5 Main Reasons Why Trade Loyalty Programs Fail

In the past insights we have delved into various success aspects of Trade Loyalty Programs. In this post we turn that over its head and investigate the major failure points of them.

The following are the major points which are usually overlooked in the design and execution of loyalty programs. Getting these right is the foundation on which successful programs are built. Keep in mind that these are necessary but not sufficient conditions for the success of a program.

1. Poor Scheme Design

This is the most important factor to be kept in mind when designing a loyalty program. There are various ways in which this can go wrong.

  • Low % of incentive
  • Unrealistic Targets and deliverables
  • Absence of caps which might lead to excessive pay-out
  • No differentiation between large customers and small customers
  • Lack of incentive to grow the business

A good scheme should address all these points to be attractive to the target audience. This is the first check that is done by partners when a new scheme is launched and failing to grab their attention here would surely lead to an early and uneventful demise of the program.

2. Convoluted Process Design

While it is important to have good checks and balances in the system, asking the partners to jump through multiple hoops to earn their points is a definite no go. This should be given more importance for companies with low market share or when dealing with influencers or parties not completely a part of supply chain. The process should be designed keeping the user convenience firmly in the center and the user actions should be limited to the bare minimum necessary. For example, in order to collect the purchase data from the retailers the process should be just click a picture of the invoice through an app. What they should not be expected to do is to enter line item wise sales, submit three copies of the invoice through courier, send an SMS with their Aadhaar number and other such time consuming activities.

3. Improper Reward Selection

This aspect is often taken very lightly but can make or break any program. One major pitfall is to have fixed rewards and not give the partner any choice. For example, think of a program in which on achieving a target the partner will get a trip to Bangkok. Now if the partner isn’t interested in travelling to Bangkok, the entire appeal for the scheme ends there. Selecting appropriate rewards and more importantly, giving the partner choice is the key to the success of the program.

Another pitfall, especially in FMCG and other highly traded goods, is to give out vouchers, discounts or any such cash transferable rewards. This is a definite recipe for market turbulence as it will lead to heavy undercutting.

4. Poor Communication Design

There are three aspects to communication design. Platform, Frequency and Content. All three must be chosen keeping in mind the target audience. Excessive spamming of unrelated content on unused platform would quickly lead to diminishing interest and slow death of the program. Identifying the suitable platforms (SMS, Email, Phone call, Physical letters, etc) and figuring what message needs to be sent when is crucial. It is also an ongoing process and can be adapted as per user preferences and behaviour.

5. Lack of Emotional Connect

And lastly, keeping a program limited to just business linked payouts and reward disbursement is a huge opportunity lost. Loyalty programs are beyond incentive schemes and should be leveraged to build lasting relationships with the partners. Building emotional connect therefore is really important for the success of the program.


If you are looking for someone to help you avoid these pitfalls and design and execute a successful loyalty program for you, please fill the form in and let us get in touch with you.

Topics: Loyalty Programs

Recent Case Studies