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What actions are businesses taking to adapt to evolving customer perceptions of loyalty and shifting their priorities for the year 2024?
The projected value of the worldwide loyalty management industry is $8.74 billion for 2023 and is predicted to increase to $13.99 billion by 2028, with a compound annual growth rate (CAGR) of 10.16%.
However, this rise does not indicate the traditional understanding of “loyalty”.
As businesses experience major changes in the economy and society, shifts in consumer habits and demands, and quick developments in technology, the concept of loyalty is rapidly evolving.
In the years to come, there will be a significant shift in the way top companies approach loyalty management.
Loyalty is a revenue driver, not a cost-center, for the business
In the business world, there has been a significant change as loyalty is now recognized as an important aspect within the boardroom. It is widely accepted by business leaders that loyalty management plays a critical role in addressing three key priorities at the boardroom level: customer information, customer retention, and consistent revenues.
According to the 2023 Consumer Trends Index report by Marigold, a majority (67%) of global consumers consider their favorite brand’s loyalty programs to be essential or extremely important in maintaining their loyalty. A small percentage (7%) do not view it as significant. Additionally, 59% of consumers are willing to spend more money to continue shopping with their preferred brands.
Loyalty management has become more important than just a small detail in customer acquisition. It now plays a crucial role in every stage of the customer journey, including acquisition, retention, and growth.
Business leaders should understand that customer loyalty should not be the ultimate goal, but rather it should be connected to enhancing customer retention, increasing lifetime value, and improving revenue and profitability KPIs.
The loyalty agenda is not simply received by customers, but rather co-created by them actively.
However, it is not only companies that are altering their attitudes towards loyalty. The concept of loyalty is undergoing significant changes for customers as well. Brands can no longer dictate the rules of loyalty on their own, relying on traditional points-based systems that prioritize their own interests over those of the customers.
Customer expectations of brands have changed beyond recognition. At the core is this truth: for customers, loyalty is no longer about their loyalty to the brand, but the brand’s loyalty to them.
In the past, customers used to go to great lengths to show their commitment to a brand in order to earn the ability to redeem their rewards after a year, or risk losing their points at the end of the year.
In today’s market, customers desire to actively participate in a brand’s mission and collaborate in creating unique experiences. According to a survey, 66% of consumers acknowledge that their preferred brand has a significant impact on their life beyond just its products or services. The degree of loyalty towards a brand is closely tied to the emotional connection and engagement it is able to establish with customers, rather than just transactional interactions based on rewards or loyalty programs. A recent study by Marigold highlights the importance of emotional loyalty in standing out in a competitive market where customers are becoming tired of traditional points-based incentives.
Customers are increasingly open to different forms of loyalty, such as loyalty programs that involve payment, charitable contributions, or rewards based on environmental, social, and governance factors. They are also willing to provide personal information in exchange for more customized experiences. Some loyalty programs do not even require a purchase to receive a reward, as participating in events or specific activities may also be eligible.
However, customers are increasingly seeking a greater value from brands. This value may take the shape of more concrete rewards, quicker redemption times, and increased autonomy over their benefits. In light of the current economic climate, there is a growing dependence on immediate discounts, which are now seen as a valuable aspect of loyalty.
Today’s consumers desire both strong emotional attachment and practical benefits from loyalty programs. The key to future success in loyalty lies in creating strategies that cater to both emotional and value-driven loyalty.
The foundation of contemporary loyalty management lies in technology and data.
Many companies now understand that technology is not the sole driver of a business, but rather a tool to help achieve goals. However, advancements in technology are constantly pushing the boundaries of what is possible in loyalty management. Therefore, investing in loyalty technology now is crucial for sustained growth, productivity, and achievement in the future.
An instance of this is when customers anticipate brands to provide a thorough and smooth interaction, regardless of the platform they use. According to 86% of consumers, their preferred brand offers a consistent experience across all channels.
The most advanced technology is unable to provide that without intelligent data. In today’s business landscape, first-party data is highly valued, and in a future where cookies are no longer used, loyalty programs will play a crucial role as both the entry point and protectors of that data.
Rewording: By utilizing the perfect blend of technology and data, marketers can establish a continuous cycle of understanding, improving performance, and increasing ROI. This benefits not only customer loyalty, but also all brand marketing efforts.
Although it provides a strong edge in competition, it can also become a disadvantage if not handled properly. The majority of European customers, 78%, report feeling at ease with how their preferred brands utilize data.
Choosing the wrong technology can have negative effects on both profits and performance. Mishandled data can also damage a brand’s credibility and lead to potential regulatory consequences. To maintain strong loyalty, it is important for leaders to prioritize investments in data management and technology solutions that ensure loyalty programs are user-friendly, secure, and adaptable across various platforms including digital, physical, and mobile.
A different type of loyalty requires a fresh approach to managing loyalty.
Undoubtedly, loyalty management remains a highly strategic endeavor for companies in 2024 and beyond. This modern approach prioritizes emotional connections with customers and execution across all channels, rather than traditional loyalty tactics.
While traditional and long-standing loyalty programs are adapting to better cater to customer desires, modern brands are striving to build loyalty by offering a mix of value, emotional connection, and creativity.
As loyalty programs continue to evolve with a range of features such as multiple tiers, point systems, exclusive benefits, discounts, gamification, paid memberships, and partnerships, the back-end operations must also adapt to be more streamlined, unified, and integrated.
A study conducted in 2022 revealed that having a unified program structure to oversee various interactions across different channels will be a significant trend for companies that prioritize loyalty in 2023.
To accomplish this, multiple components such as strategy, tactics, technology, and analysis need to be linked and coordinated.
The 3 Pillars of Loyalty Management
Developing and implementing everything internally can be difficult, and it may not be as effective as expected. Finding the right loyalty management partner who can provide strategy, technology, and service capabilities can greatly impact costs, scalability, and results. However, not all loyalty management vendors have the same level of expertise, and only a few offer complete loyalty management solutions with their own resources for strategy, technology, strategic services, and user support.
If you’re attempting to determine the ideal partner for your specific circumstances in the intricate and sometimes perplexing vendor market for loyalty programs, this guide from Marigold can serve as a valuable resource to guide your decision-making.
The list not only includes a thorough set of inquiries to ask within your organization and to potential suppliers, but it also incorporates a “loyalty maturity index” to pinpoint where you should allocate your resources, efforts, and investments for optimal results.
Find your ideal loyalty management partner with A Buyer’s Guide to Enterprise Loyalty Management: Connecting Strategy, Technology, and Services, created in association with Let’s Talk Loyalty.
Improve your journey towards building emotional loyalty by reading Marigold’s must-read report on the impact of Emotional Loyalty on revenue.
Simon Jeffs, Principal Marketing Strategist, Marigold
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