Our guest author explores the evolving landscape of loyalty programs, delving into ways to cultivate enduring customer relationships.
A competitive marketplace brings in a deluge of tempting offers from countless brands, each vying for the attention of shoppers. While new customer acquisition is a top priority, savvy marketers understand the immense potential of nurturing existing customer relationships.
After all, there is a 60–70% chance of selling to existing customers. According to a study by VISA and Bond, 64% of loyalty program participants shop more frequently and spend more, with a remarkable 86% willing to recommend the brand to friends and family.
This phenomenon is particularly pronounced in price-conscious markets like India, where personal reviews and emotional recommendations drive a significant portion of sales.
However, loyalty programs encounter fresh challenges in today's dynamic business landscape, marked by price-conscious customers, intense competition, tighter profit margins, and evolving customer expectations. The conventional approach of providing discounts and rewards is no longer sufficient to retain and engage customers effectively.
To thrive in this environment, loyalty programs must innovate, stand out, and adapt to emerging customer demands to cultivate enduring customer relationships.
Challenges and opportunities for loyalty programs
Loyalty programs face significant challenges. The struggle to maintain novelty and innovation is evident, as many programs offer similar rewards, diminishing customer engagement.
According to a recent survey, 74% of consumers value feeling understood and valued over mere discounts. To address this, companies must craft innovative loyalty offerings. Gen Z's emergence demands adaptation to tech-savvy preferences, requiring seamless digital experiences.
KPMG reports that 69% of millennials find loyalty programs challenging. Hyper-personalisation is growing, with customers seeking tailored experiences through data analytics and AI. Lastly, loyalty programs should include behavioural and social loyalty, moving beyond transactions to understand behaviour and reward advocacy. Let's discuss a few innovative solutions that can be adapted.
To move beyond transactional loyalty, programs should integrate non-transactional elements like gamification and virtual reality experiences.
For example, Epsilon provides out-of-the box
gamification options, and Dunkin Donuts' Perks Week, in which the brand rolls out offers exclusively for members of the DD Perks Rewards Program, is a successful non-transactional engagement.
Diverse earn and reward types
Providing a wide range of earn and reward options can cater to different customer preferences. Examples include the Starbucks and Sephora Beauty Insider programs.
The Preferred hotels loyalty program allows members to bid on elite experiences using points. Kellogg’s provides sweepstakes for exclusive deals.
Additionally, integrating Non-Fungible Tokens (NFTs) into loyalty programs can introduce a unique and collectible dimension to rewards, encouraging active participation.
Forge greater partnerships
Collaborating with other brands can extend the reach of loyalty programs and offer customers more diverse and valuable rewards. LANDMARK Rewards, which allows customers to redeem across brands like Lifestyle, Max, and Home Center, is a prime example.
Loyalty platforms should provide greater flexibility in integrating diverse partners.
Hyper-personalisation and social loyalty
Platforms that help brands understand, listen, and provide additional data attributes can enhance campaign relevance, engagement, and trust with consumers.
For example, our Starbucks reward program provides birthday drinks, personalised coupons based on purchase history. This is an ability for the brand to provide offers to an “Me” compared to a “segment that I belong to”. The fundamental requirement for a loyalty platform to achieve effective personalisation is the capability to gather, analyse, and construct personalised profiles for customers.
Loyalty Platforms like ours, allows insights from various data sources-mobile app behaviour, preferences, purchase history, social data, device locations etc.- to build a clear persona of consumers that drives hyper – personalisation.
Premium program offerings
Introducing premium loyalty program tiers can create exclusivity and incentivise customers to aim for higher levels of engagement. Premium offerings could include early product access, personalised services, or enhanced rewards. Amazon Prime is a notable example of a premium program.
Even though being a paid premium program customers are benefited with free shipping, Prime video access, free music access etc. Swarovski Crystal Society program is another premium program that provides customers – free shipping, free repair, access to exclusive events , early / pre-sale access to products.
In the face of escalating competition and evolving customer expectations, loyalty programs and platforms must adapt and innovate to remain effective. Embracing gamification, exploring NFTs, meeting the demands of Gen Z consumers, and implementing hyper-personalisation can breathe new life into loyalty offerings.
Focusing on non-transactional engagement, forming strategic partnerships, and providing premium program options enable loyalty programs to nurture enduring and valuable relationships with their customers.
As the market continues to evolve, staying proactive and dynamic will be essential for loyalty programs to thrive in the years to come.
(Our guest author is Geordin Jose, Director, Program Delivery, Epsilon India)