Loyalty programs have come a long way since the 1930s, when one of the first-known programs had consumers collecting stamps at supermarkets and gas stations to redeem for products in the Sperry & Hutchinson catalog. Points have given way to freebies, and paper punch cards have largely been traded in for mobile apps. But the dynamics of loyalty programs are continuing to evolve, and retailers can’t expect their programs to drive consumer engagement without rethinking the value proposition.
To dig into what consumers expect in the loyalty programs they use most frequency today, we checked in with executives at a few of the most well-known loyalty platforms. Here’s what they said consumers are looking for in loyalty programs right now.
1. Free gifts for joining “The best type of reward you can give to a customer is a free gift—no strings attached. When new people move into one of the areas we serve, we greet them with a free gift from the local businesses we partner with. The key is that you are giving them a gift that shows you value their future patronage. It creates strong customer loyalty right off the bat. Then, it’s a matter of providing regular and consistent incentives to keep them coming back. But avoid the coupon illusion. Coupons may lead to a quick influx of customers, but they aren’t the type of customers that you want.” (Brian Mattingly, Welcomemat Services)
2. Achievable rewards “Consumers today want rewards that are both achievable and foreseeable. Unfortunately, the idea of having to stay in a specific brand hotel, a specific number of nights, in hopes that the reward will be available some time in the distant future and that no black out dates are applicable to their travel dates, does not feel either achievable or foreseeable. It seems like a lot of work for a goal they may or may not achieve in the very distant future. In other words, it is difficult for the consumer to wrap their minds around this type of challenge. I use the word challenge intentionally because many modern loyalty programs feel like a challenge rather then a reward. We encourage our merchants to provide rewards that allow their customers to see the pot of gold in the near future and know with certainty that the reward will be achieved.” (Michael Gross, SpringBIG)
3. An emphasis on the consumer experience “There’s no doubt that the loyalty programs that emphasize customer experiences will become the true leaders in the space. Therefore, it’s crucial for brands to understand the give-and-take required for their program to be successful. At its core, a loyalty program is a contract between a brand and customer. The consumer is giving up their personal data in order to receive something of high value not available to everyone else. Brands then must use data to understand what they can give to consumers to increase visit frequency, drive greater spend and ultimately increase long-term loyalty.” (Jake Kiser, Belly)
4. Discounts on future purchases “Price-sensitive consumers really appreciate saving money and want discounts on future purchases or credit toward the service. They also love free and discounted retail items. Less cost-conscious consumers want to feel appreciated, and this is where VIP status or levels like gold, silver, platinum can help. All consumers like to be thanked for their business.” (Sunil Saha, Perkville)
5. A way to leave feedback “Consumers aren’t looking for blanket discounts. They want to feel special. One of the most important elements of the Thanx technology is the integration of real-time customer feedback, enabling consumers to easily leave commentary on their experience seconds after transacting. This isn’t normally thought of as a benefit of loyalty, but the one-to-one communication—where every piece of feedback is paired with the purchase history and lifetime value of that customer—allows a business to continue to build a deeper relationship with their loyalists. Nearly 20% of our transactions result in real-time feedback. Just asking for feedback results in a 7% increase in repeat visit frequency. Receiving a personal response doubles that number to 14%.” (Zach Goldstein, Thanx)
6. Cashback rewards “Consumers respond best to high value, personalized rewards. Almost 85% of customers say that cashback rewards are their preferred reward because cashback is highly tangible and the value proposition is clear. The way to supercharge consumer participation is to deliver more personalized rewards. Satisfaction with loyalty programs which provide personalized rewards is 8 times higher than with those programs that do not tailor reward offers that match consumer buying preferences.” (Walter Dubowec, Firefly Rewards)
7. Access to VIP events “Rewards are changing to make consumers feel more special. VIP experiences are becoming more popular among consumers who long for the experience that money can’t buy. One of our restaurant customers recently invited VIPs to join them for a free private tasting of the next season’s menu items with the chef. The response was overwhelming with more than 50% of eligible VIPs—identified by spending—participating in the event.” (Zach Goldstein, Thanx)
8. Enhanced personalization “Consumers want an incentive to reward you with their business—if you make the first move to reach out to them with a free gift, it’s far more likely that they’ll become a loyal customer. This type of loyalty program has enhanced personalization. Customers like the feeling that a business is specifically providing them with a free gift. Again, then it comes back to having a way to follow up and thank them for their business after they have become a loyal customer.” (Brian Mattingly, Welcomemat Services)
Stephanie Miles is a senior editor at Street Fight. Interviews have been edited for length and clarity.