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Navigating the Challenges of Loyalty Programmes and Loyalty Networks

March 25, 2024
Navigating the Challenges of Loyalty Programmes and Loyalty Networks

Customer loyalty drives business success in today's saturated and hyper-competitive market. Loyalty programmes are essential for building and maintaining repeat customers, especially when organisations have to spend as much as 4x to 5x on acquiring new customers rather than retaining existing ones.

However, maintaining loyalty programmes comes with challenges such as users being unable to redeem their loyalty points flexibly and loyalty being misunderstood as a ‘cost’ rather than a strategic customer retention strategy.

Here, we explore the loyalty programme-related challenges an organisation should overcome to deliver a seamless and rewarding customer experience and business outcome.

Challenges of Traditional Loyalty Programmes

Traditional loyalty programmes face several challenges that can limit their effectiveness and strategic value to organisations and end-customers. Organisations consider expiration programmes as a saving exercise, with expiration dates beyond which the points become invalid. Redemption may not be emphasised enough, with few options or avenues to redeem, which reduces the utility value of the programme itself.

In addition, many existing loyalty programmes have not realised their full potential and are becoming unattractive due to factors like account inactivity, low redemption rates, time delays, high customer acquisition costs, and lock-in to specific programmes with expiry dates that limit usage. Over time, points can depreciate in value from a customer's perspective.

Challenges of Third-Party Interlinked Loyalty Networks

  • Third-party loyalty networks face additional collaboration challenges. Within the same network, participant organisations have inconsistent digital infrastructure and have concerns about exposing their own customer data to third parties.

Collaboration introduces intermediaries, increasing costs and operational complexity, and the lack of adequate digitization prevents an optimal customer experience. Also, the increasing risk of data breaches further limits the adoption of third-party, interlinked loyalty programmes.

Missing Pieces in the Loyalty Landscape

Due to high costs, there are not many cost-effective solutions for smaller organisations. Also, outsourcing does not allow smaller firms to fully leverage their data. Loyalty points often cannot be transferred or used outside of the brands selected. Loyalty credits are sometimes prone to fraudulent redemption.

Moreover, the delay in crediting loyalty points to customer accounts due to the offline nature of existing programmes presents another challenge. These gaps are starkly in contrast with rising customer expectations today.

The Way Forward

It is safe to say that loyalty programmes increase customer loyalty and repeat purchases, as members are more likely to buy from stores and retailers whose programmes are progressive. However, let us overlook the downsides of the traditional customer loyalty programmes discussed above.

With this in mind, businesses and organisations are planning to offer solutions that offer interoperability and easy redemption. They want to offer transferable or tradeable loyalty points that can be used by the family as a whole and are fungible between programs. This is to delight customers who expect quick and easy redemption with no expiration dates. The good news is that, as of today, the right solution is available thanks to blockchain technology.

Blockchain-based loyalty programmes offer a secure, transparent, and interoperable platform for managing points and transactions. This enables seamless redemption, transfer, and exchange of rewards across brands and networks to drive customer engagement and business value. They fill the gap left by their traditional counterparts while making your customers feel truly rewarded.

Blockchain removes the need for ‘trust’ through decentralisation and thereby increases execution efficiency over fragmented systems that depend on centralised administration. In a distributed ledger solution, all of the participating agents of the participating agents of the loyalty rewards programme operate in a contiguous network without intermediaries and without compromising privacy.

Blockchain enables organisations to streamline the execution and administration of loyalty rewards programmes.

Disclaimer: *WadzPay is a B2B technology provider. All regulated activities featured in WadzPay are conducted by licensed entities in applicable jurisdictions.