Hidden Price of Standalone Loyalty Programs

The most successful businesses employ loyalty programs in a variety of ways. But what are these programs’ costs and benefits? To comprehend this, it is essential to distinguish between integrated and stand-alone loyalty programs.

Standalone vs integrated loyalty program

1. Standalone loyalty program

A standalone loyalty program is a static and transactional program that only rewards customers for their purchases and does not take into account other actions that customers take during their customer journey. Only when a purchase is made are standalone programs activated, which are static and transactional in nature. Instead of rewarding customers based on how much they spend, these programs typically reward customers with points, rewards, or discounts.

Loyalty programs that stand alone include:

1. Retail store loyalty programs – reward customers for purchases made in-store or online
2. Credit card rewards programs – reward customers for purchases made with a specific credit card.

While standalone loyalty programs can be useful for some kinds of businesses, they may not provide a complete picture of the customer journey and may not recognize customers for other interactions with the brand

2. Integrated loyalty program

An integrated loyalty program, on the other hand, is dynamic and rewards customers for important actions throughout their journey. To get a complete picture of a customer’s journey, integrated loyalty programs take into account every interaction a customer has with a brand, including online visits, social media engagement, and in-store purchases. Integrated loyalty programs can offer rewards and incentives that are tailored to each customer’s preferences and actions based on this information.

For instance, a clothing retailer’s integrated loyalty program might reward customers for visiting their website, following them on social media, and making in-store or online purchases. Based on a customer’s engagement with the brand, the program might offer rewards like free shipping, early access to sales, and personal styling services.

Customers and brands alike have seen the benefits of integrated programs. Earning rewards and loyalty points is highly valued by nearly 59% of internet shoppers as a part of their shopping experience. Additionally, a strong loyalty program increases a brand’s likelihood of being recommended by over 70% of customers.

Now that we’ve talked about the advantages, let’s look at the costs of putting loyalty programs into place.

Hidden Price of Standalone Loyalty Programs: Understanding the Drawbacks for Online Retailers

Loyalty programs have grown in popularity among online retailers as a means of engaging customers, boosting sales, and building customer loyalty. However, before committing to a standalone loyalty program, retailers need to be aware of a few additional costs that may be hidden. We will discuss the hidden costs of standalone loyalty programs and the reasons why online retailers should consider these disadvantages when deciding whether or not to implement one in this article.

Limited Reach

The limited reach of standalone loyalty programs is one of their primary drawbacks. Customers who are members and have an account with the retailer are the only ones eligible for these rewards. As a result, the program’s overall reach will be diminished because potential customers who are not members will not be encouraged to shop at the retailer. Customers who are members but do not frequently shop at the retailer might also forget about the incentives and rewards, which could also lessen the program’s impact.

Increased Costs

The costs associated with implementing and maintaining standalone loyalty programs are yet another hidden cost. To manage the program, retailers must invest in customer rewards and incentives as well as software and systems. To manage the program, retailers may also need to hire additional staff, which can raise costs. Retailers must carefully consider whether the program’s benefits are worth the investment because these costs can add up over time.

Reduced Customer Value

The overall value that customers receive from a retailer can also be diminished by standalone loyalty programs. This is because the discounts, sales, and promotions that are available to all customers may outweigh the program’s rewards and incentives. Customers may experience a diminished sense of value as a result, which may have a negative impact on the retailer’s long-term success.

Lack of Integration with Other Marketing Efforts

Last but not least, standalone loyalty programs may lack integration with other marketing initiatives like email marketing, social media marketing, and search engine optimization (SEO). As a result, retailers may find it difficult to maximize the impact of their marketing efforts because they are unable to use the loyalty program to increase website traffic and sales. Additionally, inconsistent messaging caused by a lack of integration can confuse customers and reduce the loyalty program’s effectiveness.

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From Expense to Cost-Saving Opportunity

The good news is that most customers, more than 60%, are willing to share personal information for value, but only under certain conditions. Businesses must be clear about what they are asking for, and the data must be relevant to the value offered.

Consider how many people would be willing to share information about their physical health and heart attack prevention practices. or provide real-time driving data to reduce insurance premiums? The author is among those who would.

The most prominent players in the rewards industry are aware of this principle and ensure that customers receive a program that is worth the time, effort, or data they put into it. When businesses require customers to provide extensive information in order to access the offers, a few freebies or discounts are insufficient.

In this regard, data is essential. Transparency and fairness must be used by businesses when dealing with the relationship between rewards and customer data. Make it simple for customers to understand how to unlock various values and ensure that these values are relevant to their lives when developing a loyalty program. Make the relationship reciprocal rather than one-sided by continuously personalizing and streamlining offerings with the data that customers are willing to share.

Customers who view their personal information as a valuable commodity stand to benefit greatly. Consider the overall value of rewards, convenience, and personal data when evaluating loyalty programs. Is it in line with your current way of life? To receive benefits, would you have to alter your behavior or go above and beyond? What kind of information do you need to share, and does it make sense to do so?

Conclusion

Although standalone loyalty programs can be a useful tool for online retailers, it is essential to be aware of the hidden costs associated with their implementation. When deciding whether to launch a loyalty program on its own, retailers must take into account the limited reach, increased costs, decreased value to customers, and lack of integration with other marketing strategies. By taking these factors into consideration, retailers can determine whether a standalone loyalty program is the best option for their business and ensure that they are maximizing their investment. To gain more insights on how to revitalize your loyalty or rewards program and enhance customer loyalty, click here.