Three trends driving the evolution of customer loyalty

77% of loyalty programs fail within the first two years.

That's a lot.

And if you're thinking it's because loyalty's dying out, think again. It's still very much alive and kicking. Even 73% of millennials, typically the least engaged demographic, think loyalty programs are a great way for businesses to reward customers.

But they're evolving. New tech and higher customer expectations are changing the way we think about loyalty. Codes and vouchers that add friction at the point of sale are out, along with irrelevant, un-tailored offers. Businesses need to do better if they want to keep customers engaged long-term.

The reality is that the market's more competitive – and more creative – than ever. So what are the big trends that you need to be leveraging to stay at the leading edge of customer loyalty?

1. Holistic customer experiences

According to the latest Bond Brand Loyalty report, only about 25% of customer engagement comes from traditional 'earn and burn' techniques. The rest is driven by experience.

And experience by definition goes beyond a single touchpoint. It's the sum of all your customers' interactions with you – online, in-store, on social media; before, during and after the point of sale. To really keep customers loyal, smart marketers need to think holistically.

Experience extends past the point of sale

The winner of Best Customer Experience at this Year's Loyalty Magazine was the Parfumerie Douglas Beauty Card. They took the prize thanks to a 360 approach that identified customers at every touchpoint – email, print, website, app and point of sale. The data they collected help them build more personalised experiences.

The rise of omnichannel means there's now no shortage of places to meet your customers, or of opportunities to grow your relationship with them. But one size won't fit all – to build a truly engaging experience, you need to play each channel to its strengths. When we spoke to Goloyal CEO Björn Bjärbo, he had this to say:

"We have to look at the bigger picture: what does the customer want, and how can we help them achieve that? What's great about e-commerce, what's great about physical shopping, and how can shopping centres and cities make the most out of those elements? A good customer journey is not coming into a physical store and doing online shopping – that's just confusing. Instead, the journey has to be relevant at the right time, in the right place."

Spending isn't the only sign of loyalty

Just as important as where is when you reward your customers. Increasingly, forward-thinking brands are focusing on forging deeper, longer-term relationships rather than boosting short-term sales – and that means looking at the whole customer journey.

High-street giant Sainsburys recently overhauled their Nectar scheme to "genuinely reward loyalty". Now, customers can earn points based on how often they shop and how long they've been members – not just how much they spend.

2. Personalised, impactful rewards

The average consumer carries 5 loyalty cards. But over 10 million are hanging on to unused points. Clearly, something's not working. Points still play an essential part in plenty of successful schemes, but getting them wrong can lead to lock-in, not loyalty.

So how do you make sure your programme stays relevant, and rewards customers in ways they care about? Personalisation is nothing new, but it still hasn't reached its full potential. And it's worth getting right– in a recent Salesforce survey, 65% of consumers said personalisation affected their brand loyalty.

Tapping into passions and preferences

New tech (especially AI and Machine Learning) means marketers have more granular insights into customer behaviour than ever before. And while that's a huge help for anyone looking to serve up more tailored rewards, you don't need to re-invent the wheel to keep customers engaged. Cashback is still King, and there's a developing trend towards treating loyalty currencies more like money –  so they're easier to earn and can be spent in more places.

What matters most is rewarding customers in ways that are meaningful for them. 81% of millennials expect businesses to be responsible, something Koin Rewards has put at the heart of their loyalty programme. The blockchain-based platform recognises 'meaningful behaviour' among its customers, and enables merchants to reward their customers for shopping responsibly and sustainably.

Rewarding everyday behaviours

Transit agencies in the US have recently started experimenting with loyalty to reward what has typically been among the least productive parts of any day – the commute. New programs launched on the San Francisco subway keep daily customers more engaged, while also cutting congestion and keeping cars off the road. It's a win-win.

But that's just one example of how innovative new programmes can help solve serious personal pains for consumers. In the UK, RentRewards allows customers to pay cashback from their weekly food shop directly into their rent account. It's a massive evolution: goodbye irrelevant, untargeted rewards; hello loyalty that genuinely improves customers' way of life.

3. Secure access to data

Data is the lifeblood of any loyalty programme. But the way you collect and use it is changing. New regulation has made it crystal clear that ownership sits with the user, not your business. Finding ways to give back control and offer choice in return for it will be crucial.

Though 57% of consumers say they would share some data in exchange for a more personalised service, the industry has been slow to deliver. Now, expectations are higher than ever. New tech is helping balance ease of access with stronger security to bring meaningful innovations to market.

Rise of the APIs

The biggest push towards consumer privacy and control has come from Open Banking. Designed to help innovations come to market by requiring banks to build public APIs for accessing data, it should deliver much more choice. But it hasn't quite delivered on its promise. 41% of banks missed the API deadline back in March, and the data delivered by the rest is often incomplete and unclear.

Open Banking data only gets your business halfway there – but APIs, when they work well, are revolutionising the way leading businesses do loyalty. APIs enable banks to share transaction data directly with tech partners, so they can build programmes tailored to specific customer spending habits. And thanks to advanced authentication and encryption, there's no risk to their security, either.

Payment-led loyalty

One frequent complaint about retail rewards programmes is that customers disengage due to friction (be it from store cards, QR codes or vouchers) at the point of sale. Payment-led loyalty avoids all that. It makes the payment itself the means of collecting loyalty rewards – and it offers an additional benefit, too. Data.

Where payment providers have historically hung on to transaction data for themselves, they're now starting to partner with new payment tech – including Fidel API. Card-linking connects payment cards direct to loyalty programmes so that brands can see granular data including merchant, location, and amount in real time.

So, how do you stack up? The stakes are high. In an increasingly crowded marketplace, catching your customer's eye is hard – but keeping their attention is harder. Creativity will be key to not only survive but thrive in the next evolution of customer loyalty.

Want to learn more? Read our blog to find out how card-linking can help you securely access payment data and build more engaging customer experiences.