As consumers become savvier, they seek to gain more added value from their regular purchases and from their membership participations. This is forcing brands to adapt and deliver wide-ranging reward offerings, more prestigious membership status, enjoyable experiences and personalised services. Traditional transactional loyalty programmes, centred on points and tiers, continue to dominate the loyalty landscape in 2024. However, the market has become saturated with these reward offerings, which leads to consumer fatigue and increased risk of brand switching, ultimately compromising long-term loyalty.
In the new hyperconnected universe, brands are facing tight competition for consumers' budgets and hearts. Finding new ways to appeal to consumers' needs and provide tailored experiences becomes crucial. Building brand loyalty in a new decentralised space requires implementation of new tools and tactics such as AI, generative AI (GenAI), tokenization, gamification, and the use of blockchain and Metaverse to create a strong value proposition and provide instant gratification for consumers.
Consumers have a pivotal role in the development and success of loyalty programmes. Understanding consumer preferences and behaviour is important for companies and brands if they want to deploy a successful consumer-centric strategy.
According to Euromonitor International, generation Alpha (born between 2010 and 2024) is projected to be the biggest age segment by 2040. This generation will have a major influence in the future, with expectations for more shopping convenience and digital solutions. Millennials (born between 1980 and 1994) and Generation Z (1995-2009) will account for around 38% of the global population by 2040. Millennials are also expected to be the most affluent generation in 2040.
Figure 1: Global population by generation
Source: Euromonitor International, Consumers
Euromonitor's Loyalty Brand Tracker 2024 reveals that point-based and tiered programmes continue to lead in the loyalty landscape. Of the 100 brands tracked, 77% offer point-based systems, while 59% implement tiered programmes. Experiential rewards rank as the third most popular feature, with 49% of brands integrating these offerings into their loyalty structures.
At the same time, according to Euromonitor's Voice of the Consumer: Loyalty Survey 2024, consumer sentiment around loyalty programmes reveals that 37% of respondents feel that rewards take too long to accumulate, while 28% believe that the rewards offered are not valuable. These insights highlight common frustrations consumers experience with loyalty schemes, emphasising the need for more instant gratification and diverse value-added incentives – which in turn can help improve customer engagement.
Figure 2: Barriers to participating in loyalty programmes
Source: Euromonitor International Voice of the Consumer: Loyalty Survey, fielded March-April 2024
With global retail ecommerce expected to achieve 56% growth over 2023-2028, digitalisation of loyalty programmes is pivotal for their success. Enhanced engagement, real-time rewards, omnichannel proposition, and data collection must be leveraged through digital tools. The customisation of reward offers through real-time engagements, AI, predictive analytics, and customer profiling helps increase the relevance of loyalty programmes and their conversion rates. It is an essential strategy to help align with consumer preferences, purchasing habits, and their future needs.
We are now in the hyper-personalisation era, where the introduction of GenAI allows companies to process the high amounts of data generated by consumers’ engagement and leverage it to offer a tailored experience that speaks directly to what they are buying and needing at any moment. According to Euromonitor's Voice of the Consumer: Digital Survey 2024, 27% of consumers feel that shopping with GenAI improves product recommendations by making them more relevant. In comparison, 25% of respondents believe it enhances personalisation assistance, illustrating how GenAI can help support tailored shopping experiences and improve product suggestions.
Introducing customer profiling – which incorporates collection of big data on purchasing history, browsing activities and social media interactions to tailor loyalty offers and benefits – can reinforce the value of the loyalty proposition and suggest new opportunities for the business. As such, predictive analytics is instrumental for customer retention. It can help refine business strategies and optimise retention tactics. Predictive analytics can facilitate categorisation of the customer base and enhance customer experiences. Ultimately, it can allow a loyalty programme to become more flexible by tracking real-time performance.
Web 3.0 is another tool that can revolutionise loyalty programmes by bringing new types of ownership, benefits and community platforms and by blending physical and digital business practices under one ecosystem. Alongside new digital assets/tokens such as NFTs (non-fungible tokens) – which offer exclusivity and fun, memorable engagement with members –, they forge new paths for customer loyalty. NFTs that are one-of-a-kind digital assets can increase real-time redemption options, deliver unique incentives, and drive interoperability and transparency of operations, which consumers increasingly demand.
Increasing the frequency and duration of engagement with customers is also key to building relationships and trust. Gamification is an effective motivator for customers to engage more frequently with brands in a fun and novel manner. Popular formats include personalised challenges, in-app mini-games to earn points or rewards, as well as digital tokens such as NFTs.
Figure 3: Gamification functionality makes shopping experience better
Source: Euromonitor International Voice of the Consumer: Digital Survey, fielded March-April 2024
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