How to Build a Modern Loyalty Program in 2022
Rising prices and ongoing supply issues put brand retailers on the defensive in 2021. Amid shifting goalposts and a quickly evolving retail environment, more marketers are now working to turn their existing loyalty programs into modern membership-based programs that drive long-term relationships with a focus on members themselves.
CPG marketers have faced waning brand loyalty throughout the pandemic. Despite outpacing nearly every other industry on digital advertising and spending more than $30 billion in 2021—$7 billion more than the year prior—the industry has continued to face decreased consumer loyalty.
At the same time, consumer expectations have never been higher. True loyalty is becoming harder to achieve across a variety of sectors. According to the 2022 Global Customer Loyalty Report, published by Antavo, slightly more than half of all loyalty program owners say they’re “satisfied or very satisfied” with their programs. Forty-two percent believe they could be getting better results.
How marketers can build loyalty
Achieving better results in 2022 will likely depend on a combination of emotional loyalty and data ownership. Those two seemingly disparate elements come together in the most effective programs, with offers that are constructed differently than those of traditional points-based rewards systems. According to Mike Welsh, chief creative officer at Mobiquity, loyalty programs that are transactional and inwardly focused are outdated. Newer, more effective programs are relationship-based, and they focus on customers.
“The reality is most loyalty programs are primitive, transactional vehicles, and what ends up happening is those programs become very expensive for the company as they get more popular,” he says. “We need to think less about getting that one extra trip through the turnstile and focus more on creating consistently great experiences that make consumers want to join and use regularly.”
Welsh says the newest class of loyalty and membership programs are built around what the company understands about their customers, and they use a lot of intelligence to personalize experiences, whereas older programs gave everyone the same rewards.
“Membership programs say, ‘we have a fundamentally different relationship with our customers, and we want them to have a different relationship with us,’” Welsh explains. “People want to feel like they’re part of something and have moments of expression.”
Loyalty as a Currency
Loyalty programs give a specific type of currency, but that’s not what today’s consumers are after. A membership program typically gives rewards as a result of specific behaviors. For example, a consumer flies American Airlines enough to earn a status, and then they get to board first. That makes the customer feel like a part of something and creates a moment of expression.
With data becoming the DNA of modern brands, Welsh says behavioral data is now the gold standard for what an AI and ML algorithm can accomplish within a modern membership program. Outsourcing data is continuing to become less common, and brands are increasingly using membership programs to keep their data ponds fully stocked.
“The reason you want to own data is because that DNA becomes the thing you can capitalize on long term. If you only own part of that, swipe data for example, you don’t give yourself an opportunity to build even the most basic AI. You can’t train a machine learning algorithm, let alone an army of algorithms, to maximize a member relationship because there’s too much limitation,” he says. “If you only get this one thing, you can only do this one thing with it. If you own all of your data, there’s less and less reliance on other partnerships. If you don’t own all of your own data, you’ll always rely on someone else’s plumbing.”
For an example of a brand that’s done membership right, Welsh points to American Express. Cardholders will gladly spend a minimum of $250,000 annually for the American Express Black Card, in part because the company has done an exceptional job of creating levels of scarcity and moments of achievement.
“There’s a cache to being an AmEx member, and within that membership program, there are different tiers,” he says.
Looking into 2022, Welsh hopes to see even more brands stepping away from the transactional mentality and setting out to make customers feel like they are a part of something bigger than themselves.
“Think of membership as an umbrella and loyalty as something within that,” he says. “When you’re part of something larger than yourself, what you get is a sense of community.”
Stephanie Miles is a senior editor at Street Fight.