The Evolution of Digital Loyalty Programmes

April 2022

Fintech & Payments

Harshada Thok

Research Analyst

The Transformation of Customer Loyalty

Customer loyalty has been undergoing significant technological transformation for the past 10 years. Retailers are focusing on greater innovation and effective loyalty solutions to accelerate their revenue growth and promote brands more efficiently. The driving factor for retailers’ increased interest in loyalty programmes is the fact that it helps build trust between customer and business. Loyalty programmes help retailers retain their existing customers, as well as attracting new customers.

What Digital Loyalty Offers Customers

Digital loyalty providers are coming up with more ways to help brands retain customers; providing them with special offers, and benefits such as discounts and free products. There are solutions where customers can accumulate points with every and receive additional perks when redeeming those points. CLV (Customer purchase Lifetime Value) is the total worth of a customer to a business over the whole period of the relationship between customer and brand.

The rewards can be in the form of stamps, virtual punch cards, points (virtual reward currency), cashback, discounts, free products, offers and charitable donations earned as a result of a purchase, or joining a loyalty programme.

Trust at the Centre of Digital Loyalty Success

The emergence of loyalty programmes has opened new opportunities for retailers to target a larger customer base. A loyalty programme helps brands build an emotional connection with customers on a personal level. Vendors are designing tailored loyalty programmes according to the shopping behaviours of individual customers. This maximises the chances of customers making repeat purchases, and often leads to brands collaborating together to get the most out of the customer-brand interaction. Often, third-party promotions are featured on the apps or websites of brands to give customers a more personalised experience. Another example of creating emotional connections with customers using loyalty programmes is offering a birthday reward.

Traditional VS Digital Loyalty

The rise of eCommerce created a greater opportunity for retailers to track customer data and incentivise the behaviour that drives business value. Digitisation of customer loyalty programmes allows brands to get over the pain points that have traditionally hampered loyalty programmes – including the challenges of enrolment and redemption. It also offers better opportunities for communication with the customer; allowing retailers to connect with customers via their digital wallets – a platform that drives greater engagement and at lower cost. It enables personalised interaction, such as timely push notifications to alert consumers inside or near a store that they have rewards on offer, or invite them in-store for experiences other shoppers will not have access to.

AI & Big Data: The Future of Digital Loyalty Programmes

Loyalty programmes are an excellent way of collecting customer data to appropriately use it in future planning. Customer expectations of personalisation in products and services are increasing the customer-centric culture. Big Data-powered AI systems will be making a big step in analysing and monitoring customer behaviours. Loyalty programme providers will tailor the loyalty programmes-based decision-making derived from artificial intelligence. This will let brands accurately strategise loyalty programmes and also plan the product launches as per consumer expectations. 

AI and Big Data will make provide more personalised experience to customers which is the biggest requirement in the retail world. Also, they get a chance to earn benefits when shopping at the store. This is a major factor to retain buyers in this digital era – the era of global shopping just with a few clicks, as well as the era of commitment and loyalty being difficult to gain.

• The value of global consumer credit card rewards will exceed $108 billion by 2026; rising from $92 billion in 2022.
• This 15% growth will be driven by an increase in the adoption of co-branded credit cards by retailers in order to boost repeat user engagement.
• The global value of credit card rewards will increase, as consumers prefer their loyalty record in one place, instead of multiple apps or physical cards.
• The value of consumer credit card rewards in China will grow by 18% between 2022 & 2026; as consumer awareness of loyalty programmes rises in the digitally savvy Chinese population.
• The total value of personal credit card rewards will be triple that of corporate credit cards in 2026.