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According to many economic forecasts, the oncoming of a recession is inevitable. However, retailers have a tool to protect themselves from its effects. It is loyalty programs, the development of which will resonate with the growing need among consumers to save money. In the current economic situation, retaining existing customers is a priority for retailers, which will largely depend on effective loyalty marketing.
Loyalty Trends 2024 report (available for download here) outlines the main challenges, strategies and investments, regarding loyalty programs. It is based on surveys and qualitative interviews conducted with 105 experts from various industries and countries who manage loyalty programs. This year’s edition of the report shows that artificial intelligence, automation and personalization will be extremely important in building and developing effective loyalty marketing.
The most important goals of loyalty marketing today
As the results of the survey and interviews show, the most important goals for companies when it comes to loyalty programs are:
- improving overall customer lifetime value (CLV);
- lowering customer churn;
- increasing purchase frequency;
- increasing return on investment (ROI).
Compared to last year’s report, the top three trends remain unchanged. However, ROI is becoming more important and has risen to fourth place, ahead of customer acquisition. This means that those in charge of loyalty programs are focusing on retaining and maximizing the value of existing customers.
Short-term investments (in the current year)
The loyalty marketing trends that companies plan to specifically invest in during 2024 are: gamification, marketing automation and experience-based rewards.
Gamification (game-based mechanics)
In order to make loyalty programs more engaging, one can expect to see more schemes and mechanisms familiar from games, such as challenges and badges.
Marketing automation
Adapting a loyalty program and automated marketing communications will be the key to achieving greater benefits with the same number of in-house experts.
Experienced-based rewards
Enriching loyalty programs with unusual rewards will help differentiate the company from its competitors.
Long-term investments (for the upcoming 3 years)
According to the interviewed experts, among the loyalty marketing trends that companies will be very keen to invest in over the next 2-3 years are gamification and experience-based rewards, as well as predictive analytics and predictive segmentation. We wrote briefly about the first two above, and below we explain the latter two.
Predictive analytics
Prediction will continue to be an area that attracts investment for years to come. Companies want to use artificial intelligence to predict customer behavior, detect buying patterns or business expectations of loyalty programs (e.g., when an investment will reach break even point).
Predictive segmentation
According to some experts, an important area of investment in the coming years will be the segmentation of customers based on predicted value or anticipated buying behavior.
Development of loyalty programs over the next two to three years – thus, as many point out, during the economic downturn – will focus on their ability to offer customers the greatest possible savings. Obviously, it will be important for a company’s market success to balance consumer benefits with return on investment. Experts also predict that loyalty programs will undergo review and updates to keep them up to date and interesting among customers.
Importance of artificial intelligence in loyalty programs
The use of artificial intelligence in loyalty programs will be strongly linked to predictive analytics and predictive segmentation, and will make it easier to target customers with personalized offers and communication strategies. With artificial intelligence, companies can offer customers exactly what the latter need, and at the moment they need it. And that means less ineffective advertising and more offers that really interest them, which will translate into greater satisfaction and, therefore, greater profits for the company.
The use of AI goes beyond segmentation, placing a strong emphasis on customer lifetime value. The future of loyalty programs is hyperpersonalization, using data to customize campaigns and offers at every touchpoint with a company. By making better use of data, AI-based approaches are playing a key role in reducing customer churn while optimizing margins.
Loyalty programs are still a challenge for Polish retail
Today, in the face of an uncertain economic situation and the constant struggle of retail chains for the customer, customer loyalty is crucial. This makes it all the more surprising that, according to the Exorigo-Upos report, only 35% of retailers in Poland declare investments in loyalty programs. So this is still a huge field to be developed.
Retailers must also remember that a loyalty program that is to be truly effective must be available wherever customers shop – both online and in physical stores. So its integration with the POS system will be important – it can encourage regular customers to shop more often, and also help attract new ones.
