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Insights

Connected customer loyalty

In 2024, the landscape of customer loyalty has become more competitive and complex than ever. Loyalty and rewards schemes are seen as essential tools for businesses aiming to retain and drive more value from customers. Historically, loyalty schemes pay for customers’ attention, but a well-designed program should go beyond this. The value offered through these programs must be unique and deepen the customer’s connection with the brand.

 

Many dedicated loyalty schemes fail to stand out, often relying on similar engagement tactics like points for discounts or exclusive experiences. In this environment, businesses must innovate their loyalty strategies, creating unreplicable value that not only attracts but also retains customers in a meaningful way. Looking at over 50 businesses across 10 verticals, we have mapped them across 4 quadrants to analyse the current landscape.

Our loyalty strategy map analyses where various loyalty schemes and propositions currently sit across four quadrants. Mapping businesses like this is valuable to identify crowded areas, with little distinction, schemes to inspire and potential gaps for innovation. Some brands are already standing out, and here are three to watch.

Expedia OneKey

In 2023 Expedia unified their brand’s loyalty keys into Expedia OneKey meaning customers could earn points from any of the brands, and redeem them with another. This streamlined approach improves efficiency for the business whilst making rewards feel more flexible for the customer. But it does raise a challenge for the master scheme of how to engage customers across a portfolio of quite different brands. Whilst for some brands the cross-pollination feels logical, for others it risks clashing.

 

Kith

When lifestyle brand Kith launched their app-only loyalty program in January 2024 it incorporated customers’ complete purchase history. This meant that on launch customers could be tiered based on points earned from purchases. Beyond this, points can be earned through engagement with Moments and Achievements, encouraging relationships to be formed beyond just money spent. These can then be redeemed to unlock rewards and benefits like exclusive products or early access to sales.

Fiat Pass

An automotive first, FIAT Pass offers anyone the chance to own a dynamic, soulbound NFT that cannot be sold on. It evolves with use, reflecting the owner’s relationship and interaction with FIAT. The FIAT Pass not only proves your entry into the community but also rewards drivers for their behaviours, offering personalised incentives. This modern CRM approach allows FIAT to engage with both current and prospective customers regularly, fostering a unique and lasting connection.

The challenge in 2024

If loyalty is about deriving more value from existing customers, what problems are businesses and customers facing today? We examine these issues across three critical areas: technology, customer behaviour, and the market.

 

Technology

In the technology sphere, the challenge is two-fold, with an opportunity thrown in for good measure. First there is a huge amount of customer data to collect, store and analyse and second there is the task of using it, and using it effectively. Customers expect personalised experiences in exchange for their data, often extending beyond the loyalty scheme to the brand as a whole. This means integrating customer touchpoints to create a seamless cross-channel experience. However, many brands lack the systems to meet this expectation. Loyalty schemes present an opportunity to test new engagement methods, using a more engaged subset of the audience as a testing ground before broader implementation. Additionally, there is growing pressure to incorporate AI systems to enhance customer experiences, a topic we’ll explore further later.

Consumer behaviour

A well designed loyalty scheme should take into account customer expectations and current behaviours whilst nudging customers towards a value-driving behaviour for the business. Schemes focused on giveaway partnerships, such as vouchers or prize draws, often fail to shift customer behaviour given their more passive nature, and tend to be costly for the business. But earn-and-burn schemes, whilst uninspiring, can change behaviour by encouraging customers to choose one brand over another, for say, their groceries.

In this competitive landscape, loyalty programs must be simple to understand and use, or they risk being ignored. With many brands vying for attention, engagement fatigue is a real issue. Consumers increasingly desire rewards that offer a brief escape from their everyday routines rather than just monetary discounts. Moreover, there is a growing consumer awareness of brand values, with a preference for brands that align with their personal values, especially on global issues.

Market

Across industries, loyalty schemes tend to follow similar patterns. There are tried and tested schemes from the playbook which are lifted and shifted, leading to homogenous experiences and a lack of distinctive positioning. This makes it difficult for businesses to effectively communicate their unique benefits. You’ll see many say they offer exclusive and money can’t buy experiences, but if everyone is exclusive, is anyone exclusive?

In 2024, economic pressures affect both consumers and businesses, influencing spending habits and shifting the style of rewards offered in loyalty programs. These tough market conditions necessitate innovative approaches to differentiate and sustain loyalty schemes. Wide-reaching rewards based schemes in particular will struggle in this climate as the rewards offered come at a cost to the business, so they must decide which customers are more deserving than others.

One in three businesses without a loyalty program today will establish one by 2027 to shore up first-party data collection and retain high-priority customers.

Gartner, 2023

The offer

Traditionally, businesses have managed loyalty as a standalone department delivering a scheme, and paid for customers’ attention. However, we believe the goal should be to drive loyalty as a natural outcome of customer engagement with your brand. This approach embeds loyalty and the customer at the core of your business, ensuring it is holistically integrated throughout the entire experience. 

At Else, we believe there are four key elements to moving the loyalty needle towards this end point. Individually, they are effective, but together, they are transformative.

 

1. Indispensable utility

This really underpins everything you do as a business–make a product that is invaluable to users, and don’t layer on a loyalty scheme to cover cracks in the experience. If you can develop an invaluable product, you’ll get customers hooked and build habitual loyalty. Over time this habit-driven usage has the potential to develop into a emotional connection, where customers find themselves going out of their way to use your service over another. This nudging towards emotion can be aided through the experience offered and the resulting feeling this musters for the customer.

Imagine a service offering perks to users that match their current behaviours, integrating seamlessly into their daily routines. This could be as simple as getting a free coffee once a week. These small benefits can bring significant benefits to the user, not just by way of convenience but also emotionally. Over time they add up, fostering an emotional connection by making users feel treated and special. The connection to the benefits can become so strong that the though of losing them triggers a sense of loss. This service is now considered indispensable.

2. Rewards vs. loyalty

Rewards and loyalty are often used interchangeably in the context of purpose-built schemes. Whilst you can combine them, it’s helpful to recognise that the related tactics for each drive different outcomes and behaviours for customers. The choice of which to use depends on the behaviour you want to encourage in your customers. Rewards are generally given simply for being a customer, or member, of a scheme. Available to all, they tend to be passive and require no action from customers. They can still be powerful, money-off or early access to tickets are worth having, but they are less likely to change a customer’s behaviour. Loyalty-focused schemes lean more towards rewarding repeat custom and longer term engagement which requires a commitment of sorts from the customer. Rewarding a long-time customer seems to be a thing of the past, with many service-based companies going the other way and offering better service and offers to new customers leaving genuinely loyal customers to suffer from a loyalty penalty.

3. Flip the perspective

While a branded TV channel might not seem like an obvious choice for a caffeinated energy drink, it has been extremely successful for Red Bull. Known for their presence in elite-level extreme sports, Red Bull’s TV channel broadcasts sports events and documentaries featuring sponsored athletes. The channel embodies the brand’s passion for energy, stimulating the same feeling in viewers. This approach shows how aligning loyalty programs with the brand’s core identity and focusing on customer experience can create deeper, more meaningful connections.

In many cases, loyalty schemes are designed to enhance customer sentiment towards the master brand, encouraging customers to buy more over time. However, they can often feel self-serving, raising questions about whether they truly consider customer needs or simply aim to boost the brand’s image. Flipping this perspective to position loyalty as a service to the customer can more effectively impact sentiment. Instead of designing loyalty programs to make the business look good, focus on how you want your customers to feel, which should align with your brand identity.

 

4. Ecosystem entanglement

Embedding loyalty throughout your entire ecosystem, rather than treating it as a standalone product, is crucial. The loyalty scheme shouldn’t be the only way you communicate with customers, and it won’t be their only touchpoint with you. All engagements are opportunities to foster relationships and loyalty with your customers, but it’s worth identifying where the business can add the most value. Determine where your presence is most active and where you play a more passive, supportive role. This understanding will help set the tone for your engagement strategy, ensuring that your loyalty program is integrated seamlessly, enhancing every customer interaction and reinforcing their connection to your brand. By bringing value, whatever the size, at every stage you’re creating a cohesive and rewarding experience that strengthens customer relationships and drives long-term engagement.

The future vision

If we continue to see the growth in loyalty schemes that Gartner predicts, and consumers keep expecting instant and relevant rewards, what does the future vision for loyalty look like?

It’s abundantly clear that AI will drive significant changes for loyalty schemes. Initially, we’ll see smarter use of customer data to predict behaviour and desires, ensuring that rewards genuinely feel tailored to the individual. As more data is collected about customers, smarter and more engaging rewards could be given that could change their behaviour (i.e. spend more, stay longer).

But if the forecasted rise of the personal AI assistant comes, and this assistant selects services or brands for you, then what is the role of the loyalty scheme? Or will the AI consider a loyalty scheme when reviewing services? If this is the case, then the challenge shifts to designing services that appeal to these digital gatekeepers rather than the human customer.

Legislation also plays a pivotal role in this evolving landscape. The Digital Markets Act (DMA) introduces data portability, enabling customers to transfer their personal data from one company to another. This allows customers to prove their value as lifelong, high-value clients instantly to a new service provider. This newfound ease of switching providers means that the traditional notion of loyalty is under threat. If a customer can carry their loyalty data with them and immediately receive personalised deals from a new provider, what’s the incentive to stay loyal to a single company?

To answer this, we must revisit the core idea that loyalty should be an outcome of every interaction with a business. It’s not just about a scheme; it’s about creating a genuinely useful service and building a strong relationship with the customer. The future of loyalty lies in making every customer interaction meaningful, ensuring that they feel valued at every touchpoint. In a world where AI and data portability are the norms, businesses that excel will be those that focus on authenticity, trust, and consistent value.

It’s that simple.