10 Biggest Loyalty Program Myths Marketers Need To Bust in 2024

The online retail sector generally assumes loyalty programs to be strategies for brand promotion and customer retention. But there is more to the story than what meets the eye.

Regardless of the scale of your retail business, customer loyalty should be taken into account for maintaining brand visibility and improving sales. However, some industry players choose to disagree with this concept based on common myths about loyalty programs.

Contrary to common loyalty program myths, facilitating customer journeys helps build a positive brand image and helps establish your online presence through multiple channels.

Knowing what customers like and getting insights into their online shopping experiences enables retailers to enhance the quality of services. 

In this blog, we address some common myths about loyalty programs and reveal facts about loyalty being applied in the world of online retail.

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Myths About Loyalty Programs

The mass-transformation of businesses to the digital world has created various misconceptions about the use of loyalty programs. For this reason, differentiating between loyalty program myths and facts is essential. 

Loyalty as a concept originated in traditional supermarkets and cafes, so many business owners wonder if such rewards programs can still be the key to success in e-Commerce. 

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1. Launching and Maintaining Loyalty Programs is Too Expensive         

Cost is something every marketing department strives to cut down and keep as low as possible. High costs for implementation and maintennce is one of the myths about loyalty programs that SMEs and enterprises often believe to be true. 

Retaining existing customers accounts for higher revenues compared to acquiring new ones. Customer retention is one of gifts of a loyalty program, meaning the benefits clearly outweigh the upfront cost of implementation.

As a matter of fact, loyalty in itself is the key to cutting down marketing costs. Even if there are additional costs to maintain loyalty programs in the years to come, your business can easily generate enough revenue to invest back into the programs. 

XStak’s LMS comes with cost-effective solution for retailers to manage loyalty and retain repeat purchasers for a higher ROI. The all-in-one solution allows businesses to analyse customer data in real time and make better marketing decisions.

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2. Brands with a Good Reputation Don't Need Loyalty

Here is one of the myths about loyalty programs that leads businesses to a loss of revenue resulting from a poor customer retention strategy. When brands reach a particular level of popularity or visibility, they begin to assume that customers will continue to buy from them just for the goodwill. However, it is quite the opposite when you consider some loyalty facts.

The current eCommerce landscape is an unforgiving one, where many notable and admirable brands also lose loyal customers. While there are various reasons for this, it is safe to say that all of them come under the category of customer loyalty. For instance, bad quality and unavailability of services during the COVID pandemic resulted in many big brands losing loyal customers. 

Owing to high saturation in the online retail market, every brand has to constantly work on its marketing strategy in order to stay on top. Customer loyalty is one of the aspects that provides a competitive advantage as repeat purchasers are known to spend more than newly acquired ones.

As coffee shops were one of the first to adopt loyalty programs back in the day, let’s take the example of Starbucks. The brand doesn’t need an introduction, and for quite some time, it did not even need a loyalty program. However, even a brand as big as Starbucks had to implement a well-formulated loyalty program to offer its customers the best offers in the market. Hence, the notion that established brands do not need to offer rewards is just one of the myths about loyalty programs.

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3. Customer Loyalty Doesn't Generate ROI

Any eCommerce business that has actually generated significant ROI constantly for a few years knows that this isn’t true. One of the common myths about loyalty programs is that customer loyalty does not have anything to do with ROI. The misconception behind this myth is that growth in ROI cannot be seen right after implementing a rewards program. 

Online retailers want assurity about every little aspect they consider, and in the case of loyalty programs, success cannot be measured within days. This is exactly why marketers in online retail think twice before incorporating a third-party loyalty program.

In reality, however, loyalty brings benefits in the long run. What customers really experience decides the fate of the brand. Here, loyalty rewards help create long-time relationships between brands and their customers.

Moreover, there is no one-for-all when it comes to rewarding customers for their loyalty. Although it is not true that loyalty doesn’t result in ROI, online retail businesses must constantly improve and update their loyalty programs to cope with evolving eCommerce trends. The fact is that loyalty programs, when done right, do generate a higher return of investment with the help of points-based bonuses, discounts, and personalized rewards.

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4. Setting up Loyalty Programs is Complicated   

Next on the list of myths about loyalty programs is that they are too complex to get around. There is no truth to that, as omnichannel solutions for online retail platforms provide detailed and helpful insights into customer behavior, which businesses can use to set up a loyalty program. What’s more? Your tech team doesn’t have to do anything new, as these third-party solutions come with an all-in-one dashboard that displays all the information you need in real time.

Many online retailers pressurize themselves due to the thought that it is too complicated to set up a loyalty program. In reality, managing loyalty is as easy as implementing the right customer retention solution. XStak’s LMS solution enables brands to create their own loyalty campaigns and reward repeat customers with personalized offerings. 

The concept behind XStak’s LMS is to make loyalty management simple for both businesses and their customers. Ensuring seamless customer experience leads to higher revenues and helps business scale. Additionally, these solutions prove that loyalty programs being complicated is only a myth.

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5. A Loyalty Program Handles all the Work for You

Moving on to the other extreme, another myth about loyalty programs is that they handle all the work for online retailers in terms of marketing. However, this is not true. Loyalty programs require constant monitoring, upgrades, and in some cases, monumental changes to be able to fulfill their true purpose.

That being said, not all of this is down to the marketing team. Modern solutions for creating and managing loyalty allow businesses to automate various processes with the help of AI. As a result, they get helpful insights into customer data. Still, it cannot be said that loyalty programs handle all the work for you.

E-Commerce businesses have to perform regular analysis of customer behaviours and trends to ensure that they can extract the maximum benefits from their loyalty programs. In case of failure or lags, they can identify the areas that need improvement.

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6. There is No Way to Measure Loyalty  

This is probably the biggest of myths for loyalty programs. In truth, there are ways to measure loyalty - not one or two, but nine ways. 

The reality is that there are a lot of factors and KPIs involved in the success of a loyalty program. Measuring, calculating, and implementing the best practices to achieve the ideal numbers with respect to each KPI gives online businesses a competitive edge.

When it comes to online shopping, customers do not waste time in making their decisions. A bad customer experience in eCommerce directly results in switching to another brand. As a result, your business has to spend more on customer acquisition.

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7. Gen Z Isn't Interested in Loyalty Programs

Generation Z is commonly perceived as one that does not pay attention to loyalty programs. However, this is only a myth. The reality is that Gen Z account for a larger percentage of online shoppers and are keen on trying new brands. It is also a fact that Gen Z like and avail loyalty rewards quite often.

Moreover, loyalty and referrals are seen to be quite effective among Gen Z, so the myth that they are not interested is definitely not true. Personalization and recommendations based on past activity, just like on Facebook and Instagram, convince this generation to become brand advocates. 

Loyalty programs that are not based on overall spending but offer rewards for referring others and writing reviews are popular among Gen Z. In recent years, this generation has also shown interest towards using digital currencies as part of loyalty rewards.

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8. It's Unacceptable for Customers to Share Their Data

Customers are as active in terms of research as any online retail manager. They know when it is the right time to share their data. In fact, customers who willingly join loyalty programs are perfectly fine with sharing data such as past transactions and account activity. 

Such data is valuable for online retail brands in creating personalized rewards programs to retain loyal customers. Generic, one-for-all rewards are a thing of the past. Generic rewards for loyalty create a sense that the brand is not interested in spending time on their loyalty program or understanding its customer base. 

For instance, Starbucks offer different rewards to customers who regularly buy sandwiches with coffee, as compared to a customer who routinely buys only coffee. Similarly, cafes can offer free WiFi access to customers who like to stay and work after having their coffee.

The same is true for online retail platforms, where customers do share their data when they know they will be rewarded with bespoke offerings. 

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9. Loyal Customers Come from Satisfied Customers

This is not true in every case. Customers who share positive reviews or spend more than others are not always loyal customers. This myth about loyalty programs is falsified in situations like the coronavirus pandemic, where customers switched instantly due to lack of availability, even after submitting positive feedback about their favorite brands. 

Therefore, a brand that gets positive reviews cannot sit back and relax while assuming that there is no need for a loyalty program. In today’s competitive eCommerce world, it is essential to have insights into customer behaviour and offer rewards to those that stick with your brand.

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10. Loyalty Only Means Earning Points and Burning them

This is yet another myth about loyalty programs. When done right, loyalty programs have much more to offer than just earning and redeeming points. 

From the brand perspective, this myth is an indication that it is not enough to have a simple points program in place of a comprehensive rewards program that is actually based on customer behavior. 

In 2024, businesses will have to update their marketing strategy to cope with the evolution of loyalty. There needs to be more to a loyalty program than just points that are based on spending and the total time a customer has been engaging with the brand.

For instance, customers can be introduced to new products and services by offering free early access. They can also be given limited access to a product of a higher tier. Businesses must take into account the advantages they can extract by convincing loyal customers to perform a certain task. To achieve this, they need to add new exciting features and rewards to their existing loyalty programs.

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Final Note

Considering the myths about loyalty programs covered in this blog, it is understandable why some online retail brands still operate without loyalty programs. The fact is, however, that they are missing out on a lot - both in terms of customer engagement and revenue. 

This year, you can launch your own loyalty program with XStak’s LMS module. Leveraging real-time insights into customer behavior, your business can identify the right rewards to retain loyal customers.