At the core of any loyalty program is the premise that a company rewards its customers for their continued business. With increasing competition, loyalty is harder to retain, as consumers are finding myriad options for their spending, and price becomes a more critical decision criteria. A PwC survey found that nearly 32 percent of consumers globally are willing to leave a brand they are loyal to for lower prices.
When companies offer only marginal differentiation and seemingly insignificant loyalty incentives, consumers will opt for the good-enough option, even becoming a member of a competitive program to secure discounts.
In retail and fast-moving goods, that switch rate can be up to 50 percent annually. With parity (perceived or real) across competitors in the travel and hospitality sector, consumers often belong to multiple programs, taking advantage of the most compelling offers — usually at joining. It’s estimated that the average American belongs to 17 different loyalty programs, erasing the concept of true brand loyalty.
At the recent Co-brand and Travel Rewards conference, dozens of sessions were dedicated to navigating innovation in loyalty programs. Innovation being the key word, but often revolving around additional incentives, seeking competitive parity, or decreasing already slim margins.
But there is a new path forward, here are the five loyalty initiatives for 2025.
1. Personalization as standard
Opportunity: Accenture revealed that 78 percent of customers are retracting loyalty faster today compared to just a decade ago, citing poor personalization or irrelevance as primary factors. Advances in AI and machine learning enable businesses to offer deeply personalized experiences, such as tailored offers or proactive recommendations. Customers increasingly expect these tailored interactions, and companies that excel in anticipating customer needs will strengthen loyalty.
Challenge: A cookieless future lies ahead, where data is not gathered from third-party sources, but instead relies on zero-party or first-party data, Zero-party data is voluntarily shared with the brand, in the hopes it will drive better personalization. A great example is a style quiz by a clothing brand to capture information directly from the consumer about their preferences. First-party data is information captured by the brand from previous (or intended) purchases.
2. Sustainability and social responsibility
Opportunity: Programs that align with environmental and ethical values resonate strongly with customers. For instance, initiatives like Adidas' "Move to Zero" showcase how brands can integrate sustainability into loyalty programs, fostering a deeper emotional connection. It’s a surprising attribute to add to a loyalty initiative, yet reflects deeper buyer concerns. Providing incentives for customers to make eco-friendly choices through rewards, such as offering points or discounts for purchasing sustainable products, opting for reusable options, recycling, or participating in environmentally friendly initiatives can advance sustainability efforts while boosting loyalty program participation.
Challenge: Broadcasting what’s already being done is low-hanging fruit. But are your customers aware? Are sustainability efforts visible on the website and in physical locations? Instantiating new sustainability programs can require more effort, but can also provide an opportunity to solicit input from loyal customers.
3. Gamification and experiential rewards
Opportunity: Loyalty programs are evolving beyond simple points systems. Companies are incorporating features such as levels, milestones, challenges, and badges into their loyalty programs to increase engagement. Examples like Sephora's Beauty Insider incorporate community-building and unique rewards that engage members in creative ways.
Challenge: While appealing, interactive apps and gamification should tie back to the brand, and resonate with its customers. Travel and hospitality companies could reward customers that complete a treasure map of locations, with winners receiving lifetime status (and notoriety via social media.)
4. Omnichannel integration
Opportunity: Ensuring rewards, promotions, and personalized experiences are seamlessly available across platforms (apps, in-store, online) enhances convenience and customer satisfaction. This creates a unified experience that builds loyalty across all touchpoints. For consumers, it’s no longer a nice-to-have, it’s expected.
Challenge: Working across multiple interfaces and backend providers can bring a host of integration challenges. Are the online offers available in-store, and vice-versa? Can buyers seamlessly purchase online and find a local store for pickup? Are the promised loyalty rewards actually received at check-in and checkout?
5. Experiential rewards
Opportunity: Points and tiers can add up to intangible benefits that resonate with consumers. Again mapping to customer preferences, these incentives can compel purchase behavior that reduces price as a decision factor. For example, early boarding for Royal Caribbean cruises gives access to an exclusive departure lounge. This provides value for passengers while promoting points earning for the loyalty program. Another option could be offering multiple options for points use, giving the ultimate flexibility to the customer, while providing critical first-party data for program innovation.
Challenge: These tiered experiences can be performed through a singular loyalty wallet added to the existing app or online. Training customer service reps and front-line staff is key to ensure the program is successfully executed, especially for newer incentives. When the emphasis is on experience, it’s all hands on deck.
Moving beyond table stakes to true value
Everything has not yet been invented when it comes to loyalty programs. Personalizing, offering experiences as rewards, and providing unique and seamless CX have more room for growth. Adding loyalty wallets to existing programs helps consumers earn, retain, and redeem rewards, and can even propel savings towards their next purchase. At the end of the day, loyalty programs that consistently provide meaningful value to their customers will win the loyalty wars.
