrous. The daily emails I still tolerate are for professional reasons. I want to see how this retailer walks and talks on a daily basis. For personal shopping reasons, please just give me a heads up a couple times a month. If I have signed up, then I like your store, your brand, your products. But I am not in the market for them every day. No need to be so needy.

Mohamed Amer
BrainTrust

I think Dick captured the key reasons well! Certainly without a compelling brand or the right assortment, a loyalty program is a waste of time, effort, and money.

I would emphasize the need to reduce complexity. Just make it simple to understand and be rewarded. Don’t focus solely on the transaction with discounts; although appealing, they’re not differentiators or loyalty builders. Design a program around exclusivity, convenience, personalization, and ease of use that creates a value engagement that speaks to the individual customer and not an entire cohort.

Georganne Bender
BrainTrust

41% of those surveyed said recognition from an associate would incentivize them to buy more. Come on. Who’s buying that?

A loyalty program must be transparent, easy to understand, and provide value – as in instant gratification, what’s in it for me value.

If you flash your loyalty card 100 times and still don’t earn anything, what’s the point? I stopped automatically joining loyalty programs because some of them are too hard to understand or they are full of perks I don’t need or care about. Keep it simple: spend a dollar, get a point – something you can explain in a sentence, not a tri-fold brochure.