Executives Are Unhappy With Their Companies’ Loyalty Programs

More than half find their customer rewards ineffective

a mastercard credit card sitting under a pile of coins
The report, which was sponsored by Mastercard, surveyed over 400 executives across a dozen industries. CSS Entertainment

When seemingly every travel brand offers its own specialized loyalty program, industry leaders are finding it difficult to stand out.

A new report conducted by the Harvard Business Review Analytic Services, the commercial research arm of the Harvard Business Review, found that corporate faith in loyalty programs might be weakening: 58% of executives surveyed believe their organization’s approach to customer loyalty is ineffective.

The report, which was sponsored by Mastercard, surveyed over 400 executives across more than a dozen major industries worldwide to learn more about their loyalty strategies and approaches.

One of the key findings? It’s not just about points.

Today, executives rank traditional rewards like points and miles fourth most important, behind exceptional customer service, digital and omnichannel access, and ease of use. Five years ago, points and miles were considered the “top determinant” of a loyalty program’s success.

“There’s much more to building consumer loyalty than just the transactional aspect of points,” said Francis Hondal, Mastercard’s president of loyalty and engagement. “We have to evolve towards experiences and enabling access to the experience.”

Only 43% of executives said their approach prioritizes digital, while more than half said they’ve made changes to their loyalty strategy within the past two years.

“It’s pretty metrics-driven,” said Hondal. “Measuring a loyalty program is pretty straightforward, but I think what’s happening now is that there is so much coming at a consumer, and digital creates a whole different opportunity to engage consumers.

But that engagement can come with risks. “If you’re not as savvy or well-developed [digitally], then you run the risk of becoming less attractive for a consumer who can go somewhere else,” she said.

Executives’ goals for their loyalty programs differ too: 65% said the main objective is attracting new customers, while 57% prioritized building a stronger “emotional connection” to a brand.

“I am giving you a reason to continue to do business with me, not only because I’m giving you a good product but because I value the relationship I have with you. That’s emotional connectivity,” Hondal explained.

According to the report, more than 90% of leisure and hospitality companies operate a loyalty program, versus 61% of all companies. However, 55% of leisure and hospitality companies say their loyalty strategy is ineffective.

“Do you not have access to data? Do you not have the capability to execute in a digital environment?” asked Jon Glick, a partner at PwC who focuses on loyalty programs in the travel industry. “There’s a lot there, and I can understand why a majority [of executives] don’t feel like their organization isn’t equipped to do it wholeheartedly.

“It’s much cheaper to retain a customer than it is to go and acquire a new one. We’ve known that forever.”

But Zach Honig, editor at large at The Points Guy, a blog focused on loyalty programs, wasn’t surprised by the survey results. Honig emphasized that within the travel space, brands can struggle with providing a consistent experience, no matter how successful a loyalty program is.

“If you stay at a Hilton, you can have a drastically different experience from one to the next,” he said. “Anytime there is a human factor, there is a potential fault point.”

@RyanBarwick ryan.barwick@adweek.com Ryan is a brand reporter covering travel, mobility and sports marketing.