Reward-Givers, Beware!

Switching loyalty platforms might cut costs—as long as you avoid angering customers

- Kate Rockwood

In 2014, Boloco, a New England chain of 11 burrito joints, moved to a mobile-only rewards program. Company executives say they intended the switch as a tech-savvy upgrade for customers. But it was also a cost-saving strategy, as the company tried to reduce the discounts it was giving out. Now burrito fans would receive $2.50 for every $50 spent—instead of what had once been a free burrito at that threshold.

“We gave our tens of thousands of loyalty-card users just 30 days to make the switch, and they revolted,” says co-founder and CEO John Pepper. Boloco’s blog was inundated with angry comments, and the brand was raked over the coals on social media. Once-loyal customers swore off the chain indefinitely. “The goal had been to reduce the discounts, and we accomplished that—along with sales and profits,” jokes Pepper, who had reinstated the old rewards program by early 2016.

Boloco is hardly the only company that’s encountered the dangers of meddling with customer loyalty programs, which have been around since at least the 1930s, according to David Robinson, a marketing lecturer at University of California, Berkeley. He points to the airline industry, where rewards programs are often in flux depending on the economy and passenger volume. “Everyone gives points, then double points, then triple points—then the whole thing collapses and starts again,” he says.