Businesses use customer loyalty cards as a way to reward their frequent buyers with discounts on the products and services they offer. While loyalty cards have their benefits, companies must investigate the disadvantages before electing to start a program for their customers.
Perception of Quality
Discounted products and services are sometimes perceived as lacking the same quality and guarantee, whereas, luxury brands, that rarely discount are regarded with a high-end status. Buyers feel a sense of prestige after making a purchase for a luxury or high-end item.
Employee Training and Program Management
Starting a loyalty card program involves educating employees on the purpose of the program, how it works and how customers can sign up for it. Companies incentivise their employees to encourage them to get customers to sign up for loyalty cards. So businesses must consider the cost to train and motivate employees as well as costs associated with creating the card and tracking its findings in terms of consumer purchases.
Short-term Customer Loyalty
Some customers use loyalty cards to reap the short-term advantages, but are not necessarily loyal to the store or brand offering them savings. Once the next savings deal comes along, or once a customer feels as if he has gained all he can from a loyalty program, it's possible he'll move on to the next store or brand. In an article for Inc.com, Brian Woolf, author of "Loyalty Marketing: The Second Act," says that most customer loyalty programs do well during the first year, but after that businesses have to find another way to connect with customers.
Inaccurate Consumer Data Analytics
While customer loyalty cards help businesses gather data on their customers to determine the types of products they buy, the brands they favour and the promotions they respond to, some don't know how to use the data to improve customer relations. These cards are designed to give businesses information they can use to make decisions about future promotional efforts and how to stock their stores. Companies who hire third-parties to gather this data could end up spending money on a system, yet they don't take advantage of the information to maximise their profits and improve customer experience.
Some savvy consumers may resist signing up for customer loyalty cards because they don't want companies collecting information about their purchases. They view this as an invasion of their privacy as a consumer. Inc.com reports that more and more customers are aware of the fact that using their customer loyalty cards help businesses collect information on their buying behaviour that they may use to create future promotional offers.