Most Common Loyalty Program Problems (And How to Avoid Them)

Travel industry loyalty programs like American Airlines AAdvantage and Marriott Bonvoy have set the standard for effective customer loyalty strategies. However, maintaining that standard can be quite challenging.

Over 9 in 10 program executives in the U.S. agree their loyalty program requires more rewards, and 80% feel their program is too similar to others in the industry. 

Those aren’t the only challenges that plague loyalty providers; every aspect of loyalty program management can prove challenging. So, what are the most common problems with loyalty programs? Better yet, how can businesses avoid loyalty program issues?

In today’s post, explore the most common loyalty program problems, along with actionable solutions to prevent them altogether. 

1. Lack of Personalization

Personalization has quickly become one of the leading loyalty program best practices for making customers feel recognized, valued, and understood. In fact, more than 9 in 10 businesses (92%) are using data-driven personalization to drive growth, and 62% of business leaders cite improved customer retention as a primary benefit of increased personalization efforts. 

Tailoring rewards, offers, and marketing messages to individual preferences can lead to higher redemption rates, increased engagement, and stronger emotional connections with a loyalty program. However, gathering individual preferences and harnessing that data for effective personalization has proven to be one of the recurring loyalty program problems for businesses. 

Steps for Personalizing Travel Loyalty Programs

Overcoming loyalty program issues with personalization is essential for boosting customer engagement and retention. Fortunately, the sheer number of data points collected through your loyalty program serves as a fantastic starting point to begin delivering more relevant rewards, offers, and communications. Consider these five steps to personalize your travel loyalty program: 

• Data collection and analysis. Leverage customer loyalty analytics, such as reward redemption rates and purchase history, to gather insights into customer behavior and program preferences.
• Customer segmentation. Next, group customers into segments based on their behaviors and preferences, such as solo travelers or business travelers, to tailor rewards and communications. 
• Personalize offers. From here, create customized offers and rewards that cater to individual customer preferences and needs, like savings at travelers’ most frequented hotels or airlines.
• Dynamic communication. Remember to use personalized marketing messages, such as emails, social media posts, and app notifications, to continuously engage customers with relevant content.
• Feedback loops. Likewise, be sure to constantly collect customer feedback on your loyalty program and research recent customer testimonials to refine and improve your personalization efforts.

2. Overcomplicated Program Structure

Overly complex loyalty programs with convoluted rules and processes frequently frustrate customers. According to a 2022 customer survey, the most disliked factor about loyalty or rewards programs was the time it takes to redeem a reward, cited by 50% of consumers. Nearly one-third of surveyed consumers also said they did not like how difficult it was to earn a loyalty reward. 

It goes without saying that when the top loyalty program challenges are earning and redeeming rewards, members will simply stop participating — and potentially stop supporting the business. How can your business provide a truly rewarding loyalty journey? The answer is to ditch overcomplicated program structures in favor of straightforward reward rules and processes. 

Solutions for Simplifying Loyalty Program Structures

Sometimes, fixing loyalty programs is as easy as simplifying the program structure. To avoid loyalty program problems surrounding earning and redeeming rewards, opt for these five strategies: 

• Adopt clear and straightforward rules. Ensure that the guidelines for earning and redeeming rewards are easy to understand and quickly accessible to members via your website or mobile loyalty app.
• Streamline as many processes as possible. Simplify the steps required to join the loyalty program, earn points, and redeem rewards — for instance, just require a full name and email to sign up. 
• Design a user-friendly interface. Beyond sign-up, earning, and redemption, further optimize the user experience (UX) of your loyalty program by creating an easy-to-navigate interface, like an app.
• Use transparent communication. It’s important to clearly communicate the program’s benefits, rules, and processes to customers in both the program design and the marketing messages.
• Implement regular updates and improvements. Continuously assess and refine the program structure based on engagement metrics and direct customer feedback on loyalty program problems. 

3. Insufficient Customer Data Utilization

Did you know that 6 out of 10 consumers want discounts in return for joining loyalty programs? 

Nearly the same number of consumers expect to earn points and rewards, and around one-third of U.S. consumers find exclusive or early access to products to be valuable features of a reward program. For loyalty program success, you’ll need to utilize data to learn what your customers find truly valuable.

Unfortunately, many businesses fail to utilize customer data effectively, missing opportunities to understand and anticipate customer needs and then deliver the appropriate value. The key to improving loyalty programs is proper data analysis. Data analysis helps loyalty program executives identify emerging trends, preferences, and behaviors that can inform insight-driven strategies.

Best Practices for Effective Customer Data Utilization

Many loyalty program problems — like a lack of personalization — can be solved with effective customer data utilization. By keeping a finger on the pulse of customer preferences, executives can adapt loyalty programs for modern consumers, accelerating rewards redemption rates and advancing customer retention. Consider these best practices for effective customer data utilization:

• Implement a customer relationship management (CRM) system. CRM systems collect and manage dozens of customer data sets, helping to track behavior over time and segment customer groups. 
• Leverage data analytics tools. Data analytics tools, especially AI-assisted analytics, help sort relevant data, understand customer motivations, identify patterns, and predict emerging trends.
• Rely on recurring surveys and customer feedback. Regularly collect customer feedback by gamifying survey completion to gain insights into consumer preferences and satisfaction levels. 
• Opt for robust data integration. Integrate data from various touchpoints, such as in-store purchases, online interactions, and social media, to create a comprehensive view of each customer.

4. Technology and Integration Challenges

Various integrations ensure smooth communications between a business’ loyalty programs and its existing systems, allowing for consistent data updates and effective program management. 70% of executives consider integrations with digital distribution channels, such as direct-buy links from social media platforms, a factor boosting customer loyalty over the past two years. 

The impact of mobile technology on loyalty rewards has only furthered the importance of integrations; however, not all businesses are equipped to handle these more modern technologies. Previous in-house development of legacy systems is now clashing with the need for integrations, ultimately hindering the effectiveness of loyalty programs for customers and providers alike. 

Strategies for Loyalty Program Management

As more technologies arise to allow for effective data utilization and program personalization, they’ve created innate loyalty program problems. Here’s a look at a few strategies for simplifying program management and overcoming loyalty program issues tied to technology and integrations:

• Seek reliable infrastructure to link various systems. Implement travel APIs and middleware to facilitate seamless data exchange between your POS, CRM, and ecommerce platforms.
• Step away from outdated legacy systems. Utilize automated data syncing and cloud-based loyalty platforms to ensure real-time updates and accurate information across all touchpoints.
• Sync your data sources. Create unified customer profiles by integrating data from various sources and implement Single Sign-On (SSO) for a seamless user experience across different systems.
• Start automating workflows. Automate routine tasks to reduce manual errors and save time, as well as access real-time data whenever you need it to improve the customer experience. 
• Supplement with artificial intelligence (AI). Strategies like customer segmentation, offer personalization, and dynamic communication can be streamlined through AI-powered loyalty programs.

Avoid Loyalty Program Problems with arrivia 

Facing loyalty program problems? You’re not alone. The vast majority of loyalty program executives are encountering similar issues. Luckily, there’s one solution that can help you not only solve but totally avoid common loyalty program challenges: arrivia.

Arrivia offers a suite of travel loyalty solutions designed to simplify program structure, personalize rewards, and streamline operations. We also offer advanced data analytics tools to gain insights into customer behavior, personalize rewards and marketing messages, and improve program effectiveness. Plus, arrivia offers seamless technology integrations.

Enhancing customer loyalty is just one click away. Request a demo today to discover how arrivia can help your business create a successful and personalized loyalty strategy.