{"id":7051140,"date":"2026-08-29T18:47:15","date_gmt":"2026-08-29T18:47:15","guid":{"rendered":"https:\/\/peraltafinancing.com\/analytics\/the-problem-with-loyalty-programs\/"},"modified":"2026-08-29T18:47:15","modified_gmt":"2026-08-29T18:47:15","slug":"the-problem-with-loyalty-programs","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=7051140","title":{"rendered":"The Problem With Loyalty Programs"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div id=\"post-body-5196007424391689081\" itemprop=\"description articleBody\">\n<p style=\"text-align: justify;\"><span style=\"font-family: arial;\">Three problems with loyalty programs:<\/span><\/p>\n<ul>\n<li><span style=\"font-family: arial;\">Wrong Incentives. Points and Discounts. Is that what the customer truly &#8220;wants&#8221;?<\/span><\/li>\n<li><span style=\"font-family: arial;\">Wrong Customers. The wrong customers are selected to be included &#8230; sometimes it is almost every customer that is included. That&#8217;s not a loyalty program, it&#8217;s not special if everybody is included.<\/span><\/li>\n<li><span style=\"font-family: arial;\">Wrong Outcome. If we assume that a loyalty program creates incremental orders that wouldn&#8217;t have otherwise happened (a big assumption), we may or may not generate a profitable outcome. For instance, too many of you ADORE throwing gross margin dollars in the trash can to &#8220;create&#8221; a more loyal customer. Why are you giving everybody an additional 20% off? Would they have purchased without the discount? If the answer is &#8220;yes&#8221;, you just threw money in the garbage can and lit it on fire.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: arial;\">A well-crafted loyalty program must result in incremental orders that wouldn&#8217;t have happened otherwise, and must result in more gross margin dollars and more profit dollars that would not have happened otherwise. Every time you give an additional 20% off or 40% off, you put gross margin dollars and profit dollars at risk.<\/span><\/p>\n<p><span style=\"font-family: arial;\">Also, you don&#8217;t solve the core problem. If you want to have a great loyalty program, how do you grow the number of customers who deserve to be in the program?<\/span><\/p>\n<p><span style=\"font-family: arial;\">P.S.: I once worked with a &#8220;brand&#8221; that decided to enter everybody spending &gt; $500 in a loyalty program, offering discounts\/promotions\/points to encourage the customer to spend more. The marketing team loved watching the orders roll in (in truth, they&#8217;d never measured how orders came in for this cohort). At the end of a year, I quantified year-over-year how much the &gt; $500 cohort spent (it was like a 20% increase). Everybody celebrated. Then I shared with them the outcome of a separate query I ran where I measured the year-over-year increase among $400 &#8211; $499 customers last year. They didn&#8217;t spend 20% more &#8230; but they spent 15% more.<\/span><\/p>\n<div style=\"text-align: justify;\">\n<ul>\n<li><span style=\"font-family: arial;\">The incremental increase of 5% was wildly unprofitable. The company simply burned money.<\/span><\/li>\n<li><span style=\"font-family: arial;\">Nobody appreciated the answer. I wasn&#8217;t invited back to continue analyzing the issue.<\/span><\/li>\n<\/ul>\n<\/div>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Three problems with loyalty programs: Wrong Incentives. Points and Discounts. Is that what the customer truly &#8220;wants&#8221;? Wrong Customers. The wrong customers are selected to be included &#8230; sometimes it is almost every customer that is included. That&#8217;s not a loyalty program, it&#8217;s not special if everybody is included. Wrong Outcome. If we assume that [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12033],"tags":[15483,4106,11391],"dealstore":[],"offerexpiration":[],"class_list":["post-7051140","post","type-post","status-publish","format-standard","hentry","category-analytics","tag-loyalty","tag-problem","tag-programs"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Problem With Loyalty Programs - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=7051140\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Problem With Loyalty Programs - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"Three problems with loyalty programs: Wrong Incentives. Points and Discounts. Is that what the customer truly &#8220;wants&#8221;? Wrong Customers. The wrong customers are selected to be included &#8230; sometimes it is almost every customer that is included. That&#8217;s not a loyalty program, it&#8217;s not special if everybody is included. Wrong Outcome. 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