From points to passion: breaking free from the loyalty program treadmill

For too long, brands have focused narrowly on tactical rewards programs, relying solely on points, tiers, and discounts.

In a crowded marketplace, loyalty schemes no longer provide meaningful differentiation or competitive advantage. Though welcomed by consumers in times of need, relying solely on points and discounts reflects a general tone-deafness to modern customer priorities. In our survey (Capgemini Customer Loyalty Survey, November 2023), we found 72 per cent of respondents feel there are too many indistinguishable programs today and are overwhelmed, indicating the fading appeal of loyalty programs.

This narrow conception of loyalty misses the mark on what today's customers truly expect. Major shifts in the digital landscape have led customers to seek more profound relationships rooted in shared values, understanding, and emotional resonance. They crave belonging and want brands to recognize them as unique individuals, connected by purpose and community.

Elevating loyalty in this new paradigm requires rethinking membership as an intrinsic philosophy tightly woven into the fabric of the brand, not an isolated marketing tactic. Activities like purposeful storytelling, frictionless service, and hyper-personalization demonstrate customers are known and appreciated as more than numbers in a database.

Critically, this new loyalty paradigm intersects with the rise of conscious consumerism. As the eco-digital builds in momentum, consumers increasingly support brands aligned with their sustainability values and not just brands that encourage them to buy more. They demand tangible ethical and green practices, not superficial messaging.

To truly earn customer loyalty today, brands must break free of the traditional loyalty program model. They need to take a broader view focused on innovating the total customer experience. This requires a deeper understanding of customer needs and the agility to meet their ever-evolving expectations, leveraging technologies like Generative AI (Gen AI) to curate adaptive experiences. Only then can relevance replace transactions as the new currency of loyalty.

Elevating loyalty beyond the sea of same

Customer loyalty today is about much more than just transactions and purchase frequency. It's about building meaningful relationships and creating experiences that make customers feel truly valued. Brands need to elevate loyalty beyond points and discounts to earn allegiance.

Loyalty now stems not just from what a brand offers, but who they are and what they stand for. When asked what matters to them the most and important factors to be loyal to a brand, 51 per cent of our survey respondents voted that brand values that align with their own personal values as one of the most important factors. This was further amplified by the 18-28 year old respondents, with 56 per cent of them prioritising value alignment. In fact, nearly half of the respondents ranked misalignment with brand values and lack of corporate social responsibility as key switch triggers.

Elevated loyalty seeks to continue driving the necessary business outcomes, whilst responding to the growing consumer desire for brands with a clear purpose, strong values, and willingness to empower their members to act collectively together. Elevated loyalty is therefore the product of driving these three strategic outcomes together.

A. Rational Loyalty

The cost-of-living crisis is significantly impacting consumers attitude to loyalty, as well their capacity to be loyal. As such, brands must demonstrate clear value across both their core value proposition and membership experience, going beyond transactional value to offer a high-quality product or service that is convenient, accessible, and functional. Some brands like the Co-Op have shifted to immediate value in the form of member pricing, whilst others like McDonald’s prefer to leverage their promotion and competition mechanics to deliver instant gratification.

B. Emotional Loyalty

Driving deep emotional engagement can help brands to build more meaningful, deep-rooted loyalty. Key emotions – such as honesty, trust, and belonging – have been found to have the strongest impact on loyalty and are central to building genuine emotional connections with customers. To engage customers, brands must create differentiated two-way experiences that offer varied interactions and meet growing expectations for simplicity, immersion and personalisation. IKEA’s newly refreshed Rewards from IKEA Family program supports members through the emotional journey of home furnishing transformation, rewarding those who seek help, engage with the brand, and make purchases big or small.

C. Purposeful Loyalty

To stand out, brands must align their experiences with customers’ core values around people, planet and society. By empowering people to act purposefully and to advocate for the topics that matter to them, within a community they feel they belong to, brands can build longer-lasting, more impactful relationships with their customers.

Outstanding value, share-worthy moments, and a sense of community help craft joyful experiences around a brand, and those that stand for a higher purpose beyond profits resonate more deeply with customers. Outdoor recreation clothing and equipment brand Patagonia builds customer loyalty not with traditional programs, but through its steadfast commitment to environmental activism, going as far to actively discourage customers from purchasing new clothing, and instead to repair current products or to reconsider their purchase altogether.

A new membership philosophy

Elevated loyalty experiences can be achieved through a new membership philosophy, which transitions the customer experience from a customer club on the side of an experience, to a golden thread that connects customers throughout the entire experience and supports exploration and engagement for customers, and cross-sells for organisation.

Within this new membership philosophy, we see four major shifts:

• From consumptive to regenerative

Customers expect brands to address critical global issues and give back to people, the planet and society. Brands must break the paradigm that loyalty drives unnecessary consumption, instead designing every new member experience to go beyond just reversing damage, and instead begin to shape a regenerative future. 71 per cent of respondents we surveyed were interested or very interested in loyalty offerings that drive thoughtful/conscious decision-making, and/or reward sustainable/ethical choices.

• From fragmented to holistic

Traditional loyalty programs have often existed on the side, fragmented and disconnected from a brand's core experiences. Future membership offerings must be considered holistic and embedded across all touchpoints as a golden thread to comprehensively address a broader spectrum of customer needs. 51 per cent of respondents we surveyed stated that a connected, omnichannel loyalty experience was an important factor in making them loyal to a brand.

• From static to adaptive

With new technologies, brands will be empowered to deliver outstanding, hyper-personalised customer experiences with the scale, speed, and consistency that consumers have grown to expect. Expected to become table stakes, brands can leverage Gen AI to quickly and impactfully adapt to changes in context, customers, and channels. 75 per cent of respondents we surveyed had favourable attitudes towards AI/GenAI and its role in creating evolving, unique experiences for consumers based on sharing data, buying/engagement behaviour etc.

• From individual to collective

Brands that can create meaningful shared experiences for customers that also integrate community into new business initiatives, can benefit from serving the core human need to belong, while empowering their members to have a greater impact as part of a collective. 73 per cent of respondents surveyed stated that they feel more connected to a brand and are more likely to buy from them if the brand makes them feel like they belong to a community.

A recent development could be mentioned here -  that Co-Op dropped its points offer and is now concentrating on membership discounts instead while McDonald’s has shifted back heavily to price promotions through their app short term after poor sales last quarter - brands are still figuring out the new lay of the land.

Christopher Baird is the global head of loyalty at frog, part of Capgemini Invent