Loyalty Trends: Rewriting the Playbook?for 2024 and Beyond
Snipp Interactive
Customer Acquisition Retention and Engagement (CARE) Platform Loyalty - Promotions - Sweepstakes - Rebates - Rewards
Introduction
Loyalty has never been more crucial. With customer acquisition costs skyrocketing by 222% over the past decade, investing in brand-consumer relationships has become a strategic imperative. Research indicates that even a slight 5% increase in retention rates can trigger a significant profit surge, elevating brand loyalty from important to pivotal. Meanwhile, economic uncertainties and the rise of online shopping have led three-quarters of consumers to explore new brands, indicating a profound shift in loyalty dynamics and an evolution in consumer behavior and expectations.
In light of these changes, brands must adapt their loyalty strategies, especially as consumers increasingly seek value in a climate of rising inflation. This white paper navigates this evolving landscape, spotlighting brands' innovative loyalty marketing strategies to align with changing consumer demands. As we delve into these strategies, consider this document your playbook for navigating the future of consumer loyalty.
ASSESSING THE PLAYING FIELD: TODAY'S CONSUMER LOYALTY LANDSCAPE?
In recent years, US and European consumers have faced significant economic challenges. The US has experienced 40-year inflationary highs, compounded by more than ten Federal Reserve rate hikes. Meanwhile, Europe has grappled with persistent high inflation, spurred by supply bottlenecks and a sharp increase in energy prices. Amid this volatility,?brands are confronting a 'loyalty calamity,' with consumers showing less allegiance than ever before, underscoring the shifting brand loyalty trends.
In the U.S.:
In Europe:
Shopping around - 50%
Opting for lower-quality goods -? 33%
Purchasing smaller quantities -? 28%
THE BASIC PLAYS: TAPPING INTO CONSUMER LOYALTY TRENDS
With consumers leaning towards discount retailers and affordable private labels, brands poised for success will be committed to deepening their connections?with consumers. Key loyalty marketing trends integral to this basic playbook include:
In an economic landscape where cost-consciousness is paramount, brands must employ strategies that directly address their customers' financial pressures. This includes price discounting, offering coupons and rebates, and streamlining supply chains for greater cost efficiency—all aimed at putting money back into consumers' pockets. In the UK, this approach has proven effective, with a surge in retailer vouchers and coupons influencing the purchasing decisions of approximately 56% of British consumers.
Hill's Pet Nutrition?launched a value-based promotion with the help of Snipp that offered pet parents both immediate and future relief. The promotion offered instant coupons for automatic, point-of-sale discounts and rebate coupons. Customers could upload a photo of their receipt to a Hill' s-branded, Snipp-hosted website to receive a similar coupon to print at home.
2. WORK TO NURTURE TRUST:
Trust is a crucial yet elusive cornerstone of brand loyalty in today's market. It's hard to measure, essential for success, easily lost, and challenging to earn.?Brands that successfully build and maintain trust outperform competitors by up to four times and cultivate a consumer base that's 88% more likely to make repeat purchases and more than twice as likely to advocate for them during challenging times.?Customer loyalty trends indicate that trust is earned through consistent service, genuine interactions, and respectful handling of consumer data. With nearly half of all consumers feeling alienated by data mishaps or a lack of transparency, it's clear that trust significantly influences brand loyalty. Notably,?78% of consumers discover qualities that attract them to a brand and drive loyalty after the initial purchase, highlighting that earning trust is a continuous process.
3. BE PROACTIVELY INNOVATIVE:
According to the Harvard Business Review,?80% of individuals are open to new brands that help them achieve their personal goals.?This finding highlights the importance of brands understanding and responding to consumer priorities proactively. Offering support in forming healthier habits, introducing products that resonate with emerging trends, and ensuring that value is at the forefront of their propositions can help foster brand loyalty. Agility and responsiveness to evolving consumer needs are essential in developing solutions that meet these demands.
L'Oréal Paris's Le Visionnaire:?This innovation hub in Paris is a testament to a proactive strategy, blending creativity with technology to stay ahead in beauty innovation. It features hands-on experimental labs and uses AI for trend forecasting, positioning L'Oréal at the forefront of beauty innovation.
General Mills?Strategic Refresh:?Despite stable sales, General Mills overhauled its fruit snack brands to engage future consumers and preempt industry disruptors. The redesign and a new marketing strategy based on deep consumer insights ensure the brand's continued relevance in physical and digital marketplaces.
4. CREATE A LOYALTY NURTURING ECOSYSTEM:
Insights from Glassdoor's list of the best places to work reveal a strong correlation between employee satisfaction and customer satisfaction. For example, Trader Joe's, known for its high employee contentment, also boasts impressive Net Promoter Scores (NPS), indicating that customers are highly likely to recommend them. In today's market, where customer loyalty trends show that close attention is paid to company practices, it's crucial to cultivate an environment where employee well-being directly contributes to customer satisfaction. Empowered employees who build deep, personal connections with customers can significantly enhance brand loyalty. After all, customers are less likely to abandon a brand with which they feel a personal connection.
Pizza Hut’s Innovative Celebration:?During the holiday season, Pizza Hut found a unique way to honor its delivery drivers and engage customers. The company distributed 50 QR-coded doormats to customers who placed online orders. When delivery drivers scanned these doormats, they received a gift card. This initiative recognized the drivers’ hard work, strengthened customer bonds, and encouraged repeat business.
5. ENGAGE THROUGH SURPRISE AND DELIGHT:
Brands offering value beyond their core products and services can forge deeper customer connections. One effective loyalty marketing strategy uses surprise and delight to express gratitude to returning customers. Whether through a simple gift, a free product, or an exclusive promotion, these gestures can extend thanks and encourage ongoing brand allegiance. By analyzing purchase trends and customer behaviors, brands can pinpoint whom to target with these personalized touches, enhancing customer retention.
Chewy's Personal Touch:?In the competitive world of online shopping, Chewy distinguishes itself by sending handwritten holiday cards to major customers in the weeks leading up to New Year's. Unlike the generic cards many large retailers send, Chewy's personalized notes create a genuine sense of connection. Previously, Chewy has also surprised customers with free pet paintings, a unique gesture that helps keep its customer base from looking elsewhere.
6. BE WHERE THE CONSUMER IS ON SOCIAL:
With Gen Z increasingly using TikTok and Instagram for search and discovery, a strong presence on these platforms is crucial for capturing market share and building brand loyalty among younger consumers. Here’s how brands are adapting:
Building Community Through Everyday Engagement:
Brands are leveraging the power of everyday, ‘light-touch’ interactions to drive engagement. With 200 billion Reels viewed daily on Facebook and Instagram, the impact of a reposted story or a seamless online purchase can far outdo traditional advertising efforts in creating a loyal community—one that feels kinship to each other and the brand.
For example,?Taco Bell's?"Purple Knights" community engages with other customers on social media, helping them find new products.
Creating Compelling Social Promotions:
Innovative campaigns, contests, and giveaways on social media platforms provide memorable experiences and compelling reasons for users to keep engaging.
An example is?Nestlé?San Pellegrino’s?photo contest, which, with the help of Snipp’s platform, invited users to share their "Table Moment" with San Pellegrino. The social promotion enhanced brand visibility and engagement while offering prizes like a trip for two to Quebec.
Leveraging Influencer Partnerships:
Brands are forming partnerships with influencers to tap into new audiences, particularly younger ones who highly trust influencer endorsements.
Garnier, for example, partnered with TikTok star Charli D’Amelio for a content series exploring the science behind Garnier Fructis Hair Filler, endorsed by a board-certified dermatologist.
7. BE CONSISTENT ACROSS CHANNELS:
The digital surge has transformed omnichannel shopping with innovations like virtual try-ons and seamless social media integration, even as DTC brands expand into brick-and-mortar stores. Creating a unified shopping experience across all platforms remains challenging despite these advancements. Brands are responding by focusing on personalized recommendations and ensuring fluid navigation between online and physical stores, including delivery and pickup options. They are also leveraging data-driven technologies to improve the in-store experience.
Pacsun?is advancing its omnichannel approach by integrating its physical stores with its e-commerce and social commerce platforms through strategic partnerships with data platform SoundCommerce and marketing platform Cordial. This collaboration leverages SoundCommerce's retail data insights and Cordial's personalized communication tools across email, SMS, and mobile apps to offer a seamless and cohesive shopping experience across all touchpoints.
8. LEAN INTO LOYALTY PROGRAMS:
Retail executives are prioritizing loyalty programs as a key growth strategy for 2024. These programs are valued for their rewards and as a vital source of first-party data that can generate additional revenue from personalization. According to research, loyalty program members are 61% more trusting of their brands and may increase their spending by up to 30% when offered personalized experiences. Visa’s The Loyalty Report surveyed consumers across global markets and found that effective loyalty programs can significantly enhance brand perception, leading to an increased share of wallets. Europeans, in particular, are?64% more likely to recommend a brand with a robust loyalty program, and 57% would alter their spending to maximize loyalty benefits.?Given these advantages, Gartner forecasts that by 2027, one in three companies without a loyalty program will launch one.
Ulta Beauty?saw its loyalty memberships rise from 30.7 million in FY2020 to 40.2 million in FY2022, accounting for over 94% of annual sales. In January 2024, it refreshed its program to include more perks and a personalized birthday offer, reinforcing its importance to the company's success.
ADVANCED PLAYS: LEVERAGING TRENDS IN LOYALTY PROGRAMS
While 61% of European consumers view loyalty programs as vital to their brand relationships, enthusiasm in the US is more tempered. Loyalty program trends show that many Americans enroll in several branded programs (one to five on average) but actively engage with only a few. This disparity underscores the need to rethink traditional loyalty programs to captivate and maintain consumer interest. Modern consumers demand greater control over their rewards, outreach, and redemption processes and highly value personalized experiences and brand ethics. These shifts require loyalty programs to extend beyond the basics, focusing on the following key areas.
In loyalty programs, simplicity is key.?Consumers prioritize ease of enrollment and straightforward methods?to earn and redeem rewards above other factors. Deloitte research confirms these aspects as essential for the last two years and increasing in importance by 4% and 5%, respectively.?Effective loyalty programs remove barriers to participation, making it as easy as possible for consumers to engage.
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IHG’s Simplified Milestones:?IHG restructured its IHG One Rewards program to make rewards more attainable. Members earn benefits every ten nights stayed, with additional Milestone Rewards after 20 nights, including food and beverage credits, suite upgrades, and annual lounge memberships, simplifying the path to valuable perks.
e.l.f. Cosmetics' Flexible Earning:?e.l.f. Cosmetics allows customers to earn points on purchases made anywhere, not just directly from them. By simply uploading a receipt to their platform, e.l.f. demonstrates its commitment to convenience and inclusivity, catering to the customer's preference for flexibility.
2. ENGAGE BEYOND TRANSACTIONS:
There's a significant shift from traditional spend-to-get loyalty programs to engagement-based models, which aim to foster emotional–not just transactional–loyalty. Brands incorporate interactive elements like gamification and experiential rewards into their loyalty programs to deepen customer connections and bring their personalities to life. This approach does more than entertain; it collects valuable data for personalized and automated marketing that truly resonates with consumers. According to Capgemini's research,?emotionally engaged customers are likely to spend twice as much, keep the brand top of mind, and actively promote it to friends and family.
NASCAR’s Enhanced Fan Engagement:?NASCAR?has transformed its Fan Rewards platform into experience-based rewards, like fantasy leagues and race-day challenges, that engage fans beyond attending races. This strategy has led to Fan Rewards members spending 70% more time on NASCAR.com and achieving a click-through rate three times higher than non-members.
Marriott's March Madness Sweepstakes:?As the NCAA's official hotel partner, Marriott offered an experiential sweepstakes during March Madness. Open to Marriott Bonvoy members or those who signed up for the sweepstakes; participants could win a comprehensive Women's Final Four package in Cleveland, including flights, hotel stays, courtside seats, and a "game day rituals session" with coach Sydney Carter.
3. INVEST IN PERSONALIZATION:
Hyper-personalization, driven by AI and machine learning, is emerging as a key loyalty marketing trend, as consumers increasingly expect brands to recognize and anticipate their needs. Industry leaders are leveraging AI, ML, and data analytics to parse immense volumes of customer data, identify patterns, and tailor experiences—making interactions more engaging and rewarding. Surveys indicate that?64% of consumers prefer brands that offer personalized experiences, and despite privacy concerns, over half are willing to exchange personal data for better services. However, a notable disconnect exists:?45% of consumers have disengaged with brands that fail to provide tailored experiences, and while 90% value preferred communication methods, only 31% believe brands manage this effectively.?This gap underscores the need for integrating personalization into a comprehensive customer experience strategy, focusing on what consumers receive and how they are engaged.
Starbucks’ Personalized Approach:?Starbucks uses its Deep Brew analytics and AI to customize incentives, turning occasional buyers into regulars and enhancing the Starbucks Rewards experience with personalized communication, expanded ordering options, and a new partnership with Bank of America. With over 30% of its transactions conducted via its mobile order and pay feature, Starbucks is committed to integrating emerging technologies and continuously evolving to meet consumer expectations for personalization.
4. CREATE DATA-DRIVEN PROGRAM ENHANCEMENTS:
Leveraging AI and customer feedback, brands are fine-tuning their offerings to cater to their customer base's nuanced interests and characteristics, extending beyond the core group of frequent shoppers. This approach enables businesses to tap into diverse customer segments by analyzing their own and partner data, unlocking insights that drive targeted improvements and innovations.
Margaritaville's Strategic Expansion:?Margaritaville spotted an opportunity within their customer data, revealing that 60,000 to 100,000 customers owned RVs. Seizing this insight, they expanded their brand into the RV resort industry, creating destinations catering to this unique lifestyle. This strategic move broadened their hospitality offerings and deepened the brand's connection with a significant segment of their customer base by aligning with their specific interests and needs.
Petco Vital Care’s Revamped Loyalty Program:?In response to the rising pet care costs, Petco overhauled its loyalty program in January 2023. They introduced a two-tiered system: Vital Care Core, a free service offering benefits like complimentary grooming and pet food, and Vital Care Premier, which provides additional perks such as unlimited vet exams and boarding discounts. This simplification and enhancement increased store visits and spending among members, demonstrating the power of using customer insights to refine loyalty programs.
5. EMBRACE INNOVATIVE TECH:
Integrating technologies such as Virtual Reality (VR), Augmented Reality (AR), and Non-Fungible Tokens (NFTs) into loyalty programs can provide brands with a significant competitive edge by creating more interactive and personalized experiences. NFTs, for example, can grant customers special privileges like exclusive event access and VIP experiences, effectively blending digital innovations with tangible rewards.?
Hilton in Roblox:?Hilton's campaign within Paris Hilton's Roblox universe is a pioneering example of using digital platforms to bolster real-world loyalty benefits. Users can earn Hilton Honors perks and points through virtual challenges in an immersive Roblox experience, one of the first for loyalty engagement on the platform, demonstrating how virtual achievements can translate into tangible rewards.
Clinique's NFT Campaign:?Clinique's first NFT campaign, exclusive to members of the Clinique Smart Rewards program, offered winners an NFT alongside a decade's supply of Clinique products. This campaign illustrates how brands can link digital exclusivity with substantial real-world value, advancing the integration of innovative technologies into loyalty strategies.
6. ALIGN WITH CONSUMER VALUES:
Aligning with consumer values is crucial for cultivating deep loyalty. Brands that resonate with their customers' ethical and social convictions can forge strong emotional connections, transcending transactional loyalty. This approach is?essential for engaging younger consumers, such as Millennials and Gen Z, who often prefer brands aligned with their environmental, social, and governance (ESG) principles. Therefore, a key trend in loyalty programs has become incorporating ESG principles—such as rewarding actions like recycling, choosing eco-friendly products, or donating points to charitable causes. While not yet widespread,?50.8% of companies plan to incentivize such responsible behaviors.
Dick's Sporting Goods' Community Impact:?In response to the decline in youth sports participation, particularly in underfunded communities, Dick's has committed to providing access to sports for 1 million young athletes by 2024, investing over $7 million in local leagues and schools. Their Sports Matter Giving Truck initiative donates essential sports equipment, reinforcing their mission to promote sports and build loyalty from a young age.
Pampers Club's Holistic Approach:?Beyond just offering products, Pampers Club's website and app serve as a resource for parents, providing valuable services and information. The brand detailed its efforts to reduce carbon emissions and introduced the "Diaper Stash" in 2023, an online fund where users can gift diapers and wipes to financially challenged parents. These initiatives, aligning with the values of their consumer base, have significantly boosted app engagement and led to over 560,000 subscribers on their YouTube channel.
7. CREATE STRATEGIC PARTNERSHIPS:
Strategic partnerships are transforming loyalty programs by expanding reach and increasing cost-efficiency. Leaders like Hilton and Marriott now allow members to use points for everyday purchases on platforms like Amazon, broadening their appeal beyond frequent travelers. This strategy overcomes a significant loyalty marketing challenge by attracting a broader customer base with more versatile rewards. By moving beyond traditional, single-brand loyalty models, these partnerships offer a variety of benefits that cater to diverse consumer preferences, a crucial feature for?60% of consumers who value the flexibility to earn and redeem points across different brands.
Retail Collaborations:?Target's?partnerships with?Ulta Beauty?and?Apple?exemplify this trend at the retail level. Customers can access rewards from Ulta Beauty and Target Circle and free trials of Apple's digital services by linking loyalty accounts. Likewise, ?Sephora?and?Kohl's?collaboration allows shoppers to accumulate points from loyalty programs for purchases made within Kohl's Sephora sections, enhancing the shopping experience and loyalty benefits.
8. OFFER PREMIUM AND SUBSCRIPTION-BASED LOYALTY PROGRAMS:
The rise of premium and subscription-based loyalty programs reflects a growing consumer readiness to pay for exclusive benefits, moving beyond traditional free-to-join models. According to a Deloitte survey, the percentage of?consumers paying for loyalty programs has surged from 17% in 2021 to 53%. These paid programs are shifting from hard currency rewards like discounts and points to emotionally rewarding benefits such as exclusive product access, personalized experiences, and conveniences such as free shipping or extended returns–which builds a stronger emotional bond without direct financial incentives. For example,?Under Armour's loyalty program provides early merchandise access, special events, and exclusive content from athletes.?However, these programs require high customer expectations to be met, particularly when a membership fee is involved or a loyalty threshold must be reached.
Target Circle 360:?With a $99 annual fee, Target competes with Amazon Prime and Walmart+ by offering unlimited free same-day delivery for orders over $35, free two-day shipping, and more. This initiative comes as Target plans to expand by opening 300 new stores over the next decade, aiming to enhance customer value and convenience.
Sweetgreen Sweetpass+:?For $10 a month, Sweetgreen offers $3 off daily orders, free delivery, and exclusive perks, leading to a 15% increase in visit frequency and encouraging more frequent orders.
Restoration Hardware:?The RH Members Program, costing $200/year, offers 25% off all full-priced items and an additional 20% off sale items, plus complimentary design services. Though more of a discount than a traditional loyalty program, it effectively encourages repeat business.
FORECASTING PLAYS: ANTICIPATING THE FUTURE OF LOYALTY PROGRAMS
à LA CARTE LOYALTY?PROGRAMS:
Looking ahead, loyalty programs may evolve from exclusive brand commitments to flexible and unbundled à la carte selections, where consumers choose the perks that best suit their needs. This shift mirrors trends in streaming services, where subscribers can tailor their packages with preferred features. Airlines have already adopted this approach:?American Airlines and Delta allow loyalty members to customize perks, enhancing the travel experience based on individual preferences.?This trend towards personalized loyalty benefits is poised for growth as consumers increasingly demand more control and flexibility over how they earn and redeem their rewards, pushing more brands across various industries to adopt a more modular, consumer-centric approach to loyalty programs.
LOYALTY PLATFORMS EVOLVE INTO ECOSYSTEMS:
The future of loyalty programs is trending towards decentralized ecosystems, enhanced by blockchain and AI, which simplify the processes of earning and spending points. At the core of this shift is "composable loyalty," which uses modular components to build flexible and personalized programs. This trend aligns with broader composable business practices prioritizing agility and rapid adaptation.
Looking beyond 2024, we expect loyalty platforms to integrate seamlessly with various tools, from e-commerce and social commerce to customer service, significantly improving user experience and engagement. A notable development is the adoption of loyalty points as a form of payment, exemplified by Valuedynamx Ltd.'s "Pay with Points" solution, which offers versatile reward options.?Platforms like Singapore Airlines' Kris+ are leading examples, allowing members to use points across a vast merchant network.?Blockchain's role in facilitating these transactions promises a more efficient and cost-effective system. As these technologies advance, they will revolutionize loyalty programs by offering diverse rewards and increasing consumer control, marking a new era in customer-brand relationships.
Valuedynamx and Emirates Skywards Collaboration:?Enhancing the Emirates Skywards program, Valuedynamx introduced its "pay with points/miles" feature through the Skywards Miles Mall's 'Spend Online' section, allowing members to use their miles for various everyday items, from digital gift cards spanning over 500 brands in key global markets. By expanding redemption opportunities in fashion, fitness, technology, and more, this initiative not only diversifies how members can use their rewards but also deepens consumer loyalty by aligning with globally recognized brands.
Conclusion
Play The Long Game For Consumer Loyalty
As brands navigate the complex terrain of consumer loyalty, the path forward requires a capacity for adaptation, personalization, and continual innovation. Loyalty is not a destination but a journey—a process of perpetually earning consumer trust that leads to more frequent and significant purchases. It’s a game of ongoing optimization where loyalty is not achieved overnight but cultivated over time. Brands must constantly evaluate how to improve their offerings, enhance value, and provide compelling reasons for consumers to return. In an era where consumer loyalty must be earned rather than expected, success depends on understanding shifts in consumer behavior, leveraging emerging trends, and committing to building deeper, trust-based relationships.
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