The Reimagined Loyalty Playbook
Your guide to building a more engaging, dynamic, and personalized customer loyalty program
Today’s consumer is exposed to more brands than ever before. And people, swayed by availability and better value, are ready and willing to try something new. Seventy-one percent of consumers switched brands at least once in the past year. This makes it more important than ever for companies to focus on fostering loyalty and nurturing lifelong customer relationships.
Customer expectations are shifting. A good loyalty strategy involves adapting to, meeting, and predicting those shifts. Today’s consumer looks for brands to meet them with what they want, wherever, and whenever they want it. They also want friction-free, personalized service. Meeting these expectations demands that you not only know who your customer is but that you understand them as well.
Loyalty is a valuable part of an organization’s business strategy. Loyalty programs go a long way toward increasing purchase frequency, retention, customer lifetime value, and access to first-party data. In fact, 56% of consumers report they are more likely to buy from a brand that has one. However, it’s not just about a loyalty program. It’s about brands that personalize and cater to customers' wants and needs. Building a program that can foster loyalty while delivering on customers expectations requires that you redefine loyalty and reimagine your strategy.
Redefining Loyalty
Your ability to foster brand loyalty is more complex than it was even just a few years ago. For a business to truly find success, it needs to have a holistic loyalty program that goes beyond simple transactional relationships. Brands need to harness what they already know about their customers to spark meaningful, memorable moments.
People aren't just looking for a deal or a discount. They want something deeper. They want experiences and, oftentimes, a commitment to shared values. It’s no longer just about what people buy, but about who they support and how they see themselves. Building a loyalty program that speaks to these desires requires engaging customers and surfacing opportunities to truly get to know them.
Today’s customer loyalty is twofold. Brands need to reward loyal behavior with things like points, discounts, and freebies, while also inspiring an emotional connection through empathy, understanding, and shared values. Consumers (especially younger generations) are drawn to rewards that emphasize exclusivity, community, and personalized attention. However, despite 73% of customers expecting companies to understand their unique needs, only 44% of brands are delivering. In fact, many businesses are falling short because they’re focusing on traditional points programs.
This playbook will show you how to build and execute a more personalized and experiential loyalty program that is in line with your customers’ wants and needs.
Chapter 1
Loyalty as a Strategy
Customer loyalty goes beyond your marketing department. Your customers interact with many departments, and each experience affects their overall loyalty. Building a true connection with your customer requires an overarching strategy that ensures their experiences are:
Connected:
Connecting data across all departments allows agents to view all the customer information they need, including past purchases, service calls, loyalty status, and more. It also bridges the gap between digital and in-person interactions.
- Consistent:
All departments (customer-facing, sales, marketing, etc) should have access to the same data so customers get the same VIP, personalized service regardless if it’s through a loyalty promotion, a marketing email, customer service call, online interaction, or in-store visit.
- Personalized:
You want the ability to understand your customers beyond just the behaviors they take on your site, app, etc. Different customers value different aspects of a loyalty program, so the ability to cater to those preferences is key. Gaining insights into your customers’ hobbies and interests enables you to use that data to tailor your program to delight them.
Pre-program work
Determining a baseline strategy that ensures a connected, consistent experience cannot be done without the proper foundation. The first step in assuring you can provide this type of customer experience is to focus on data unification.
Unifying data across your organization
Your customer needs to be at the center of everything you do. Successful loyalty programs do not exist in isolation. They extend across an organization. However, as it stands, only 61% of companies are using loyalty data across three or more departments. Sharing data across your organization makes it possible for you to prioritize your customer.
Most companies already have a lot of the information needed to paint a detailed picture of each customer, however it may live in different systems. To find success, you need to unify all your data so that you have a complete picture. Then you’ll be able to answer questions like: What are your customers’ preferences? How long have they been patronizing your brand? How often do they shop? Where? When? Once you know this you can begin identifying target segments. This will allow you to determine the type of loyalty program to run, and if the rewards/experiences are targeted toward everyone or a unique subset of your customer base. Your data strategy is key to activating your target audience in meaningful ways.
Building out a data strategy can feel complicated or overwhelming. Start by asking yourself the following questions:
- Is your customer data centralized?
- How will it be shared across business systems?
- How complex is your tech stack? Can it be simplified?
Then, work with your head of IT and data science team to ensure you’re able to unlock the data you need.
Setting Program Goals
You should have a firm grasp of what you’re trying to accomplish with your loyalty strategy. This includes how you’ll measure and track its profitability. It’s important to balance both behavioral changes with emotional changes.
Behavioral Changes
- Increased frequency and basket size
- Broadened the product mix purchased
- Increased Customer Lifetime Value
- Increased share of wallet
- Increased engagement across social, marketing campaigns, etc
Emotional changes
- Increased net promoter score (NPS) and customer satisfaction score (CSAT)
- Improved sentiment analysis
Chapter 2
Configuring your Program
Determining Your Program Type
There are many program types that can support your loyalty strategy. Points-based programs are the most popular, but by no means the only effective choice. The most successful programs tend to use a combination of types. This allows you to appeal to different customer segments.
- Points-based programs
Earning points for purchases. These can be qualifying (i.e. points that go toward a tier status) or non-qualifying (i.e. points that you earn, but are simply redeemed for rewards).
Pros: Easy to understand and easy to track liability.
Cons: May not be compelling enough to engage your customer.
- Experiential programs
Rewarding customers with experiences that may or may not incorporate your products and services.
Pros: Flexible, more engaging, and builds emotional connections.
Cons: Harder to measure emotional impacts.
- Premium programs
Programs in which customers pay to participate.
Pros: Faster ROI and exclusivity.
Cons: May exclude some customer segments.
- Partner programs
Partnering with complementary businesses to offer a wider variety of member rewards. Enables both businesses to run joint promotions.
Pros: Increases program stickiness, offsets liability, provides access to each partners’ customer bases, and builds the association with the partner brands.
Cons: Challenging to manage partners, little visibility into and control over the partner customer experience, legal considerations, and less data transparency.
- Tiered programs
Providing levels with increased perks, discounts, rewards, etc.
Pros: Unique benefits incentivize customers to spend more to level up.
Cons: Customers may give up if it’s too hard to achieve the next tier.
- Cash-back programs
Offering customers money back on purchases. For example, a credit card company might offer 3% back on grocery store purchases made using its card.
Pros: Immediate gratification.
Cons: Value needs to be high enough to sustain engagement.
Integrating your Program
Your program will need tools to run it. You may need to connect systems like marketing automation, e-commerce, point of sale, service, enterprise resource plans, and property and reservation management. These systems work with your loyalty management tool to inform actions like earning and tracking points, redeeming points, activating a promotion, etc.
You’ll also need to determine how quickly you want to process transactions. This may impact how you integrate your systems.
Types of processing:
- Real-time: An event is triggered within seconds of a behavior and points are applied to customer accounts immediately.
- Near real-time: Event triggering can range from a few minutes to a few hours. This is a great option if you don’t expect customers to make multiple purchases in a day.
- Batch: Events are triggered over several hours or once per day. This is a good option for programs that include features like tier assessments (upgrades or downgrades) or point expirations.
Choosing your vendor
When assessing vendors, it’s important to think about your current and future needs. There are many loyalty technology providers in the market ranging from highly customizable enterprise platforms to turnkey solutions. Creating a custom program from the ground up may offer more flexibility, but it also takes more time and resources to maintain. Building onto an existing platform reduces the time, resources, and money needed to maintain it.
Ask yourself the following questions to determine which vendor and tool(s) may be right for you:
- Complexity: How complex is your program?
- Flexibility: Will your program evolve over time requiring additional capabilities, including adding new rules and logic on a technical level?
- Scalability: Can your system grow as more customers join or is there a cap to the number of members it can support?
- Extensibility: Is the system compatible with other tools if you need to add new features?
- Speed of feature development/vendor investment: Is your vendor investing in research and development for their product? Do their goals/investments align with the vision you have for your program?
Ensuring data privacy
No matter what type of program you use, data privacy is imperative. 86% of consumers want more transparency over how their personal information is used. This means businesses need to be mindful of how they’re using the data consumers are sharing. This includes remaining compliant with local and regional regulatory policies (i.e. General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), etc.).
Chapter 3
Launching and Running your Program
Implementing your program
When implementing your program, you’ll need to decide whether you want to launch with your full program or take a phased approach. There are benefits and drawbacks to both:
- Fully-configured program:
- Benefits:
- Better customer experience with all features, benefits, and promotions.
- Aside from those needed for maintenance, no major resources have to be allotted for further program development.
- Large marketing moment at launch drives a greater percentage of your customer base to sign up.
- Drawbacks:
- Higher upfront investment.
- Longer time to market.
- Benefits:
- Phased program:
- Benefits:
- Opportunity to leverage new phase launches as marketing moments.
- Investment is spread over a longer period of time.
- Faster initial time to market.
- Learnings can be incorporated into the future phases
- Drawbacks:
- Initial program may not be as engaging.
- Costs and resources needed for multiple launch planning cycles.
- Benefits:
Member Acquisition
The most important part of any program is getting people excited and eager to join. A large part of your marketing strategy should focus on continually acquiring and engaging members. Member acquisition campaigns should:
- Create excitement.
- Outline program benefits and communicate the journey so customers understand they are entering a relationship, not signing up for a one time perk.
- Align with other big moments (holidays, yearly sales, etc.).
- Offer sign-up bonuses to entice customers to become members.
- Create brand advocates by rewarding members for posting reviews and contributing to your community.
Employee Training and Incentives
Employee excitement and knowledge is paramount to a proper implementation. You need to train your employees to help facilitate a seamless onboarding. Member service agents will need to know the inner workings of the program so they can help customers troubleshoot issues. Frontline staff need to know the perks to effectively promote it.
Also, consider an internal incentive program. You can reward your employees for things like signing up customers, providing great customer service, and increased customer satisfaction (CSAT) scores.
Member Engagement
54% of program memberships are inactive because members aren’t engaged consistently. Engaging your members is an ongoing effort. Offers, perks, bonus points, and personalized interaction need to continue at regular intervals. You can also create engagement moments that enable you to continually learn more about your customers by asking targeted questions. This includes:
Rewarding members for completing their profile.
Offering points or rewards for taking surveys about their preferences and interests.
Using important life events as opportunities to engage members with prompts like:
Who are you shopping for this holiday season?
Are you planning a vacation?
Have you found the perfect Mother’s Day gift?
Engaging customers in this manner helps you get to know them on a more granular level. You can use this information to provide more dynamic and unique rewards and to better define your centralized customer profiles. The following sections outline ways to engage your customers more dynamically.
Experiences
Experiential aspects should be woven across every facet of your loyalty program. Work to understand which customer segments prefer experiences over monetary rewards. Then, test what mix of benefits works best. You can also localize experiences for certain regions or cities, and leverage program partners. For example, if you sell headphones or speakers, you might partner with an event company to offer top-tier members exclusive access to concert tickets. Or, an airline might offer a VIP travel experience complete with a ride to the airport, VIP lounge passes, and other upgrades.
Exclusivity
Creating a feeling of exclusivity makes your members feel like they’re a part of a special community. This is especially important for paid programs, where members expect to feel like VIPs. But it’s important across the board, especially for younger generations. 35% of Gen Z and 28% of millennials value exclusivity most in a loyalty program compared to 17% of boomers and 20% of Gen X. People like to feel like they’re in on something special. You can create this feeling by offering perks like exclusive or early access to products or sales, invitations to member-only events and communities, and member-only customer support lines.
Gamification
Games have become an increasingly popular way to deliver on people's desire for unique and interactive experiences. Games not only provide a fun experience, they motivate people on an emotional level. They provide immediate gratification and keep members engaged as they continually work toward something. This makes it especially valuable as an ongoing engagement and acquisition tool. Gameplay can take the form of a video game, board game, sweepstakes, or virtual game.
Value-based loyalty
71% of consumers say they pay more attention to companies' values than they did a year ago. Incorporating company ethos within your loyalty program is a great way to tap into emotions to build a stronger connection with your customers.
Expressing your values engages your customers on a whole new level. It allows you to join together for the greater good. You can do this by:
- Allowing members to convert their loyalty points into a charitable donation.
- Creating a sweepstakes for a large donation to an organization of the member’s choosing.
- Rewarding program members for behaviors like volunteering or offsetting their carbon footprint.
Chapter 4
Measuring Success
More than 20% of companies believe they can use their loyalty data to drive more business value. Measuring loyalty is multifaceted and encompasses both behavioral and emotional measures. As mentioned in chapter one, behavioral measures can include changes in purchase frequency, amount spent, basket size, and more. Emotional measures are harder to quantify, but changes in net promoter scores (NPS), customer satisfaction (CSAT) scores, and program engagement data are common indicators.
You want to ensure your program is delivering a return on investment. This necessitates tracking things like member acquisition, engagement, loyalty-influenced revenue, program liability, and customer lifetime value.
Member and Customer Acquisition
Set a benchmark timeline for your expected member acquisition progress. You’ll want to continually track both existing customers as well as new customers who now do business with you as a result of your program.
Member Engagement
Set a threshold based on how often your customers do business with you and track the percentage of active members. Keep track of metrics like repeat purchase rate (how many members purchase more than once), redemption frequency (how often members are redeeming rewards), and if members are active in your community, app, and social media. NPS and CSAT surveys can also be valuable tools in assessing overall engagement and satisfaction. You can also use artificial intelligence (AI) to anticipate which members are likely to disengage with the program before it happens.
Loyalty-Influenced Revenue
Loyalty-influenced revenue refers to incremental revenue that results from your program. Comparing loyalty program members with your other customers, you can determine the impact on things like sales frequency and basket size. You can also assess the program’s effectiveness by customer segments. Knowing this will allow you to tweak things further for a better ROI.
Program Liability
Program liability refers to the cost of the loyalty program. For example, in a points program, each point has a monetary value that is reflected in your financial records. That value is used as part of the ROI calculation. Also, because 28% of consumers abandon loyalty programs without redeeming their points, program liability also needs to account for the number of loyalty points issued but not redeemed due to expiration or other reasons.
Customer Lifetime Value
Customer lifetime value is often highly dependent on the individual business/industry. That said, you’ll want to do your best to understand your marketing and operational costs compared to various components of customer lifetime value. These might include the length of your customer relationships, annual revenue driven per customer, and referrals.
Conclusion
Customer loyalty is one of the most valuable factors in today's business landscape. Brands that are able to develop programs that leverage data, analytics, and a cross-organizational strategy are able to produce emotional and transactional loyalty. As a result, they’re able to build and sustain an engaged customer base. Creating these personalized experiences will open up valuable exchanges that work to develop wide-reaching, personal customer relationships.
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