This white paper is focused around the way companies are redesigning their approach to loyalty, as traditional rewards programs fail to address customer expectations in terms of convenience, speed, and relevance.
In a world where we are always logged in and customer loyalties can switch with a few taps on a mobile phone, leading brands are rethinking the entire experience they deliver to their most loyal customers, in order to make repeat purchases a habit.
Our research, based on an analysis of 40 leading brands, examines how experiences designed to increase loyalty are evolving now and into the future.
2. EXECUTIVE SUMMARY
Loyalty is not for sale
Conventional points-based loyalty
programs are failing to build lasting brand
love in the digital age. Rapidly changing
consumer expectations are pushing brands
to re-think how they engage and impress
their audiences to keep them coming back.
Traditional loyalty programs have offered consumers rewards in
exchange for their personal shopping data since the mid-1990s.
Although this model has been widely adopted, with the average
American household enrolled in 29 programs, over time a lack of
differentiation between points-based schemes has resulted in
fading consumer engagement1. In fact, research shows that
traditional loyalty scheme members are actually less loyal than
non-members!2.
With the proliferation of user experience centered businesses
like Uber, Netflix and Amazon, consumers have come to rate
convenience and ease of use as highly, if not higher, than cost-
saving.
Our research explores how brands are driving consumersâ
loyalty by saving them time, predicting their needs and tailoring
incentives to their preferences. We outline how the intelligent
use of technology and user-centric design can offer greater
value to consumers in-store and out compared to the traditional
transactional rewards model.
1 Colloquy Census, 2015
2 TABS Group Consumer Value Study, 2015
3. RESEARCH RESULTS
Thereâs more to loyalty than points
Through our research, we found that
loyalty programs fall into four distinct
categories, assessed across functional
features and emotional elements.
We analyzed the 40 leading loyalty programs from some of
the most admired brands in the US and the UK. We found
that best-in-class programs were designed to make the
purchase experience easier, quicker, more personalized, and
more enjoyable. Schemes focused solely on points and
discounts failed to add the same amount of value to
consumers and therefore are less affective at driving loyalty.
NO FRILLS REWARDS
Just the points
Offers rewards and discounts only, with no
focus on the consumer experience.
UTILITARIAN
Saving time and effort
Designed to make the consumerâs
purchasing journey easier but fails to
create a personal connection.
CONNECTOR
Meaningful engagement
Appeals to the emotional side of consumers,
personalizing the experience and delighting
them, but doesnât make the journey any
quicker or easier.
HOLISTIC
Thinking about the whole experience
Uses innovative digital functionality to remove
friction and build personal connections with
consumers throughout the journey.
FUNCTIONAL
EMOTIONAL
LOWHIGH
LOW HIGH
6. Traditional loyalty
programs donât cut it
In a world of instant gratification, traditional
programs donât deliver.
Since the mid 1990âs, traditional points-based loyalty
programs have rewarded consumers with points and
discounts in exchange for their purchase data and
loyalty. Consumers are failing to see value in this
exchange anymore.
Research shows that there are an estimated ÂŁ5.7bn
worth of unclaimed points across the top 10 loyalty
programs in the UK. Points take a long time to earn, are
difficult to redeem and rarely provide a sufficient return
on the effort made to collect them, so consumers arenât
bothering anymore.
Traditional loyalty program
The Telegraph, 2015
Estimated worth of unclaimed
points from the top 10 loyalty
programs in the UK:
ÂŁ5.7bn
AWARENESS
Consumer receives
points or rewards
post-purchase
PLANNING PURCHASE USE
7. We have seen three major
shifts in consumer behavior that
are impacting brand loyalty.
8. TREND 1
Consumers are
spoiled for choice
Consumers have more choice across online and
offline channels as new brands proliferate and
consumers have access to every store in the world
through their smartphones. Digital marketplaces
and platforms like Amazon, Etsy, Pinterest, and Uber
Eats provide more exposure to choice, resulting in
decreasing consumer loyalty to any one brand3.
Two thirds of consumers say that the number of
companies or brands they consider when making
purchase decisions has increased significantly
compared with 10 years ago4. As a result, research
shows that 90% of the largest brands are declining
in market share5.
3 AdAge, Top 100 CPG Brands Mostly Lost Sales and Share in Past Year, 2015
4 Accenture, Customer 2020
5 Catalina Marketing Report / IRI Worldwide, 2015
9. TREND 2
Expectations are
higher
Brands need to focus on convenience as much as
price. In fact 86% of consumers are willing to pay
more for a better consumer experience6. Younger
demographics especially are used to getting things
on-demand, with 56% of consumers aged 18-34
expecting a same-day delivery option from retailers7.
If companies donât move faster, consumers will move
on. Nearly two-thirds say they use online channels
across sales, marketing, and service because of their
speed and convenience, while just over half say they
have become more impatient and want their buying
decision process to be fast with minimal effort8.
6 Oracle CEI Survey, 2011
7 Trustev, 2015
8 Accenture, Customer 2020
10. TREND 3
Memorable
experiences
matter most
77% of Millennials prefer a cool experience over a
cool product9.
As consumers become more digitally savvy and
increasingly barraged with choices, standing out with
a captivating and memorable consumer experience
can be a compelling advantage. Competitive prices
alone are not enough to entice consumers to keep
coming back. Itâs about the whole consumer journey
and making each interaction a moment of delight and
authentic engagement.
9 Deep Focus, 2015
12. RESEARCH
Our methodology
In our research, we assessed 40 brands who have
loyalty programs active in the UK or US, and who are
ranked on any of the Superbrands, Fortune, Forbes or
Interbrand lists of most valuable or admired brands.
We evaluated these loyalty programs across two
dimensions of consumer value: functional and
emotional. The functional factors focused on how the
loyalty programs were designed to take friction out of
the consumer purchase experience. The emotional
factors focused on how the loyalty programs were
designed to bring the consumer closer to the brand
with features that delight or surprise them.
We scored brand programs on the degree to which
they addressed each factor through a heuristic
scoring system.
13. FUNCTIONAL FACTORS EMOTIONAL FACTORS
Faster: e.g. shorter waiting time, no
queues, faster delivery
Special: Delighting the consumer with
special moments or surprises
We assessed the loyalty programs across six factors
Purpose: The loyalty program closely
ties to the brand purpose, extends it,
or complements it in a meaningful way
Personal: Based on data, give
consumers personalised experiences
and recommendations
New functionality: Enabling you to
do new things that add value to the
consumer experience
Simpler: e.g. use digital to enable
easier steps in the journey, i.e. use
smartphone functionality to complete
actions
14. RESULTS
Loyalty
programs are
offering more
than discount
points NO FRILLS REWARDS
Just the points
Offers rewards and discounts only,
with no focus on the consumer
experience.
Through our research, we found
that loyalty programs fall into
four distinct categories.
UTILITARIAN
Saving time and effort
Designed to make the consumerâs
purchasing journey easier but fails
to create a personal connection.
CONNECTOR
Meaningful engagement
Appeals to the emotional side of
consumers, personalizing the
experience and delighting them but
falls short on making the journey any
quicker or easier.
HOLISTIC
Thinking about the whole
experience
Uses innovative ideas to remove
friction and build personal connections
with consumers throughout the
journey.
FUNCTIONAL
EMOTIONAL
LOWHIGH
LOW HIGH
15. No Frills Rewards
Like the traditional coffee-shop stamp
cards, these programs allow returning
consumers to accrue points and
discounts through repeat purchases.
These programs are easy to sign up to
and always free, but provide limited
differentiation and donât do much to
improve the overall consumer
experience.
O2
Whole Foods
Nordstrom
M&S
Coca-Cola
Wyndham
Nandoâs
Avios
MorrisonsMcDonaldâs
Tesco
TRANSACTIONAL
TRADITIONAL
ONE STEP OF THE
JOURNEY
Sainsburyâs
KFC
Southwest Airlines
CostaBoots
Subway
16. Utilitarians
Utilitarians are the programs that focus on
improving the experience from the
functional side. While many activities are
made easier or faster, the loyalty programs
tend to miss the personal touch of the
brand that could differentiate them from
competitors. These programs focus on
features that are easy to copy. They could
improve by doing more to delight
consumers or focus on building long-term
relationships.
CVSAccorHotels
FASTER
EASIER
GENERIC
Delta Airlines
17. Connectors
Connectors focus on putting their brandâs
imprint on their loyalty program and on
making the consumer feel special. They
provide additional value to the consumer
through personalized offers and exclusive
rewards (e.g. early access to sales) that can
forge stronger emotional bonds by
delighting the consumer. These programs
could do more to embrace digital channels
and focus on making the purchase
experience quicker and easier.
IKEA
Mothercare
Lego
PERSONAL
PURPOSE
SPECIAL
Waitrose
Pampers
Lancome
Virgin RED
Asos
18. MEANINGFUL REWARDS
Holistic
Holistic programs score highly both on
functional and emotional factors. These
programs give the consumer something
that makes the overall experience
unique compared to competitors and
aligns closely to what the brand stands
for. They are innovative and foster
loyalty with consumers.
Amazon
Starbucks
Walgreens
Pepsi
Hilton
Marriott
Sephora
Target
American Express
John Lewis Nike
CONNECTED TO BRAND
PURPOSE
PART OF PEOPLEâS HABITS
19. Most loyalty programs are moving
beyond monetary rewards
AmazonStarbucks
Walgreens
CVS
Pepsi
Hilton
Marriott
British Airways
Sephora
Nike
AccorHotels
Target
American Express
Southwest Airlines
Lancome
O2
Whole Foods
Sainsburyâs
KFC
IKEA
MothercareLego
Nordstrom
M&S
Coca-Cola
Costa
Waitrose
Virgin RED
Wyndham
Boots
Subway
Nandoâs
Avios
FUNCTIONAL
EMOTIONAL
John Lewis
Morrisons
Delta Airlines
Pampers
Asos
McDonaldâs
Tesco
UTILITARIANS HOLISTIC
NO FRILLS REWARDS CONNECTORS
21. CASE STUDY
Starbucks
Starbucks differentiates from other
coffee houses because it considers the
context of buying their product: being on
the go. Its loyalty program is designed
for the urban tech-savvy consumer who
likes the ease of paying through the app
and skipping the queue.
16 million active users
and 20% of revenue
exchanged through
the app.
Receive points
âThe Star Rewards are
almost as addictive as
the coffee itself!â
- Robert H. app review
Automated journey
steps / easier
interactions
Check your balance and
add funds to your
Starbucks Card (with
debit/credit card or
Apple Pay).
Save waiting time in the
queue
Starbucks identified a
key pain point in the
experience of getting
coffee on the go: rush
hour queues. With the
Starbucks app, you can
order and pay before
you step into the shop
saving time on queuing.
AWARENESS PLANNING PURCHASE USE
LOYALTY
22. 80m out of 104m
members are active.
CASE STUDY
Walgreens
Pharmacist Walgreens uses its loyalty
program to keep their brand promise
front of mind even after consumers
have left their stores. The loyalty app
integrates with usersâ Fitbits and
rewards them based on how much
exercise they do. The app also has a
âpill reminderâ tool that helps
consumers keep on top of their
medications and prescriptions.
Simplified journey
Through pill reminders, Walgreens
makes it easier for their
consumers to stay on top of their
medication.
Connection to brand purpose
The purpose of Walgreens is to
enhance health. With their loyalty
program, consumers collect points
with healthy behavior, tracked by
their Fitbit. This connects them to
Walgreens in an emotional sense
because they share a purpose -
improving their health.
Save time
Get reminders and refill
prescriptions through
the in-app label scanner,
saving time in-store.
AWARENESS PLANNING PURCHASE USE
LOYALTY
23. 63m Amazon
Prime members.
CASE STUDY
Amazon
Prime
Online retailer Amazon Prime flips
the loyalty program premise on
its head by asking its consumers
to pay for it. In return they provide
a bundle of valuable services
from convenient next day delivery
to instant access to amazing film
and original TV series content.
Image sources
http://www.broadbandtvnews.com/2016/11/08/amazon-increases-amazon-prime-price-germany/
Faster
Free two-day shipping
on millions of products
with no minimum
purchase.
Rewards
Free access to Amazon
Prime video on demand,
borrowing books from
the Kindle Ownersâ
Lending Library,
unlimited photo storage.
Connection to brand
purpose
The purpose of Amazon
is to build a place where
people find and discover
anything they might
want to buy online. All
these Amazon Prime
perks enable this to
happen.
Special
Members get 30
minutes early access to
Lightning Deals.
AWARENESS PLANNING PURCHASE USE
LOYALTY
24. Eight things to remember when
designing your loyalty program
26. 3 4
Eight lessons for growing loyalty
Traditional programs often expect consumers to fill in long forms
to order a loyalty card, and understand complicated points
systems to figure out how much money they are saving. The key
is to make the whole experience smooth sailing for the consumer.
Enrol them automatically with their first order. Avoid complicated
points systems. Donât make them work hard to prove they are a
loyal consumer, so that they feel truly special when you notice
their love for your brand and reward them.
At booking.com, travellers who book through the site six times
are automatically enrolled on their .genius program which not
only gives a 10% discount to hotels that are part of the program,
but also makes the consumer feel special by giving them perks
like a free drink upon arrival and free airport shuttles.
Make it easy
Services that become more valuable the more you use them, such
as storing extensive sets of preferences and data, can be effective
at dissuading consumers from moving to a competitor. Similarly, by
solving recurring pain points in their journey, brands give consumers
a strong reason to stay loyal. Amazon often wins because
consumers never have to re-enter data such as frequently ordered
items, payment details or shipping preferences. But it can be taken
further through anticipatory design - a combination of data analysis
and user-centric design.
Some of the most successful platforms do this really well, such as
Spotify and Pinterest because they hold so much information on
consumer preferences, they are making it extremely difficult for their
loyal users to even consider going somewhere else, where they
would have to build their music or pin libraries from scratch.
Make it hard to
walk away
27. Eight lessons for growing loyalty
The strongest loyalty programs create network effects when
consumers engage with your product, and enable the most loyal
consumers to become brand ambassadors. This can be achieved by
rewarding consumers for referral, social media promotion or other
types of engagement. Consumers are increasingly used to being an
active part of a product, rather than passive users, through their
regular use of social media.
Some brands have succeeded in emulating TripAdvisorâs community
contributor model. TripAdvisor users are encouraged to review
restaurants and hotels on the site to gain points, reach new levels
and show off their expertise with unique and fun badges. UK telco
TalkTalk incentivizes consumers to provide answers to other
consumersâ questions through points and badges.
5Make consumers
work for you
Loyalty programs should be an extension of the brand
promise, strengthening what the brand stands for. If it doesnât
feel like a natural fit, it wonât make sense to the consumer.
Walgreens, for example, integrates its brand with peopleâs
health behavior by rewarding them through their Fitbits, and
relieving key frictions in the consumer journey through pill
reminders and easier prescription refills. By rewarding them
for their healthy choices, Walgreens reminds its consumers
of its brand throughout the day, even when theyâre not
directly consuming.
6 Extend your brand
proposition
28. Eight lessons for growing loyalty
Consumers are becoming increasingly concerned about whom
they share their data with. The value exchange needs to be
transparent and communicated clearly to the user, so they are
fully aware of what theyâre entering into. In addition, data
security should be a top priority for any brand launching a
personalized loyalty program. Build functionality that allows
consumers to pick and choose what data they share.
During recent years Facebook has moved power to their users
by allowing them to choose what information to share with
third party apps. This type of functionality addresses privacy
concerns, and should be considered in loyalty programs to
clearly demonstrate to the consumer the value exchange
between shared data and program benefits.
7 Show transparency to
gain trust
Technology continues to re-shape and provide more and more
exciting options for brands and how they can interact, build
experiences and sell to their consumers. However this ever-
changing environment makes it increasingly difficult for brands
to keep up with their rising expectations.
Understanding the changing landscape of new technology and
how they integrate into consumersâ every-day lives (such as
voice-based services like Amazon Echo and Google Home) is
essential for brands that want to provide a consistent
experience, whatever the channel. Brands that recognize this
and keep their finger on the pulse of leading tech trends will
have the advantage of crafting future-proof experiences.
8 Let technology lead
the way
29. INVISIBLE INTERFACES
Voice driven interactions remove
friction and make it easier for
users to engage with products.
ANTICIPATORY DESIGN
Automating the whole task of buying (e.g.
through subscriptions) or simplifying choice
through personalized search results.
PLATFORMS AS PRODUCTS
The future of loyalty is making
people part of your brand,
allowing for network effects.
NO-FUSS DELIVERY
Driverless transport makes delivery
a no brainer, making anything
accessible to consumers instantly.
CONNECTED SERVICES
Through open APIs, services integrate
with each other through a central AI
(e.g. Google Home) and create one
holistic, frictionless experience.
Image sources:
https://www.amazon.co.uk/echo
https://nest.com
http://venturebeat.com
Stepping into
the future
To determine the future of loyalty,
we need to understand the future
of technology and design.
To inspire you, we identified key
trends for 2020 that can help
design an engaging consumer
experience that will deepen your
brandâs relationship with your
consumers.