Loyalty Abyss: Let’s Be Honest About The Attrition Rates!
The brand launches a new loyalty program. For a few weeks it’s executing the full-on acquisition campaign. Press releases, in-store app promotions, website home page screaming “Download the App NOW”, paid and organic media pointing the users to the AppStore and GooglePlay. A respectable number of consumers get recruited into the program and set up a profile. Hooray! Our app just reached 500K downloads!
These numbers get immediately reported, with pride, to the senior management. The higher the number, the more successful the acquisition campaign is deemed to be. It’s true. You can’t really see the impact until you have enough users in the loyalty program.
The problem is that once you have announced to the CEO that you have 500K app users it’s hard to go back and acknowledge that 3 months later the number of active users dwindled to 300K. It’s not unusual to see the program participation spike during the launch and drop off, sometimes abruptly (poor UX design) and sometimes gradually (campaigns/rewards not motivating). It’s not unusual for 20% of the users who downloaded an app to log in 2 times or less after the initial installation.
The key problem with the inflated user base rate is that it created an unreasonable expectation as to the program performance. If you have 500K users your redemption rate on any given offer will be calculated to be much lower than what it really is. Your campaigns will look weaker than they really are. Your user engagement rates will appear diluted. Most importantly, you will lose sight of the need to bring those lapsed users back onto the program.
Here is a radical proposal: be honest with yourself and your management about the customer attrition rates. Yes, it’s bad news – but hiding it doesn’t make it go away. When you acknowledge and account for lost users you discover the true customer pain points associated with your program, and allows your program to improve. The good news is that you know exactly who those users are. You can reach out to them with a custom survey or conduct some qualitative interviews to learn what went wrong for them in the experience. You can diagnose app design/UX issues or check your hypothesis on the reasons for abandoning the program (Not using it as frequently as expected? Too long to get to the rewards? Too many notifications?).
With this information in hand you will be ready for the next customer acquisition drive. The good news: you’ll be able to show the CEO the reduction in attrition rates and program effectiveness.
What’s the level of attrition you’ve seen with your programs? How do you find out the causes behind them? Let me know in the comments!