Why Attrition For Rewards Programs Happens And How To Fix It
Nov 23, 2024
Why Attrition For Rewards Programs Happens And How To Fix It
Regardless of how good your business is, it will on average lose customers during its existence. That's because 78% of customers are retracting or switching to other loyalty programs faster than in the last three years. On average, a business loses 10 to 25% of its customers annually!
In this situation, it would not be wrong to say that customers have become less tolerant of shortcomings in customer service, value for money, brand experience, and product quality.
Thankfully, a referral program with Duo can provide you with a modern solution to overcome all of these shortcomings at once and save you from losing more customers. This is a post-purchase referral solution that adapts to the needs and real requirements of most customers to reduce churn: a cashback incentive.
So, to minimize this attrition, understand your customers and engage them effectively through a referral program. But how? Let's explore this in detail here!
Common Causes of Attrition in Rewards Programs
Many customers order just once and leave your brand, which is part of the business. But, there are more valuable customers, which every business regrets losing, as their CLV (customer lifetime value) is too high to be neglected. Let's understand the primary causes why customers leave you as later on it will help you in reducing churn in loyalty programs:
Low Perceived Value:
About 37% of customers get frustrated and leave the loyalty program when the value of offers points or rewards is too low. So, businesses need to understand that customers will never return if the rewards they get aren't worth their loyalty or offer real savings or aspirational value. Ultimately, this increases the attrition for rewards programs as customers switch to appealing rewards from another brand.
Complex Program Structures:
Point-based loyalty programs have existed for the last century. That’s why customers are familiar with the basics and understand how these programs work. It ultimately encourages buyers to join your loyalty program.
But sometimes, brands try to spice up these programs by adding complicated conditions or rules. These overcomplicated systems frustrate customers instead of exciting them. Ultimately, they reduce reward program satisfaction and complicate customer engagement with the program.
Delayed Rewards:
The other top reason customer retention strategies fail is slower reward accumulation. Statistics also show that about 43% of customers don't want to wait for a long period of time to get meaningful rewards via these loyalty programs.
Airlines, for example, ask customers to fly thousands of miles before getting seat upgrades or receiving free flights. The only solution to this problem is to increase reward-earning rates. Resultantly, customers can access redemption faster. You can also let them earn extra points on certain purchases or days to keep them engaged and loyal.
One-Size-Fits-All Approach:
About 58% of millennials abandoned a loyalty program because the rewards or points were irrelevant. Understand that customers can be interested in the same type of products but not in the same type of points or rewards.
Though dollars-off coupons work for many customers, that does not mean that each of your buyers will find them appealing. A lack of personalization causes this disengagement and customer loyalty attrition.
Remember that 80% of customers do business with brands or companies offering personalized experiences. Likewise, 70% of customers get frustrated with impersonal experiences.
To clarify how personalization in rewards programs can boost your success score, let’s take the example of Starbucks, which offers personalized rewards to its members. The loyal members earn points for each purchase they make using the app, and after reaching specific points, customers can get personalized rewards (their favorite drink or food).
Likewise, Uber offers its customers personalized rewards based on their usage behavior or patterns. The customers get points depending on the money they spend, which they can later redeem to get discounts on rides or food orders.
Sephora is another successful example of a personalized reward-based program. Customers earn points for their purchases, which they can redeem to receive personalized rewards based on their purchase history and preferences.
How Instant Cashback Programs Can Solve These Issues?
Businesses have relied on point-based loyalty programs to build customer loyalty. However, a shift towards instant reward programs has been seen. Through cashback rewards, customers can get a partial refund immediately after making a purchase.
It ultimately enhances the customer satisfaction, engagement, and repeat purchases. So, let’s understand here why these instant cashback rewards are so successful:
Immediate Value:
Instant cashback rewards offer immediate gratification to the customers, which is one of the primary reasons these reward programs are so successful. Remember that when customers earn points, they have to wait a long time to accumulate enough, which they can then use to earn rewards.
It can take weeks, months, or even years for them to accumulate enough rewards. The same is not true with instant cashback rewards, as customers earn the rewards right away. This powerful motivation keeps the buyers coming back.
Famous, for example, is a well known footwear brand running a loyalty program that rewards loyal customers with cashback. Instant gratification for loyalty programs such as cashback reduces the order cost and lets the customers return. The brand has also earned the title of best loyalty program in 2021.
Simplified Experience:
Point-based loyalty programs can be confusing and complicated. Not many customers know how many points they need to earn a reward or how to redeem them. On the other hand, instant reward programs are simple and easier to understand. The best thing about them is that customers know what they need to earn the rewards and, most importantly, how to redeem them.
Customization for Higher Engagement:
Most point-based loyalty programs limit the rewards that customers can earn. For example, customers can redeem the points to earn a specific reward (which may not be what they need or want).
Instant cashback, which has become one of the best e-commerce retention strategies, allows the business to offer a variety of rewards. Customers can choose these loyalty rewards according to their preferences. This flexibility and instant gratification make the loyalty programs more tempting for customers and boost their chances to participate actively.
Duo’s Cashback Referral Program: A Solution to Combat Attrition
With Duo, you can easily set up your post-purchase referral program retention strategy with instant cashback rewards or incentives. The referral program outperforms the traditional point-based reward programs.
This program gives each customer an automatically generated unique discount code to share with friends and family. As the code is redeemed, your existing customer can receive instant cashback. In return, increasing referral program engagement boosts repeat purchases and customer loyalty, contributing to long-term success.
This massive success is Duo's incredible features, which differentiate it from other referral programs. First, it is highly customizable and lets you set the tone of the post-purchase email notifications according to your preferences.
Plus, you can feature the cashback offer via email or on the thank you page. Now, if you are thinking of reducing churn in ecommerce business by integrating the Duo into your Shopify store, follow the mentioned-below steps:
Step 1: Look for Duo on the Shopify App Store and download it
Step 2: Sign up and set up your referral program within minutes.
Step 3: Your customers will receive an instant cashback reward after every purchase.
Best Practices for Reducing Attrition in Rewards Programs
Though customer retention is a challenge, you can master this challenge by following the best practices mentioned below. Also, this way, you can ensure that your hard-won customers will always remain loyal and engaged. Let's learn about these practices in detail here:
Personalization:
From communication to rewards, you must customize everything to meet your customer's unique needs and preferences. It will ensure buyers feel more valued and stay loyal to your brand. Let's take Starbucks as an example, which rewards customers based on the value and number of products they purchase.
But did you know Starbucks's reward program goes far beyond the local café because it offers personalized benefits? The rewards include pre-load cash for extra points and exclusive games. Resultantly, with its 30 million members, Starbucks has become one of the most successful café reward programs of all time.
Likewise, Dollar Shave Club has a personalized loyalty program that offers unique benefits and rewards to customers. Ultimately, it helps the brand build a sustainable relationship with buyers.
Communication:
Effective communication is crucial to making your loyalty program successful. That's because most customers forget about the reward programs they are connected to. So, you can keep your customers informed and engaged through regular updates and reminders. You can also seek feedback, address issues promptly, and inform customers about new developments. It will also foster a sense of loyalty.
Leveraging Referral Programs:
Another effective practice to keep your customers returning is running referral programs. For this purpose, you can use different tools like Duo and set instant cashback rewards. The immediate gratification boosts loyalty, keeps the buyers active, and keeps them invested in the ecosystem.
Remember that setting up the referral program will not be enough. You will have to track customer satisfaction to measure the success of your referral program. For that, you can use different tools like:
Hotjar
Hotjar provides complete information regarding customer experience, which you can use to determine what to improve. First, the tool lets you understand where users move on your site, which features they click on like, and what you should improve. Also, it helps you understand what your customers think when they navigate your products or sites.
Zendesk
Zendesk is another amazing customer satisfaction tool that lets you organize customer information on one platform. This tool gives you a crystal clear overview of all customers and understand their pain points. This picture can help you boost customer satisfaction. The tool also helps businesses communicate and lets them know how and when to contact customers.
Feedbackly
Feedbackly is a customer satisfaction tool with its own sales and marketing software. It helps businesses understand customer experience feedback, which they can use to improve sales. The tool asks customers about their feelings at different points and tries to uncover the emotions behind the customer's satisfaction metrics, including the customer churn rate, which is amazing.
This tool's "Customer Journey Builder" feature is amazing. It lets customers map out various customer journeys and lets you know how your buyers feel in real time.
Examples of Successful Programs with Low Attrition
Various businesses have been running reward programs successfully and have reduced customer churn or attrition rates significantly. Celebrity Cruises rewards program, for example, offers direct cash rewards on trip sales. It motivates the customers to participate in this reward program and take advantage of instant cashback.
Dell is a multinational computer technology company that runs a reward program in multiple countries. Dell has customized the program for each country. For example, in the UK, customers can get rewards through transactional and non-transactional means. These points can be spent on Dell cash on any purchase made. Customers in the USA and Canada have to spend a specific amount. In return, they can get 3% cashback on their orders. They can also enjoy other rewards like access to special promotions, sales, and expedited shipping.
These personalized reward programs helped these businesses retain customers and motivated other businesses to use instant cashback reward programs. That's why only the US market will spend $75.48 billion on cashback reward programs until 2029. So, what are you waiting for? Set your instant cashback reward program and start making money. But don't forget to customize it according to your customer's preferences!
Conclusion
Factors like low value, delayed rewards, program complexity, and lack of personalization in this increasingly competitive loyalty space lead businesses toward attrition. Fortunately, Duo comes to rescue you in this situation through its instant cashback program, which ultimately boosts customer engagement and retention. Now, why is this program so successful?
If so, remember that instant cashback rewards are flexible, customers get real money, and there is no annual fee or expiry date. On top of these, everyone loves to save money while shopping. If you are considering running Duo's instant cashback reward program to reduce customer attrition, don’t forget to explore Duo!
