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The reality is that well-designed loyalty programmes are rare. The term is popular, but heavily advertised discounts and promotions have little to do with loyalty.
How can you avoid falling into your own trap by offering customers benefits without reducing your profits? Ill-conceived loyalty programmes are completely ineffective. And yet, behind every failure there is often a strong marketing idea that has simply not been fully developed. The specialists at Stelvel Ltd suggest analysing such examples and seeing how to benefit from them.
Deferred discount
Customers stop buying goods without discounts! One of the well-known marketing failures is the case of a deferred discount of 30%–50% on goods that have been left in the basket for more than 30 or 60 days. To get a significant discount, users were willing to wait two months or more.
Free promotions with a low entry threshold
An online store offers to try promotional products for free. This is a good marketing move when it comes to something small, such as samples. Or, in this way, the seller collects a database of potential customers. In the case of real goods, it is a matter of pure psychology. What comes easily is not valued. Most often, a low entry threshold attracts a non-target audience and increases the cost of serving these customers.
Hoover’s failure or free flights
In 1992, the British division of Hoover offered two free tickets to the United States to anyone who purchased goods worth £100 or more. The ticket cost about £600, and the number of applicants turned out to be six times higher than expected. Instead of the predicted 50,000 participants, the company received about 300,000, which turned the advertising campaign into a multi-million dollar loss.
In an attempt to ‘save itself,’ the company complicated the exchange procedure: it sent forms at inconvenient times, rejected applications, and scheduled flights from airports that were often far from the customer’s location.
Old Navy Rules or Discount, a puzzle
Old Navy, a well-known clothing retailer, launched the SuperCash programme to reward customers and encourage repeat purchases. At first glance, the idea was simple: buy something now and get a coupon for your next purchase.
But in practice, it turned out to be more complicated, according to experts at Dropshipping Stelvel Ltd. The coupons were only valid on certain days, for a limited range of products, and came with a long list of exceptions. The terms and conditions were so confusing that customers began to perceive SuperCash not as a bonus, but as an annoying marketing gimmick. As a result, the company spent money on advertising and printing coupons, but failed to achieve its main goal — retaining customers.
Starbucks Rewards or stars
Starbucks decided to ‘improve’ its loyalty programme. The new system awarded points for every dollar spent. Customers quickly noticed the catch: previously, they received a free drink after 12 visits. Those who ordered cheap coffee lost out — now they had to visit several times more often to get the same reward. And instead of increasing loyalty, the programme caused irritation! Over time, Starbucks solved these problems by introducing a more structured, multi-level loyalty system.
Each of these cases is a reason to think not about the idea, but about its implementation. It is important to understand what result you expect. STELVEL recommends tracking basic KPIs: customer retention, average cheque, and purchase frequency.
- Be sure to consider the cost, scale, and response.
- Test your hypothesis on small audiences or in pilot mode.
- Making it more difficult to receive rewards is a neutral or negative move.
- Confirm facts — only real cases with sources are worth discussing.
- If the programme rules are difficult to understand or do not bring sufficient benefits to customers, they are unlikely to use it.
- If points expire too quickly or are difficult to exchange for desired rewards, this can lead to customer disappointment.