Two Common Tools To Promote Loyalty That Don’t Work (And Why)

In our previous post, we looked at seven ways that Loyalty and Rewards programs are different and why Loyalty has the edge when it comes to promoting retention, repeat sales and long-term customer relationships. 

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We’re returning to that same subject here but this time we want to use a couple of familiar examples to dig deeper into what makes Loyalty programs a better way to go for most businesses. 

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These examples will probably sound familiar but as we go through them, ask yourself a question — Are these building loyalty that result in future purchases or simply making customers happy in the short term? 

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Ready? Let’s look at two concrete examples of frequently-used methods of cultivating customer relationships that are often mistaken for parts of a true Loyalty program. 

Birthday Gifts

Who’s going to criticize birthday presents? Not us, for sure. However, certain kinds of gifts for these occasions perfectly illustrate what we’re talking about. 

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Here’s the situation. You collect dates of birth for everyone who signs up to your “loyalty” program. On or near their birthdays, you email them a code or coupon for a free drink or a discount or a two-for-one deal or some sort of “reward” for turning a year older. 

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It’s certainly nice to be on the receiving end of these emails and, as a brand, you’re hardly committing a crime by upping the feel-good factor among your customers but is this really a good idea?

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Yes, we understand that those codes and coupons can result in foot traffic and maybe a sale but at what cost? What’s happening to your margins with these giveaways? Will the discount be applied to something the customer was going to purchase anyway? Are you conditioning your customers to wait for coupons before making a purchase? 

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On top of all that, consider these issues:

• Spam alert! These days, with better Inbox filters than ever before, you can’t even be sure your birthday email will land where you want it to. There’s a decent chance it will be directed to the “Promotions” tab, also known as where commercial emails go to die. Also, given current data protection regulations and provisions of GDPR, birthday promotions can be the source of trust issues or even legal trouble. 
• It’s been done. Nope, sorry, you’re not the first to think of sending customers something on their birthdays. That doesn’t mean you’ll get zero response, just that the novelty is gone and it’s possible that a given customer will get multiple such emails on their birthday. 
• Timing. Are you going to make the coupon good only for the day of their birthday? What if it’s on a day the business is closed? What if they have other plans? Are you going to make the coupon good for a week? A month? Where’s the sense of urgency there? 
• Diluted brand perception. Offering a birthday discount every year can cause customers to view the brand's pricing as inflated. They might come to expect discounts regularly and hold off on purchasing until their birthday or other special promotions, reducing the perceived value of the product or service.
• Personalization fails. A birthday promotion is a fairly generic type of personalization. While it is based on a customer’s specific date, it doesn't account for other factors like purchasing habits, preferences, or needs. Over-relying on such tactics could lead to missed opportunities for deeper, more relevant engagement.

The Bottom Line on Birthday Promotions

While it’s always a good idea to promote a positive attitude toward your brand, you still have to consider the pros and cons of any particular method. Birthday promotions had their moment in the early days of email marketing but, in addition to some of the practical issues noted above, it’s likely that they no longer align with other important considerations. 

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Most important of all, though, is that they don’t result in a strengthening of a customer’s ties to a brand that result in long-term relationships. 

Discounts for This, Discounts for That

Probably the most tempting of all promotions, giving away discounts to drive customer behavior is a hard habit to break. This is especially true in ecommerce, where overcoming the barrier to making a first purchase is key and the “solution” is often found in discounting goods and services. 

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We’re not saying that there is never a time or place for discounts, just that reliance on it for customer “loyalty” is a bad idea. Just as with the Birthday “gifts” discussed above, discounting has a downside that can work against any effort to build true loyalty among customers. 

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Discounts for signing up for a newsletter, discounts for a first purchase, discounts for holidays you only hear about when it’s time to give discounts (an Arbor Day Sale, really?), discounts for no reason whatsoever and more — there are huge downsides to conditioning customers to always getting a discount for everything:

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• Customer loyalty issues. New customer discounts can alienate existing loyal customers, who might feel undervalued. If only new customers get the best deals, loyal customers may switch to competitors who appreciate their repeat business.
• Price-sensitive customers. Attracting customers primarily through discounts can result in price-sensitive shoppers who will leave as soon as the discount ends. This makes it hard to build a lasting customer relationship.
• Cheapens the brand. Frequent discounts, especially for new customers, can make a brand seem less premium. Customers might start to perceive the product or service as lower quality and expect discounts to justify their purchase.
• Profit margins. Offering steep discounts cuts into profit margins. For new customers who may not stick around long-term, this can lead to financial strain without a guaranteed return on investment.
• Short-term focus. Focusing on short-term customer acquisition through discounts often ignores the long-term value of customer retention strategies. Building a sustainable customer base requires more than just enticing deals.
• Churn increase. Discounts for new customers can encourage "churn and burn" behavior, where customers sign up, get the discount, and then leave. This artificially inflates customer acquisition numbers without fostering real growth.

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Let us close with a quick description of a well-known outdoor wear company that used a significant discount to attract first-time buyers of their premium products. The discount was given to those who signed up for a newsletter and was immediately valid for any purchase. 

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Given the average price point of their goods, even a 10% discount was substantial, so what do you think happened? 

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That’s right, tons of existing customers used or created a secondary email address just to “sign up” for the newsletter to get the discount code. The result was an inflated, artificial number of newsletter subscribers, a significant hit on margins and, maybe, a handful of actual new customers. 

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And did this giveaway do anything to promote more, additional purchases from existing customers? We can only guess because this kind of promotion doesn’t even track that kind of thing but it’s fair to say the answer is likely a big “No”. 

Loyalty is the Way to Go

Our goal here was just to show how two familiar ways to engage with customers are well-intentioned and may bring in some level of benefit but, in the long term, have little impact on customer behavior. 

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What does have an impact on customer behavior and definitely results in long-term benefits? True loyalty programs based on personalized customer paths. That’s exactly what you can build with TRIFFT and achieve a more balanced strategy that rewards both new and loyal customers and builds stronger, more enduring relationships.

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Learn more about the industries we support or set up a personal introduction to effective loyalty programs.
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