Today’s consumers encounter an unprecedented number of brands on a daily basis. Their purchasing decisions are influenced by value, trends, and quality, which make them more open to experimenting with new products and brands. This means businesses need to prioritize loyalty marketing to build lasting relationships with their customers.
To have an effective loyalty strategy, you must not only adapt to changing consumer behaviors but also anticipate and meet those consumers where they are in their journey. Modern consumers expect brands to deliver exactly what they need, whenever and wherever they need it, along with seamless, personalized service. Fulfilling these expectations requires a deep understanding of who your customers.
Loyalty marketing needs to be a crucial component of any business strategy. Successful loyalty programs can significantly boost purchase frequency, retention, customer lifetime value, and the acquisition of first-party data. In fact, 56% of consumers say they are more inclined to purchase from a brand if it offers a loyalty program.
However, loyalty extends beyond just having a program – it’s personalizing experiences and addressing the specific desires and needs of customers. To do this, businesses must redefine what loyalty means and revamp their strategies accordingly.
Let’s dive into why loyalty marketing is vital, highlight common customer pain points, and how loyalty is evolving. We’ll also look at three industry-specific use cases to show a clear blueprint of how loyalty marketing should be done.
What you will learn in this blog
Why is loyalty marketing important?
Loyalty marketing is becoming increasingly important for brands and is much more far-reaching than just a program. Loyalty is the result of the sum of all interactions a customer has with a brand, and when done right, it builds an emotional connection that establishes trust between both parties.
This is more relevant today than ever, as we see consumers consolidating their overall spend. According to the United States Census Bureau, people devoted 20 minutes per week to shopping in 2023, which was down from past years. The good news? They spent more money during this time than they did in the past.
Brands across all industries are taking notice. According to Gartner, one in three businesses that do not have a loyalty program today will establish one by 2027. We see this impacting the Fintech sector heavily, where they are not historically known for prolonged loyalty initiatives but are now finding new value and becoming market leaders.
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Common loyalty marketing pain points
Loyalty strategy isn’t static. While many new brands are entering the loyalty space, we are also seeing a large uptick in companies that have had long-running loyalty programs change their approach. It’s important for organizations to continuously modify their programs and tactics based on shifts in consumer trends, market changes, and evolving customer preferences.
For Fintech, there has been a shift from high-value acquisition tactics to rewarding members who are more engaged over time and utilize more offerings from the institution. According to Berkshire Hathaway, customer acquisition costs have risen 60% in the last five years, leaving brands with a $29 loss for every new customer acquired. New loyalty programs are focused on rewarding and encouraging existing members through engagement even when they are not in a traditional “buying” moment.
For example, they create more financially literate members through gamification or educating members about the benefits of related product offerings to encourage cross-product acquisition, creating more stickiness and greater lifetime value.
How loyalty marketing is evolving
While transactional loyalty programs – which reward customers with incentives like points, discounts, or cash back for frequent purchases, are key to driving results and encourage continued engagement – they don’t necessarily prompt the customer to prioritize that brand over others.
This is what we call the “Do / Get” relationship, where you do something only because you get something in return. On the other hand, when a brand builds a genuine relationship and connection with a customer, fully integrating into the customer journey and experience, customers feel a connection to the brand and proactively take actions to engage. This is what we call the “Feel / Do” relationship and what creates a relationship built on trust between brand and member. This is where we should be headed.
Loyalty marketing use case 1: How to get to know your members
When launching or evolving a loyalty program, it is important to understand who your members are and what is important to them. When planning your rewards, first talk to your members about what they value in the brand and find ways to reward them that are related. Remember what might be meaningful to the organization might not be meaningful to the consumer, so it is important to keep an open mind and dig into customer expectations.
Once you launch your program, you can mine the data and engagement to understand your customers better. Use rewards to incentivize giving first- and zero-party data, surveys or quizzes to learn more about where your members are in their journey. Then use the data you discover to craft better experiences and moments for them.
Loyalty marketing use case 2: How to personalize the experience
Personalization is another key to successful loyalty programs. Simple personalization can be identifying if a customer is a member of your loyalty program on their first website visit and then tailoring the experience. If they are a member, remind them of the benefits they have earned. If they aren’t, inform and educate them about the benefits of membership. This can be a low-cost way to drive new member acquisition and remind existing members of the value of the program and increase overall engagement.
However, good personalization goes beyond this. It’s using the information you have captured to create memorable moments. For a financial institution, knowing that a member has children, understanding their economic status, and being aware of their highest education level (such as a college degree) can be used to advertise a CD or college savings account on a special offers page with messaging tailored for parents, which can drive cross-product acquisition.
Personalization can go beyond product offers. It can also create an emotional relationship between brands and members. For example, if a customer is researching home mortgages, a brand could send them information about mortgage rates and important things for first-time home buyers to know.
The brand could even gamify the experience by rewarding the customer for becoming more educated with a promotion spinner, badge, or proficiency metric. By building trust and continually reinforcing the value of the program, brands will achieve better loyalty outcomes.
As loyalty programs expand, brands have an opportunity to unite their members around causes and actions that align with the brand and its membership base. Starbucks celebrates Earth Day with online games that help members learn simple ways they can reduce waste and stop plastic build-up in the oceans through everyday choices. Programs like these reward those who share their experiences online and through social channels. This gamifies referrals and brings new awareness to important causes for the brand and its members.
By creating a community, members stay engaged outside of buying behavior and brands stay top of mind and part of members’ conversations. This leads to longevity and more purchases over the long run.
Reimagine your loyalty marketing
It’s time to step up your loyalty game. This guide will help you build a more engaging, dynamic, and personalized program.
