Programme failures – why did they go wrong?

04 August 2011

Despite the overwhelming presence of loyalty programmes in virtually every industry, not all programmes are successful.   In other words, having a programme is not a guarantee that it will really work as a useful marketing tool.  In this article, we look at companies that decided to ‘pull the plug’ on the programme they implemented and  explain the key reasons for failure.

Here are some examples of programmes that failed:

Safeway
, a UK-based grocery retail chain who abandoned its ABC programme in 2000, claiming that it was unable to use the information generated by the programme to generate enough incremental sales to justify the programme’s high cost.

Swisscom, the Swiss telecom operator stopped its Joker Programme in 2001, two years after introduction due to huge investments to run the programme, fraud protection issues and the new discount laws eroding margins.

American Airlines & America Online ended their joint customer-loyalty programme, in 2002. The program could not meet the expectation to set a new standard in brand synergy.

Subway phased out its Sub Club cards in the USA and Canada in 2005 due to fraud issues: Customers have been trying to redeem fake stamps and Sub Club cards for free sandwiches.

eBay pulled the plug on its Anything Points program for USA customers in 2005. eBay highlighted that the program wasn’t providing the return on investment it had expected. Members claimed the programme rules were unclear.

Latin Pass, a frequent-flyer consortium of ten Latin American airlines, did not generate enough revenues to cover the operational programme costs. Programme ended in 2006.

HappyPoints, a coalition programme giant in Germany suffered from marketing partners leaving the programme or filing for bankruptcy, as well as declining activity rates of too many members who did not reach the award thresholds. The programme was stopped in 2010.

Vanilla, the Swiss points-based shopping-partner platform by Ringier (leading media enterprise) in partnership with GE Money was switched-off April 2011. The reason: Objectives set in the business case could not be reached.

T-Mobile, the Czech version of the Bonus loyalty programme was stopped this summer, after 12 years in the market. Research has shown it was no longer attractive for end customers.

The list goes on and would be much longer, if we included programmes that failed but continue to exist…

How can this be?

In many cases, programmes are created by highly competent marketers in otherwise successful businesses. Furthermore, modern loyalty programmes have been around for more than 30 years – so what can be so hard about successfully running a loyalty programme?

Our research suggests five key patterns where loyalty programmes usually fail.

  • Lack of customer understanding and insight
  • Programme proposition is not compelling enough (no differentiation)
  • Performance of the programmes is insufficiently measured
  • Business case (P/L) has been ignored or built on non-realistic assumptions
  • Lack of top executive sponsorship (the foundations of a great programme are not put in place)

To conclude, loyalty programmes run a risk for failure if they are (1) not well-planned and (2) not continuously refreshed with enhancements e.g. new rewards or new ways of earning reward enhancements. Consequently, a programme with a strategic and flawless execution plan is less likely to fail than others.


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