Customer loyalty must be earned, study finds

In March 2023, Runa conducted research to understand what motivates consumers to join or leave a loyalty program. After polling 900 loyalty program members in Germany, UK and United States, researchers found traditional loyalty product and service offerings failed to meet customer expectations, with 64 percent of respondents stating they would abandon current loyalty programs that make earning rewards complicated or difficult.

"The global loyalty management industry was worth $5.6 billion in 2022 and is expected to surpass $24 billion by the end of 2029, growing at CAGR of 23.5% in this period," Runa researchers wrote. "Loyalty programs need a reboot and retailers and marketers need to think of how to fulfill evolving consumer expectations. This study reveals key insights on what consumers want and care about the most when it comes to loyalty programs and rewards."

Aron Alexander, CEO and founder of Runa, told The Green Sheet that modern loyalty programs improve customer lifetime value by providing user-friendly, personalized services that consumers can easily access and use across multiple channels.

"Personalization is essential for a successful loyalty program," he said. "Service providers should use customer data to tailor rewards and incentives based on individual preferences, purchase history, and other relevant factors. Personalized rewards are more likely to be relevant and valuable to customers, which can increase their engagement and loyalty."

Modern loyalty attributes

Noting that traditional banking and card networks struggle to keep up with the digital economy, Alexander pointed out that digital value can be stored easily, while the traditional way of doing things doesn't allow consumers to spend their digital value in their preferred ways. Following are what he termed the key attributes of modern loyalty programs:

• Personalization: Using more customer data and analytics to provide personalized rewards, incentives and offers based on customer behavior and preferences, which are table stakes for serving today's consumers, most of whom expect merchants and brands to know their preferences and purchase histories.

• Choice of Rewards: Offering customers a wider range of rewards and benefits to satisfy modern consumers looking beyond discounts and promotions for more meaningful rewards including gift cards, prepaid cards, subscriptions, charitable donations to causes they care about, and cryptocurrencies.

• Flexibility of Redemption: Offering choice and flexibility to customers who want to choose where and when to spend rewards, which is a major shift in focus from time-sensitive offers.

• Multi-Channel and Ease of Use: Modern loyalty programs integrated across multiple channels—including online, mobile, social media, and in-store—and ease of earning and redeeming points.

  Instant Access: Modern, real-time loyalty programs that meet customer expectations for instant notifications at point of purchase and enable them to instantly access points and rewards.

Next-gen loyalty differentiators

Alexander further noted that next-gen loyalty programs offer better service to users, such as best-in-class rewards and data-driven insights.

"Next-gen loyalty programs source an exceptional range of rewards and will often leverage partnerships with third party providers to offer customers a wider range of rewards and benefits, offering them rewards they actually want," he said. "This can help to differentiate the loyalty program from competitors and provide more value to customers."

Alexander went on to say that data-driven loyalty programs collect and analyze customer data to gain insights that drive personalized rewards, incentives and offers. Customers have the opportunity to earn, redeem and spend rewards across all channels, he added, creating a seamless experience that is integrated with POS systems, CRM software and mobile apps.

"Next-gen loyalty programs provide real-time tracking of customer activity, automatic reward redemption, and personalized communication with customers," he said, adding that when providers build loyalty programs, they should offer multiple redemption options based on what their users are looking for—whether cash back, discounts, exclusive experiences, gift cards or other options. In addition, he said, providers should offer a range of payout types, including shares, donations, cryptocurrencies and more.

Alexander emphasized that most loyalty members would switch to new loyalty programs that offer better reward options. Ultimately, he said, success in the loyalty space depends on understanding customer needs, not just at the beginning, but throughout the customer journey. He advised program managers to gather as much information as possible about customers and design their programs accordingly. Ask the hard questions—such as what users really want and need from a loyalty program—and analyze that feedback, he added.

A free copy of the Runa study is downloadable at: runa.io/loyalty-rewards-report

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