Loyalty programs have long been a staple of the business world, offering incentives and rewards to engage and retain customers. However, as consumer expectations evolve and technology advances, these programs are undergoing a significant transformation, with brands on the hunt for seamless backend solutions to help them foster lasting connections that transcend the transaction.
From data and privacy concerns to consumer preferences and the latest tech innovations, here’s what’s now and next in the dynamic landscape of loyalty.
From Fragmented to Frictionless
By now, the benefits of a good loyalty program are well-documented: improved customer retention, more frequent purchases, higher-volume orders and better brand sentiment. But there are bumps in the road for brands looking to implement a successful loyalty program nowadays.
Legacy systems that historically operated in their own silos need to be integrated to connect online and offline offers, aggregate customer data across platforms and programs and foster a frictionless experience.
Great Clips is a perfect example of a company that saw success after upgrading its tech stack. With over 4,400 locations across North America, the salon chain lacked the tools necessary to properly track offer usage and redemption, making it vulnerable to fraud and unable to measure promotion performance.
Rather than completely gutting its systems, Great Clips enhanced its existing POS capabilities with an offer management platform that enabled it to distribute, track, validate and redeem digital and print coupons on a 1:1 customer level. The omnichannel experience now allows customers to check in online from anywhere, view real-time wait times and monitor where they are in line through the Great Clips app, creating a frictionless check-in process that saves time and tracks individual customer data for personalized engagement.
Now considered a high-tech leader in the salon industry, Great Clips has real-time insight into how its campaigns are running through multiple channels.
A New Era of Personalization
With these interconnected systems, brands can now more easily track data and personalize promotions. Once a buzzword for brands, personalization has become table stakes for the modern loyalty program, with customers expecting a tailored experience. According to Merkle’s 2024 Loyalty Barometer Report, roughly 60% of consumers say they’re likely to respond to a personalized message. Another 31% remain unmoved by personalization, meaning there’s room to grow on the personalization front to nudge this neutral segment into action.
As AI integration spreads, brands will be able to build more exciting experiences that not only personalize but also predict consumer behavior. Imagine approaching the drive-through of your go-to lunch spot and the digital menu board has already pulled up your typical order, having been triggered by the loyalty app on your phone, your license plate number or facial recognition. It spurs the same joy as your favorite barista remembering your coffee order, but automated on a much larger scale. Now imagine the menu features specials, offers and new items based on what you like. It’s the next stage of personalization: predictive personalization.
Transcending Transactional Loyalty
Historically, loyalty programs have been transaction-based, rewarding customers for their repeat purchases or points accumulation. Now the future of loyalty programs is shifting toward emotional loyalty, where brands build deeper connections with customers based on trust, recognition and lasting impressions. This shift involves going beyond traditional rewards to create meaningful interactions that foster genuine loyalty and advocacy. By incorporating elements like gamification, soft actions rewards, community-building initiatives and emotional engagement strategies, businesses can cultivate stronger relationships with their customer base.
Chipotle leads the pack in leveraging gamification to drive loyalty, from its Freepotle program to the new Burrito Vault game to virtual Burrito Bucks in the metaverse. As a result, Chipotle Rewards is now one of the largest and most successful loyalty programs out there, with over 35 million members to date. Chipotle also has embraced collaborations, touting partnerships with brands like Snapchat and Strava.
Collabs and VIP Experiences
Collaborating with another brand, influencer or celebrity to offer limited-edition products and experiences is another growing trend among loyalty programs. It’s a great way to generate buzz, reach a wider audience and create a sense of exclusivity and prestige among your members.
E.l.f. Cosmetics, for example, partnered with Chipotle to create a limited edition burrito-themed beauty collection that was available to its Beauty Squad ahead of the general public. Come launch day, the unconventional collection sold out in just 11 minutes. That kind of exclusive limited-edition offering will continue to grow in popularity for loyalty programs.
Leveling Up
The next level of loyalty is the subscription-based (paid) program, which already is increasing in popularity. According to Merkle, one in four consumers belong to between four and 10 paid programs, with millennials over-indexing on paid program enrollment.
Not only are folks signed up, but the paid model encourages broader engagement with a brand. Over half (51%) of consumers are more likely to engage with a company beyond making a purchase because of their participation in a paid loyalty program.
Programs like Taco Bell’s Taco Lover’s Pass and Panera Bread’s Unlimited Sip Club offer premium benefits that pay off. In fact, Panera now attributes 25% of its overall purchases to Unlimited Sip members, who are naturally inclined to add food items to their beverage orders.
Pulling Back the Curtain
It’s not all rainbows and tacos for brands looking to implement a successful loyalty program. On the operational side, brands need to ensure they have the proper infrastructure in place. Integrating loyalty programs with existing POS systems, mobile apps and customer data platforms can be complex and resource-intensive. Scaling the program to handle growing membership and transactions also can be challenging without the right technical foundation.
Once a program is launched, clear ownership and accountability is essential within the organization to effectively monitor, manage and tweak loyalty initiatives. Above all, there needs to be an ongoing commitment to keeping it fresh and engaging for consumers. It’s not a set-it-and-forget-it endeavor.
Data Security and Privacy Concerns
As loyalty programs become more sophisticated and personalized, customers are increasingly conscious of how their data is being used and expect brands to prioritize data protection: 62% of consumers say data privacy policies impact their decision to continue doing business with a brand, according to Merkle. Moving forward, companies must ensure that their loyalty programs adhere to stringent data security measures, respect customer privacy preferences and, above all, provide transparency to the customer.
The future of loyalty looks a lot more personal, with streamlined systems that show real-time impact and insights, predictive personalization and VIP experiences. To thrive, companies must be nimble, stay true to their customer base and think ahead. By doing this, they’ll create unforgettable experiences that resonate on a personal level and cement loyalty for the long haul.
Catherine Tabor is the Founder and CEO of Sparkfly, a retail technology solutions company that helps innovative retailers and merchants like Chipotle, Denny’s, Bojangles, First Watch and Texas Roadhouse unify guest engagement technologies to create deeper and more meaningful connections with guests. Through strategy and implementation of its platform, Sparkfly provides real-time POS and digital ordering connectivity, offer management, loyalty, digital offer and rewards wallets and real-time capture of transactional data.
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