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Retail Loyalty Program Challenges: Top 8 Operationalizing Obstacles

By November 17, 2020 July 20th, 2022 CCG Retail Marketing Blog

Ready to put your loyalty program or refresh plan into action? Watch out for these issues that could derail performance.

Article Highlights

  • Many problems can crop up as you implement a new or improved retail loyalty program
  • Consistent and effective cross-department collaboration will help ensure that all key players know critical information
  • Detailed documentation will help keep everyone on the same page and create a better customer experience
  • Customer journeys, voice of customer research and data flow diagrams are all useful tools to avoid common loyalty program challenges

You and your team have laid out a plan for the optimal retail loyalty program or an invigorating program refresh. Now all you have to do is put your plan into action, so you can reap the benefits of expanded data collection, improved customer retention and increased profits. But therein lies the problem. Whether you’re creating a brand new program or revising an existing one, you’ll likely bump against several of these customer loyalty program challenges as you near your launch.

The review below covers eight of the biggest problems of loyalty programs from a company perspective. In particular, these problems tend to crop up during the operationalization phase, as you turn your carefully crafted blueprint into a working retail reality.

Man frustrated sitting near computer.

Loyalty Program Challenge #1: Creating Consistency

During implementation, multiple departments are working on the retail loyalty program plan from different angles. It’s not unusual for one department or another to accidentally get dropped out of the loop at some point and miss receiving important information. This can not only cause internal issues, but also can lead to challenges in maintaining customer loyalty as members have an incomplete or inconsistent customer experience.

For example, the Loyalty group may assume that points will be debited on returned purchases, but that requirement isn’t passed to IT. While members may appreciate keeping points even after a return, this type of error can cause confusion with staff and customers in store — not mention it could throw your financials way off your targets.

The solution revolves around cross-department collaboration — a critical factor in solving nearly all of the loyalty program problems discussed here. In addition, it’s important to have solid documentation of your new or updated loyalty program and implementation plan, including use cases and user requirements. Developing or updating customer journeys can also help you identify key touchpoints and interactions.

Loyalty Program Challenge #2: Documenting the Details

Documentation isn’t only important to ensure everyone is on the same page. It’s also vital for making all details of your retail loyalty program plan clear — and for making sure you’re covering all factors. For instance, how will you round dollar amounts when calculating points? Do you round up or down on a purchase of $5.33, for example? And what about inactive accounts — how do you define inactivity and what happens to that member’s points? Likewise, how will you address expiration dates — is points expiration rolling? What about rewards expiration dates?

Questions like these must be answered for proper system set-up and to avoid confusing the customer.

The solution includes developing an internal document detailing the rules and sharing it with Operations, Legal and IT early on. Later, you’ll use these rules to write customer-facing materials — everything from terms and conditions, to FAQs, to marketing materials. As the program evolves, you’ll continue to update these rules and related documents. The solution to this loyalty program problem also includes reviewing your customer journeys and voice of customer research, to identify (and smooth out) current and potential friction points.

Loyalty Program Challenge #3: Understanding the Financial Impact of Change

Some retail loyalty program problems erupt around the multiple financial aspects that need to be considered. These include everything from what points cost the company and how you account for them, to understanding how to leverage loyalty data for targeted promotions. If these aspects aren’t clearly spelled out and understood, you can lose buy-in from the CFO and your Operations partners.

The solution begins with developing detailed pro formas with assumptions that have been vetted by your team members to ensure support from Finance and Merchandising. This also allows you to present financial details in a familiar way to Senior Management to help secure budgets. Also consider building a test-and-learn team with Merchandising and Operations to test targeted promotions so you can learn the most effective customer segments and offers. This can help you compete internally for advertising and co-op dollars.

Loyalty Program Challenge #4: E-commerce Integration

Most of today’s retailers aren’t truly integrating their loyalty programs into the online shopping experience. For instance, members shopping online don’t see how many points they could earn on a purchase or get nudges to “Spend another $10 and earn a reward.” By not leveraging critical reward triggers like these, retailers are ignoring one of the most powerful tools that loyalty programs have to drive incremental sales.

It’s typically easier to integrate the customer loyalty program into all channels at the beginning or re-launch of the initiative, since it’s likely that you’re already updating feeds and systems.

The solution includes auditing the online shopping experience. As part of that, you’ll want to develop customer journeys and use cases to for opportunities where you can build in loyalty messaging and related functionality. For instance, at checkout, can your system show points earned for the current transaction, plus a reward status update based on those new points?

Loyalty Program Challenge #5: Managing Data

Capturing a comprehensive 360-degree customer view is one reason for having a loyalty program in the first place. But retailers often struggle to break down siloes that separate data pools and so fail to integrate multiple data collection points into the loyalty system. One of the optimal times to address integration is during the launch or re-launch of a loyalty program.

It’s typically easier to integrate the customer loyalty program into all channels at the beginning or re-launch of the initiative, since it’s likely that you’re already updating feeds and systems.

The solution typically begins with creating data flow diagrams to identify which systems aren’t connecting to loyalty. This exercise will also let you spot convoluted paths that require the data to flow through multiple systems before reaching the loyalty platform.

Loyalty Program Challenge #6: Integrating Tech

Most retailers stack new loyalty-related tech on top of existing operational systems, creating a satellite system that isn’t truly integrated and doesn’t provide much flexibility. Ultimately, this can impact the customer experience, leading to decreased engagement with the loyalty program and watering down its effectiveness.

The solution includes documenting detailed user requirements and keeping IT involved with your tech search and implementation. Your data flow diagram will also help determine whether the standard APIs will support your needs.

Loyalty Program Challenge #7: Over-Reliance on Tech Partners

It’s easy to use off-the-shelf loyalty solutions. But retailers who do so are likely to end up with a cookie-cutter solution that supports a cookie-cutter loyalty program. They lose the opportunity to customize their program’s benefits and create a unique customer experience that will differentiate their brand from the competition. The more unique your customer loyalty program, the greater excitement you can generate during the launch, not to mention that it will help keep members engaged in the long term.

The solution to this customer loyalty challenge includes doing your own due diligence on benefits, then sharing results with your tech partner. For instance, you should obtain customer feedback and conduct a cost-benefit analysis to determine the most compelling rewards for different types of customers, along with the expected return. This information will help you determine the optimal benefits mix that will motivate customers while making sense financially. You can then work with your vendor to determine how the technology can support those benefits.

Loyalty Program Challenge #8: Hiring a Loyalty Specialist

Loyalty is a unique, specialized niche, not simply a branch of marketing. Hiring a loyalty manger or director without specific loyalty experience (including how to build customer journeys, collaborate across departments and maximize the value of the loyalty program) can impact your program’s launch and even its long-term success.

The solution includes developing a detailed job description before conducting a search for an experienced loyalty manager. You may also find that using word of mouth to find the right hire or working with a third-party partner who understands loyalty can help identify the right candidate.

Paving the Way to Success

Being aware of these loyalty program challenges and taking steps to avoid them will pave the way for a smoother implementation of your new or improved retail loyalty program — and help ensure it delivers on its promise.

CCG’s retail marketing strategists have extensive real-world experience developing and refreshing loyalty programs for more than 75 of the top retailers in North America. Our turnkey retail marketing services include consulting, tech sourcing and implementation support, and data and creative solutions. Call us at 303.986.3000 or click below to schedule a free consultation and see how we can help you turn your loyalty program plans into successful reality.

Lane Ware

Author Lane Ware

Lane is CCG’s former senior vice president, consulting & account services, and currently sits on the CCG Board of Directors. She combines strategic expertise and experience in multiple industries with implementation and project-management skills. Her involvement in projects has ranged from building loyalty programs from the ground up to implementing long-range CRM initiatives to refining existing strategies.

More posts by Lane Ware

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