In today’s highly competitive marketplace, building strong customer loyalty is more important than ever for brands looking to retain customers and grow their businesses. According to a recent report on customer loyalty, 88.5% of consumers say loyalty rewards programs help them overcome economic challenges like inflation and potential recession.
With the coming global recession in 2023, customers will be more discerning with their purchases and engagement with brands. Brands will need to focus on revamping their loyalty programs to provide maximum value to customers in order to earn their continued loyalty. In this long-read article, we will explore the key trends, metrics to track, and findings that brands should be aware of to create effective loyalty marketing strategies.
Key Trends Reshaping Loyalty Programs
Several key customer loyalty trends will impact loyalty rewards programs over the next few years:
- Web3. Blockchain and decentralization will enable more secure, transparent loyalty programs. Brands can issue tokens that customers can redeem for rewards.
- Convergence of Payments & Data. Integrating payments and loyalty accounts provides brands valuable customer data to deliver personalized offers.
- Personalized Rewards. Customers expect tailored communications and experiences. Smart use of data enables relevant rewards and offers.
- Customer Experience Focus. Customers want unique experiences like access to events, travel packages. Not just discounts.
- Strategic Partnerships. Partnerships with complementary brands allow for more diverse rewards and added value.
- Card Tokenization. Linking payment cards to loyalty accounts captures customer spending data for personalization.
- Financial inclusion and other ESG initiatives. Aligning with ESG causes like financial inclusion boosts brand image and appeals to conscious consumers.
When examining metrics, customer lifetime value is one of the most critical KPIs. This measures total revenue driven by a customer across the entire relationship, revealing the long-term impact of loyalty efforts. Brands should track lifetime value by cohort to compare program effectiveness over time. Identifying high lifetime value customers also enables more personalized rewards to encourage retention.
Key Metrics to Measure Loyalty Program Success
Along with the above trends, brands must track key metrics to gauge the effectiveness of their loyalty programs:
- Customer Lifetime Value. The total revenue a customer generates over their lifetime. A core goal of loyalty programs.
- Customer Churn Rate. The rate at which customers stop engaging with the brand. Reducing this is critical.
- Purchase Frequency. How often the average customer transacts. This indicates loyalty .
- Customer Acquisition. The number of new members acquired. Important for growth.
- Revenue. Total revenue driven by the loyalty program specifically. Measures profitability.
- Personalized Offers Redeemed. Shows effectiveness of personalization efforts.
- Customer Retention Rate. Indicates loyalty program’s ability to retain customers.
Key Findings for Loyalty Marketers
Recent customer loyalty surveys revealed additional insights for marketers.
A crucial survey finding was that 80% of brands with mature loyalty programs see over 5x return on their loyalty investments. This reveals that long-term thinking is imperative – the ROI potential strengthens over time as programs drive sustained customer value. Marketers should take a patient, persistent approach to see the full financial upside.
- 80% of companies tracking loyalty program ROI see a positive return, averaging almost 5x higher revenue than expenses. This demonstrates that investing in loyalty pays off.
- 78.6% of brands are likely to revamp their loyalty program this year – a 7% increase over 2022. Keeping programs updated is key.
- Top priorities are improving Customer Lifetime Value, reducing churn, and increasing purchase frequency. These should be core goals.
- Personalization is critical as customers expect tailored communications and offers from brands that understand them.
Conclusion
While economic conditions will present challenges in 2024, brands can overcome them by leveraging loyalty programs to provide maximum value to customers. Following key trends like experience-based rewards, strategic partnerships, and social cause alignment will help loyalty programs stay competitive. Tracking metrics like customer lifetime value and churn will reveal what’s working. The payoff of investing in loyalty is clear, but brands must be willing to revamp programs to keep customers engaged for the long haul.
Author bio
Dmitry Shcherba is Digital Content & PR Executive at Wallet Factory. As a long-time FinTech enthusiast, Dmitry is dedicated to spreading awareness about how financial technology innovations can promote financial inclusion around the world. He firmly believes that digital financial services have immense potential to let the underserved access the global financial system.
Dmitry Shcherba on LinkedIn: https://www.linkedin.com/in/dmitry-shcherba/Personal blog at Finextra: https://www.finextra.com/bloggers/138859
