Beyond the Fan Club: How to Reward Customer Loyalty

Everyone likes to feel special, especially when it comes to engaging with our favorite brands. Like, do they even know we exist? NOTICE US! So brands, here’s what to know about rewarding customer loyalty and how to plan more effective loyalty strategies.

Loyalty programs have become a part of almost every retail experience. From a trip to the grocery store to cashing in rewards for special perks on vacation, some type of loyalty or membership program comes into play with just about every brand we engage with regularly. And we loooove it.

However, the retail landscape is always shifting, and customer expectations continue to evolve.

When done well, loyalty programs are highly beneficial for both brands and consumers, but the bar is higher than ever before — and when a brand fails to adapt, its attempts at driving engagement with a loyalty program may turn consumers off more than it draws them in. (Making customers spend thousands of dollars to get $5 off just isn’t gonna cut it.)

Let’s take a look at the value of loyalty programs, current trends when it comes to loyalty, how technology can help to make programs more valuable, and how the most forward-thinking brands are rewarding customer loyalty in 2024 and beyond.

What are the benefits of loyalty programs?

Let’s start by understanding why loyalty programs are so popular, and what benefits they offer to both brands and consumers.

And they are popular: according to a report from Merkle, 79% of consumers have a relationship with a brand through a loyalty or membership program. The average person is part of 19 memberships, with 9 of those being actively used. Further, 65% of consumers have reported finding members-only offers important.

It’s easy to understand why these programs appeal to the majority of consumers. They usually provide access to special deals, and everyone likes to save money on their next purchase. There’s a psychological benefit, too: loyalty programs offer a sense of belonging, and make people feel appreciated for patronizing a brand. The brands we love, especially in the fashion or beauty space, tend to become a part of our identities, and loyalty programs help to cement the experience of feeling personally connected to a brand.

Now, what about on the brand side? Driving loyalty can pay off for brands in a surprising number of ways. Here’s how rewarding customer loyalty benefits retailers.

Increasing customer retention & value

When customers are part of a loyalty program that they find rewarding, they’re more likely to stick around and develop brand loyalty. They’ll choose that brand over others that they don’t have an existing relationship with. And if they’re earning rewards on their purchases, they’ll likely spend more with the brand, too. That means sticky customers who bring more value to the brand, both over the course of the lifetime of the relationship and at the level of each individual purchase.

Enhancing engagement & deepening connections

When a consumer is part of an active loyalty program, they’re more likely to engage with the brand in various ways. That might mean signing up for an email list, following the brand on social media, sending SMS updates, and downloading an app — all of which open up new channels for marketing, telling your brand’s story, and building enthusiasm for your product line and enhancing customer experience. The more ways a consumer interacts with a brand, the more opportunities that brand has to prove their value and create more meaningful and lasting connections.
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Using budget more efficiently

Whenever possible, brands are better off investing their funds into keeping existing customers over acquiring new customers. Data indicates that customer acquisition can cost five to seven times more than customer retention! There are a few reasons for this, but it mostly comes down to the marketing and promotional expenses that go into capturing attention from new customers and convincing them to buy. When a customer is already interested in your brand — especially if they’re interested enough to join your loyalty or membership program — there’s greater ROI in keeping them around than attracting completely new people.

Gaining insights into customer behavior

When a consumer takes part in a loyalty program, they agree to provide access to some of their data. Purchases are linked to rewards accounts, so the brand can track what they buy, when, and in what sizes. And in today’s retail landscape, few things are more valuable than data. Brands can make better decisions when they know how their top customers behave and feel about their specific products.

What are the current challenges for running loyalty programs?

Loyalty has always been a two-way street. The beauty of rewards programs is that they are mutually beneficial. But customers now have higher expectations than ever, and brands have to work harder and provide more to keep them happy. In fact, a study from Accenture shows that 77% of consumers now retract their loyalty more quickly than they did compared to three years ago.

Everyone agrees that loyalty programs are valuable, but they need to evolve. When it comes to rewarding customer loyalty, these are the top challenges that brands face:

• Concerns about data: Customers have grown savvy to how much brands value their data — and to the fact that it can be abused. 92% of users report having concerns about data privacy and transparency (per TrustArc). That’s made it a tougher sell to get customers to participate in loyalty programs when they know any perks will come in exchange for some of their personal information.
• Higher expectations: Recent technological advances, like AI, have made highly personalized experiences the norm in retail. A standard coupon or discount, which might once have gone over well with consumers, will now feel low-effort. Consumers know what brands are capable of, and they expect more.
• Difficulty with scaling: Due to a lack of effective tech solutions, many brands — particularly luxury brands trying to do something special with high-value loyalty programs — have relied on manual effort, tracking invoices and extending individual offers.

These challenges in play have created a transitional time for loyalty and membership programs. However, plenty of brands are adapting and running highly successful loyalty programs.

What are the current trends in loyalty programs?

The brands running the most popular loyalty programs are the ones that show creativity, use the right tools to create a solid user experience, and pay attention to trends and consumer preferences. Let’s take a look at some of the factors that are currently trendy, which we can expect to drive the future of loyalty programs in retail.

Gamification

The majority of consumers today fall into the Millennial and Gen Z categories. That means they’ve been raised with video games, and are familiar with the structure of a gamified experience. Of course, gamification is based on psychological principles that appeal to any generation by tapping into the brain’s reward system, but it helps when consumers are tech savvy and already wired to approach tasks in this manner.

Gamification can be applied to loyalty programs by creating tiers and challenges that allow the member to earn more perks by completing certain tasks — a way to guide desired behaviors by making them fun and appealing. Gamified loyalty programs might ask members to unlock new levels of rewards by spending more, following the brand on social media, sharing content with friends, and more.

For some great examples of gamified loyalty, look to Sephora, which has a tiered rewards program that offers higher value perks (like larger discounts on sales or special access to exclusive products) to those who unlock levels with their spending. And it should come as no surprise that XBox Live — mainstay of the gaming industry — has a highly gamified rewards system as well, offering members the opportunity to gain rewards through completing in-game challenges or completing surveys and quizzes. Points earned can be cashed in for exclusive content as well as discounts or cash back.

Loyalty partnerships

As we’ve addressed, modern consumers are more skeptical when it comes to giving out their data, so it’s essential for brands to make loyalty programs more valuable in order to win people over. One way to do this, without cutting into the brand’s ROI, is by creating loyalty partnerships. In a loyalty partnership, multiple brands can link up, offering various ways of redeeming points or taking advantage of perks. This offers more value to the customer without any one individual brand having to give away more.

These partnerships work best with brands that are complementary, not competitive. For example, Starbucks and Delta have pooled loyalty — perfect for people wanting to grab a coffee at the airport after a flight. Uber and Marriott also have a shared loyalty program, allowing members to earn on Uber purchases and then redeem points or enjoy enhanced status with Marriott.

Another benefit to loyalty partnerships: brands gain broader data on consumer behavior, learning about habits and preferences outside of their specific industry.

Personalization

Consumers know that brands have access to their data when they join a loyalty program. This gets plenty of people wary, but the more perceived value they get in exchange, the less they’ll take issue. That means putting that data to use in delivering perks that feel custom-picked for each individual member. Think Se

Consumers expect brand relationships to feel more personal, and by offering a custom experience that’s tailored to each member’s interests, retailers can create this experience that is as emotionally rewarding as it is practical. A program that’s doing this well now is LEGO Insiders, which invites members to register the LEGO sets they purchase to their accounts in order to earn bonus points. Then, Insiders uses that information to send personalized emails and promotions that highlight sets the member is likely to be interested in.

Mobile apps

Many loyalty programs have come to involve mobile apps, which offer new possibilities for engagement, gamification, and convenience. Using an app can make it simpler for members to collect and redeem customer loyalty rewards, pay in-store, browse products, shop, and engage through other channels. Users can quickly open a loyalty app to check what rewards they have available and how they can be used. When a mobile app is built with a seamless and pleasing UI, it makes the loyalty program more enjoyable to engage in.

How can the right tech platform increase loyalty program value?

Running a successful loyalty program requires, first and foremost, creativity and an understanding of how to give customers what they really want. However, having access to the right tools and technology can increase the value of any program. Here are a few ways that certain features and tech capabilities can move the needle for brands.

An invite-only feature

Exclusivity is an exciting element of many loyalty programs. Rewarding members with special sales, products that aren’t available to the public, or early access to hot drops is a thrilling way to show appreciation to top customers. Additionally, offering paid VIP memberships that include these exclusive experiences is a great way to enhance member engagement. The exclusive element increases the value of the reward by adding emotional weight and making it feel special. But invite-only drops are tough for brands to pull off, mostly because anything that’s exclusive is sure to be leaked. Leaks cheapen the experience and send the message that earning loyalty isn’t worthwhile.

The right platform can take all the manual effort out of running exclusive drops with an invite-only component, while preventing invites from being leaked. For example, EQL’s launch platform thoroughly verifies users to ensure that they are who they say they are, and that they’re on the list for an exclusive drop. Even if the link gets leaked, unapproved users will not be able to access the drop.

Geotargeting capabilities 

Being able to access a user’s location through a launch platform opens up unique possibilities for a brand’s loyalty program. This feature takes brand experiences offline and out into the real world, where memorable and fun moments can be curated.

Brands might offer the opportunity to earn more rewards by attending an event or visiting a pop-up store, for example. Or, attendees of an in-person drop could receive exclusive offers to purchase a product. Using geotargeting technology pulls digital convenience together with the memorability of a real-life experience.

Better data insights

All loyalty programs involve some collection of data from participants. However, especially when it comes to high-heat retail, the insights can be quite limited. When demand for a product exceeds supply and not all customers manage to successfully purchase, brands typically lack insight into any followers that didn’t get to buy.

The right platform can track all types of engagement, offering a look into what consumers are interested in. It also helps brands to understand the mindset of specific customers to better meet their needs. If a customer has been entering launches and consistently losing, they might be at risk of burning out — a situation that could be remedied with a tailored special offer.

Broader, more actionable data enables more personalized experiences, and meeting customers where they are.

Smooth, simple operations

Brands often get creative and cobble together tech solutions for their loyalty program needs. This can result in a disjointed experience for the customer, and chaos behind the scenes that requires manual effort to manage. However, using a launch platform that’s designed to enable loyalty strategy keeps things running smoothly and feeling polished to the user. Brands can save significant time and energy by not needing to invest in directly managing their loyalty programs.

Rethinking loyalty programs with EQL

Loyalty programs that go beyond the basics are the ones that drive brand success. Consumers react positively to programs that are uniquely structured, deliver personalized experiences, and offer truly valuable rewards. With the right tools, brands can achieve all of this seamlessly.

EQL is an end-to-end launch platform that was built to power the hottest launches in retail. Catering to some of the world’s most creative and in-demand brands, EQL has incorporated features like invite-only launches and geotargeting tools that can make loyalty programs more memorable and exciting for fans. That’s in addition to robust data collection capabilities that give brands deep insights into their followers’ mindsets in order to provide a custom experience.

Interested in learning more about EQL and how it can power up your brand’s loyalty program? Reach out today to get in touch.