Forrester Report Shows Customer Loyalty Enters New Season of Growth

Three key areas of information point the way to the future of customer loyalty

A false narrative is circulating that the customer loyalty market is oversaturated. With so many well-known programs catching consumers’ attention — think Amazon, Sephora, Starbucks, loyalty programs and more — some brands might weigh the wisdom of launching a new loyalty program or increasing investment in the one they want. they currently operate.

By: Łukasz Słoniewski, Comarch

A new research report from Forrester, commissioned in Q1 2022 by global loyalty provider Comarch, examined current trends in customer loyalty and offered insights that can be grouped into three key areas:

  • Customer orientation is on the rise
  • New structures will dominate the future
  • Supplier expectations are rising

The report is titled Loyalty and Rewards Marketing Programs – Global Market Report 2022 and in this article, we cover the top trends, insights, and expectations in customer retention globally.

Research from many sources clearly illustrates the popularity of loyalty programs with consumers and the impact on their purchasing behavior. Nielsen research found that 84% of customers are more likely to choose a retailer that runs a loyalty program. The Wise Marketer published research showing that 82% of people who participate in points-based programs are more likely to buy more often and more than half (52%) say the opportunity to earn points encourages ignoring offers from competing brands.

A surprising research finding showed that the majority of programs (57%) have been operational in the market for two years or less. Given the global maturity of customer-centric and loyalty marketing, it’s encouraging to see many brands taking steps to create formal approaches to engaging and rewarding their customers. B2B programs reflected a similar trend, although B2B programs had twice as many programs running for more than 2 years as B2C programs.

Recognize renewed customer loyalty

The early development of B2C programs supports the hypothesis that we are seeing a resurgence in customer loyalty, with brands recognizing the value they bring to customers and their business. With the launch of a new wave of programs in the market, the structures we are used to seeing will begin to change. That the loyalty market is poised for continued growth was also supported in the research, as brands’ commitment to program expansion was centered on adding a portfolio of new features. , including gamification, value-based rewards, family housekeeping, multi-brand offerings, and experiential rewards. .

The most popular approach to B2C and B2B loyalty is to use a program structure to drive traffic and revenue to multiple brands. We see this as an “umbrella” approach, where two or more companies join forces to build, and an end-to-end ecosystem for customers to earn and trade on all participating brands. The use of strategic partnerships to create a stronger loyalty offering has been seen in the market in recent years and combinations like Dicks Sporting Goods and Nike or Kohl’s and Amazon are examples of this new concept.

Customer expectations have changed

Customer expectations for how their favorite brands market them have evolved since 2020. There is a desire expressed by consumers for simplicity, ease and family. They want to have fun and reach reward levels faster, so gamification is easily embraced. The key to creating a program design that connects with customers is to listen to your customers. Your listening can take the form of first party data analysis or an increased focus on information from Zero Party Data. When combined, your brand will be in a better position to create innovative, personalized, omnichannel programs that meet customer expectations.

Cash is still king…for now?

Forrester research has shown that even within these new structures, value propositions remain centered around redeemable cash back at the brand. Forty-nine percent of all programs reviewed and 59% of B2C retail programs had cashback central to the value proposition. Overall, at least 37% of programs offered redeemable cash back in an open currency format, that is, cash that can be applied to an account or used for a point-of-sale purchase .

To generate this future value, brands are accelerating their expectations of their loyalty provider and the value they deliver. The research revealed that brands seek to create an interoperable ecosystem of IT solutions for higher customer impact. To achieve this, they expect their vendor to be able to easily integrate a new customer engagement system into existing IT environments.

Working in a vendor organization myself, I’m always looking for the magic bullet that will entice customers to work with our set of solutions. Unfortunately, the research did not reveal a single reason why companies make the decision to partner with a particular vendor. Past employment relationships, capabilities beyond basic loyalty management, time to market, and responsible corporate and social values ​​topped the list of search results. Interestingly, price was the lowest selection criterion on the list of factors studied.

The takeaway from this research in terms of what makes a loyalty provider attractive is:

We believe that the vendors who will excel in the market today must not only deliver solid technology, but must present a more complete value proposition that includes thought leadership, service, flexibility and innovation.

Loyalty managers note that loyalty is more than just a reward. Personalizing the experience, communicating at every touchpoint and understanding customers is challenge #1. At the same time, their biggest issues are supporting their IT teams with their toolset integrations and the lack of expert resources.

That’s why companies should focus on vendors that can offer a full set of tools to engage and retain customers, including data analytics, personalized recommendations, and comprehensive omnichannel communication in addition to pure rewards. and simply the members for their actions. At the same time, due to the strong growth of loyalty programs in the market and the insufficient number of experts in the market, the loyalty solution provider must be able to bring and support the brand in end-to-end management. at the end of the loyalty strategy at all times. stage of the project.

All of this will serve to meet and exceed customer expectations through the implementation of successful programs that delight consumers.

With any business, there are challenges, and Forrester research found availability of resources, consistent delivery customer experience execution, and coordination with internal teams were among the biggest loyalty challenges today. today for the brands surveyed. Aligning the retention strategy with the overall business strategy was also high on the list and this is quickly becoming recognized in C-Suite conversations as a topic to address if the organization is truly to become more customer-centric.

Summarizing the report’s findings into concise categories, I landed on three main areas of information from the combined Forrester/Comarch research:

Customer orientation is on the rise

Brands continue to emphasize the value of becoming more customer-centric and place great importance on developing effective customer retention strategies that deliver financial benefit to the brand while delivering value to customers. . There has been an acceleration of new programs being introduced to the market and the nature of the program value proposition is evolving to go beyond cash back. Programs that will attract customers in the future will incorporate features such as data-driven personalization, gamification to increase reward speed, value-based rewards, and even cryptocurrency exchange.

New structures will dominate the future

Multi-brand loyalty program structures will become the most popular approach to engaging and delighting customers in the future. Multi-brand programs allow customers to earn and redeem rewards from multiple brands participating in the program, providing higher earning speed, better access to rewards, and higher perceived value for members. Importantly, multi-brand programs extend the ability to engage customers across the lifecycle, so relationships can grow over time and build trust.

Supplier expectations are rising

Expectations regarding the quality of technology and service are increasing. The capability of the technology provided is important, of course, but professional project management, thought leadership, and program management support should be paired with the technology to make a more powerful offering. Brands also want to integrate new loyalty platforms into existing IT environments, so new platforms must have the flexibility to fit easily into business situations.

Forrester’s research findings reinforced something fundamental that we at Comarch understand well: brands have high expectations of their loyalty provider and expect them to not only be a capable technology partner, but a thinking partner to help them solve business challenges.

Łukasz Słoniewski is Head of R&D – Loyalty Marketing Solutions at Comarch.

Forrester Report Shows Customer Loyalty Enters New Season of Growth

Joseph P. Harris