Loyalty rewards programs used to be so simple. You handed customers a punch card when they made a purchase, and you marked or punched their card each time they made another purchase. Then, when a customer’s card had enough punches or marks, he or she got something for free.
Technological advances over the past two decades have made it possible for marketers to collect and use increasingly granular and personal information on customers to offer them more personalized rewards. While this sounds desirous and mutually beneficial on the surface, the reality of it is much muddier.
Marketers are not always using the data they collect effectively, research shows, and customers aren’t always excited about businesses peering into their personal lives, chronicling their private purchases in a database—among other things. As a result, the popular practice originally designed to help businesses grow has become less straightforward (and less popular) than it once was.
This is particularly problematic for startups that rely on an effective rewards program to attract and retain customers—especially when about 20 percent of startups fail within the first year and only about 50 percent survive five years, according to Bureau of Labor Statistics.
Marketers at national chains have large advertising and promotional budgets to keep customers coming through their doors, and can therefore afford to make mistakes with their loyalty programs.