How Loyalty Programs Fail At Customer Engagement – And How To Fix It

klyons Customer Loyalty

Loyalty programs are proven to help merchants from all industries retain and delight their loyal customers. 

Yet a frequent issue within loyalty programs is low levels of active customer participation. And there’s a simple reason why — some loyalty programs just suck at customer engagement. These kinds of loyalty programs operate by a “set it and forget it” mentality. And that simply won’t do in a digital age.

The main issue is most loyalty programs are geared towards rewarding transactional interactions, and only transactional interactions. The reasoning behind that mode of thought is simple after all. Customers make purchases, earn the points for the purchases, and eventually redeem the points. Simple in theory and simple to execute.


Where they fall short, however, is when they provide great incentives to join up…and then little to no incentives to stay.


Loyalty programs fail their customers when they cease engaging with the customer beyond the check-out cart. Most merchants assume their loyalty program is solely about rewarding purchases. In reality, they should be engaging with the customer at multiple opportunities.


Why Are Loyalty Programs Overly Focused On Transaction-Only Rewards?


Part of the reason is that it’s simple. Merchants can track customer’s purchases with the minimal amount of technology. Capturing data like types of items purchased, the frequency of purchase, and the average number of dollars spent allows merchants to easily reward the customer for customer transactions.


Yet just because a customer purchased an item in the past doesn’t always mean they’ll repurchase it in the future or that they’ll purchase similar items. They could end up not liking the item or only needing it infrequently.  Or their circumstances could have changed so they won’t end up purchasing the item ever again. When your program is structured so your customer only receives rewards for purchases, then their only opportunity to engage with your program is when they make a purchase. And that could be very infrequent.


This is the downside of limiting rewards solely to purchase behaviors. When your customer’s buying is low, so is the effectiveness of your rewards.


Encourage Engagement To Build A Better Customer Experience.


Now more than ever the overall customer experience is what helps build true customer loyalty. Which is why loyalty programs should invest in rewarding engagement-based actions from their customers.

In one study over 54% of customers said they’d purchase from a company where they had an excellent customer experience. Encouraging customers to engage with your brand in multiple ways (not just during the check-out process) creates a larger, more improved brand experience for your customers. By rewarding customers for non-transactional behaviors — engaging with your brand’s social media accounts, signing up for product alerts, or participating in a brand-sponsored event — you telling your customers you’re invested in them and not just their purchases.

The merchant who not only provides excellent products at great prices but also smooth shopping process with a personalized touch stands out amongst its competitors. When the customer also receives valuable rewards for those purchases, it only enhances the already-positive engagement.


Take the Opportunity To Learn More About Your Customers


If you focus only on analyzing the past purchases, you miss understanding your customer as a whole. Merchants only receive a one-dimensional view of the customer since they restrict themselves to only using historical data.


You should focus on current customer behavior. Is your customer browsing certain reward categories repeatedly? Are they visiting specific parts of your site more than others? Have they bookmarked specific items but failed to purchase or redeem for those items? You can use this information to develop targeted offers which can nudge your customer to buy or redeem.


You should also provide your customer the opportunity to engage with your brand through feedback. Reward your customers for taking surveys, reviewing products or locations, and interacting on social media. This can also provide you with valuable insight into your customers’ preferences.


The time and effort required to break down this level of detail about your customers are exhausting. However, it is necessary to build a seamless customer experience, not only within your loyalty program but during your customers’ interactions with your brand as a whole.  By devoting the resources to learning more about your customers’ specific interests, you can cash in on vital opportunities to create more personalized engagements.




Loyalty programs that are engagement-focused do not ignore transactions. But they understand by only rewarding transactions, you only encourage future transactions and nothing else.  By encouraging your customers to engage with your brand through engagement rewards, you’re creating opportunities to truly understand your customers and setting a precedent that you value your customers for being loyal to you.  

Now go rengage those customers!