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The goal of implementing and maintaining a customer rewards program is to increase retention of customers and improve profits. However, in many cases, retailers find that their customer loyalty programs are not working as well as they expected. These programs can struggle for a variety of different reasons. Once you have identified the cause of the problem, you can resolve it and improve the effectiveness of your program.

Customer Loyalty Statistics

According to Colloquy, the number of enrollees in customer rewards programs has increased by 26 percent in the last two years, with more than 3.3 billion memberships across the country. The average American household holds a staggering 29 loyalty program memberships. However, on average, the American household is actively using only 12 of these memberships. The percentage of household rewards program memberships actively in use declined by 4.5 percent from 2013 to early 2015, and it is continuing to fall.

Why are Programs Failing?

Some of the most common causes of customer rewards program struggles or failures include:

1. Not enough incentive.

In many cases, customer loyalty programs are not as successful as they could be because they don't give the consumer enough incentive to make returning to the brand worthwhile. For example, if customers must spend $500 before they see any tangible reward from the loyalty program, they are much less likely to participate than they would be if rewards began sooner.

2. Too many exclusions.

Many customer rewards programs include multiple exclusions that drive consumers away. For example, the program may allow consumers to rack up points only for certain types of purchases, or it may offer rewards that cannot be redeemed easily. If consumers are unable to build rewards or use what they have earned without jumping through hoops, they won't want to continue with the program.

3. Undesirable rewards.

In some cases, customer loyalty programs allow consumers to earn and redeem rewards easily, but the rewards offered are not enticing to the consumer. Examples of rewards that may be less desirable include free merchandise chosen by the brand, low-value coupons and entries into sweepstakes.

4.  Expiration issues.

Some of your more frugal consumers may want to wait until they have built up a substantial number of points or other rewards before they cash in. If the program's rewards expire too quickly, consumers won't be able to reach their desired level in time to take advantage of the rewards they have earned. Once a consumer has lost his or her rewards once or twice, the consumer is less likely to try in the future.

5. Waiting period frustration.

Other consumers who earn valuable rewards, such as money off a future purchase, may want to use the reward immediately. However, if the reward requires the consumer to wait until a certain date before using it, the consumer may become frustrated and/or forget to use the reward at all. Because the consumer gained no tangible benefit from his or her participation, future activity may decrease.

6. Loss of cards or membership numbers.

In the past, most consumer rewards programs relied on paper cards and/or membership numbers to track consumer activity. In many cases, consumers were unable to get credit for rewards they had earned because they forgot their card or number at the time of purchase. Consumers who forgot to bring their cards with them when it was time to redeem rewards also experienced issues. Today, many customer rewards programs are integrated with mobile apps and online customer accounts. However, those programs that don't offer this feature may still suffer because of lost or forgotten membership cards.

Improving Your Customer Rewards Program

If your customer rewards program isn't performing as well as you'd like, ask yourself if any of the issues above apply in your case. If so, resolve the problem by making the necessary changes to the program's structure. You can also gain valuable insight about your programs strengths and weaknesses by reaching out to your customers for feedback and suggestions.

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