Loyalty is at a crossroads with businesses rethinking their brand strategies in light of changing consumer preferences, an e-commerce boom and dynamic economic conditions. The evolution of loyalty strategies calls for an increased focus on demand and purpose-driven decentralised loyalty ecosystems to help provide scalability and simplicity of operations across the whole customer journey. Curating an emotional bond with consumers becomes a dominant factor for adding value and increasing retention.
COVID-19 forged a major reset for loyalty programmes
COVID-19 brought drastic changes to consumers’ shopping behaviour with a major shift to e-commerce and preferences for shopping locally. The desire for escapism brought in brand fatigue and fragility, which negatively affected loyalty schemes. Consumers were switching brands due to price sensitivity and cost cutting. These developments reinforced the significance of consumer-centric strategies to help shape evolving loyalty programmes.
Today, immersive experiences and gamified rewards, real-time customer service and purpose-driven brand values are essential pillars for brand advocacy nurtured by loyalty programmes. This is supported by the development of active omnichannel brand communities, which provide platforms for consumers to engage and ultimately convert from a regular customer into a brand evangelist.
60% of respondents agreed that they seek curated experiences that are tailored to their tastes, and 56% agree that it is important to spend money on experiences
Source: Euromonitor International's Voice of the Consumer Lifestyles Survey 2023
As consumers become more experience-driven, offering experiential rewards helps nurture customer engagement and enhances the uniqueness of loyalty programmes.
The application of digital tools will also continue to grow in the loyalty space. The use of non-fungible tokens (NFTs), blockchain and the metaverse will help bring more exclusivity to the offer. With the arrival of web 3.0, powered by blockchain and cryptocurrency, loyalty programmes are transforming, establishing new business and incentive models, which are more transparent, secure and flexible. Interoperability and the portability of value of the new loyalty ecosystems can help deliver a smooth customer experience, expand reach and ultimately reduce costs.
The power of loyalty is building an emotional connection
Shifting business models require customer loyalty schemes to be very adaptive and multidimensional, combining price-based benefits with emotional experiences and continuous interaction with loyalty members. Establishing a balance between emotional and transactional loyalty schemes can help boost retention, encourage referrals, and build trust and brand reputation as customer loyalty evolves.
According to Euromonitor’s Voice of the Consumer: Digital Survey, “say thank you for being a customer”, “welcome me by name when I visit store” or “recommend products based on personal needs” are important factors for a company to interact with consumers when building loyalty. This tendency is especially observed among Generation Z, highlighting how younger consumers are seeking a closer and more personal relationship with brands and expect more than monetary benefits to build loyalty.
Fun in-person experiences and engagements through social media are also influential characteristics of loyalty programmes especially for such consumer segments as Generation Z. The social media channel cannot be ignored as it is ingrained into customers’ lifestyles today, particularly among younger consumers.
More than 79% of Generation Z access Instagram and TikTok multiple times per day in 2023
Source: Euromonitor’s Voice of the Consumer: Digital Survey 2023
Loyalty service providers will need to be mindful of such needs and develop a balance between both monetary and emotional offerings.
Introducing Euromonitor’s “Engaged Loyalist” consumer segment
Euromonitor International has identified key indicators linked to emotional loyalty with 25% of consumers profiled as “Engaged Loyalist”
Source: Euromonitor International's Voice of the Consumer: Lifestyles Survey, 2023
For businesses, it is important to understand the characteristics, habits and perceptions of these consumers as they hold the potential of being more engaged and having personal connection with the brand, leading to long-lasting relationships.
Engagement-based loyalty programmes, which build on deeper customer relationships are expected to have longevity. As consumers become more purpose-driven, the nature of rewards that customers expect is also changing, with more focus on experienced-based perks. Embracing multi-brand loyalty ecosystems can help craft more compelling experiences that are adapted to the lifestyles of individual customers.
Can Web 3.0 revolutionise loyalty programmes?
Crypto-based rewards are seen as the next-level development within customer loyalty schemes, which are expected to decentralise and reinvigorate legacy loyalty programme structures. They can be quickly included as part of loyalty schemes to help reduce fraud, costs, and create a safer environment.
With these new formats, customers are in the driving seat – using a wallet of their own preference and linking their crypto rewards to instant cash value. Crypto loyalty programmes can process rewards in real-time and be implemented by different types of businesses, from SMEs to big fmcg players and industries, eg retail, travel and beauty and personal care.
More than 33% of respondents are interested in interacting with others in an immersive virtual world instead of in-person in 2022
Source: Euromonitor International’s Digital Survey, 2023
These new digital assets (e.g. NFTs) are expected to disrupt the loyalty segment, modernise it by allowing direct access and strong engagement with a wider customer base, enhance partnerships with players across industries, as well as increase social responsibility and social incentives within communities. For example, the proceeds from NFTs as part of the loyalty programmes can be used to support charitable organisations in reducing carbon footprint, protecting biodiversity or preserving cultural heritage. Consumers can trade NFTs based on their preferences, interests or new lifestyles in both the digital and physical world.
Editor’s note: This article was originally published in March 2023 and has been updated.