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Customer Loyalty

​​Customer Loyalty: 10 Terms That Every Marketer Should Know

Written by 
Brad Davis
November 8, 2022

Customer loyalty in the last few years is very different to what it was 10 (or even five!) years ago. As a rapidly evolving sector with highly advanced new technologies emerging all the time, here are some terms that every loyalty marketer worth their salt should be aware of.

Some are relatively new; others have been around for a long time – but rest assured, they are all extremely relevant!

1. Goal Gradient Effect

customer loyalty punch card in 2021
The goal gradient effect

It makes sense that the nearer you come to receiving a reward, the harder you’re prepared to work for it. This is referred to as the “goal gradient effect”, and this logic applies to customers who are progressing through their loyalty card – the intervals between each transaction typically shrinks as the customer grows closer to redeeming the reward.

Therefore, it’s crucial to ensure that your rewards are both relevant and attainable, so that customers remain engaged by your loyalty program and enticed by the rewards. Otherwise, you’ll notice that the average rate of each loyalty program member’s transactions will decline, and your amount of lapsed customers will rise… this is not the direction you want either of those metrics to go!

2. Redemption Rate (Not to be Confused with Participation Rate!)

redeem your reward
Redemption page

To calculate what your loyalty program’s redemption rate is, simply divide the total number of loyalty points redeemed, by the total number of loyalty points that your business has issued. The resulting number determines the level of engagement your rewards program is receiving.

Low engagement means your program is efficiently building registrations, but failing to maintain participation among new members. There are a few reasons why this might be happening, but luckily there’s a nifty solution for all of them (which we’ll cover in the below points!).

3. Value-add Marketing

IKEA's value add content
An example of IKEA's value-add contents

Value-add marketing is when businesses provide their customers with high quality content that enhances their overall experience, establishes the brand’s authority as a reputable source of information, and strengthens their emotional attachment to the brand.According to a study by HubSpot, 47% of buyers view 3-5 pieces of content before engaging with a sales rep, while 82% of marketers report actively using content marketing in 2021 – up 70% from the previous year.

As an example, IKEA manages a very well put-together and aesthetically-pleasing blog to keep its customers updated with interior design tips, furnishing hacks and general entertaining content around the subject of home interiors.

This endless stream of quality content is all free of course, and no doubt serves IKEA’s email subscriber list extremely well, as more and more people decide they’d like to receive regular ongoing content from a trusted global brand.

Depending on what your business sells, you might consider managing a regular blog that informs your customers of delicious recipes, gardening hacks or general industry news and expert product recommendations.

4. User-generated Content

user-generated content for crown melbourne
User - generated content

Media measurement and analytics firm Comscore recently conducted a study, which found that customer engagement is 28% higher among content that’s created by peers, rather than the brand itself. This is because consumers increasingly trust peer reviews and referrals over traditional advertising like TV/radio ads, billboards and so on.

Loyalty programs are the perfect vessel for building a wealth of user-generated content to create hype around your brand.

By offering customers loyalty points in exchange for creating their own content around your products, services and general customer experience, you produce brand ambassadors – arguably the Holy Grail of customer loyalty marketing.

Some forms of UGC to incentivize through your loyalty program might be:

  • Reviews
  • Instructional guides
  • YouTube tutorials
  • Instagram posts featuring your product

5. Surprise + Delight

three people looking at excited at phone
Surprise and delight your customers

Surprise & Delight quite literally means surprising and delighting your customers with spontaneous rewards and unexpected gifts that enhance their experience with your brand.

It could be a random “double points day”, or an unannounced gift on the anniversary of their loyalty program registration. You might even build a handful of “milestones” into your rewards structure that the customers aren’t made aware of. This way, the loyalty program functions as normal on the business end, but offers up a wealth of hidden delights on the customer’s side of things.

An upfront reward just for signing up to your loyalty program is also a welcome surprise. It provides the customer with a sense of instant gratification, and gets them motivated to earn points and redeem more rewards.

6. Personalization

recommended just for you
Personalized website content

By storing and analysing customer data, your rewards platform can provide you with invaluable insights to customer spending habits, and send tailored communications based on each individual customer’s previous transactions and various other interactions with your brand.

The more a customer engages with your loyalty program, the more it can hone in on what the customer wants and cater for them in its own unique way. Perhaps one customer would appreciate 50% off all ties and collared shirts for one week only, while another customer would prefer free shipping on their next purchase of jewellery and accessories.

Personalization is a loyalty program standard now, and brands who neglect it risk losing customers to their competitors.

7. Gamification

gamification customer loyalty 2023

In the context of marketing, gamification is the process of taking a mundane task and adding a gaming component to it for more engagement. Some examples include:

  • Earning bronze, silver or gold trophies when you make progress learning a language on Duolingo
  • LinkedIn kindly informing you that your profile is only 17% away from being fully complete
  • DOM the Pizza Bot – Domino’s very own pizza tracking robot, who keeps customers delightfully entertained (and informed) throughout the waiting period between ordering their pizza and eagerly accepting delivery

You can imagine the opportunities a digital loyalty program presents for gamification. Our own Scratch & Win function is a prime example of how to increase customer engagement with gamification.

8. Experiential Rewards

hot air balloon in sky
An example of experiential rewards

Whether it’s exclusive access to pre-season sales, free tickets to a product launch, complimentary in-store cooking classes, hairstyling workshops or networking meetups – customers want tangible rewards they can experience and tell their friends about.

Discounts and freebies (while effective in retaining customers) don’t create an emotional connection between brand and customer the same way that experiential rewards can.

Especially in this post-COVID phase, people crave experiential rewards that they can share with friends, post about on social media, and gain pleasant memories from.

9. Omnichannel Engagement

omnichannel engagement is important for customer loyalty in 2021
Omnichannel engagement

A key aspect of loyalty marketing is omnichannel engagement – the art of engaging with your customers across multiple mediums simultaneously. This doesn’t merely mean having a customer support email address, 24/7 phone support, instant messenger chats and so on.

Omnichannel engagement allows the customer to interact with the brand seamlessly across numerous channels, consistently picking up where they left off last time.

By providing a flawless and cohesive experience across all aspects of your business, you can ensure your customers will quickly build a rapport with your brand. It also allows you to better understand your customers’ needs and preferences, thus resulting in a more customer-focused loyalty program that leaves a lasting positive impression.

10.  CSR (Corporate Social Responsibility)

H&M sustainability report
Image Source: H&M 2018 Sustainability Report

Now more than ever, a brand’s corporate citizenship is just as crucial as its customer service, the quality of its product and the value for money. To put it simply, brands must “walk the walk” when it comes to their Corporate Social Responsibility initiatives.

Global fashion chain H&M adopts a full transparency approach with its annual sustainability report, released every year for all to see. The report provides in-depth details regarding H&M’s goals, techniques and progress towards sustainable methods.

Loyalty programs are the perfect opportunity to weave your business’s CSR into the very fabric of your brand, as well as equipping your customers with the means to get involved and play a more hands-on role in the contribution.

MAC Cosmetics’ Back to MAC Program rewards its customers with a free lipstick of their choice every time they return six empty MAC primary packaging containers to any MAC outlet.

What can we expect in customer loyalty in the future?

It goes without saying that much of the current state of customer loyalty has been impacted by the global COVID-19 pandemic – especially innovations such as contactless loyalty and a sharp incline in ecommerce loyalty programs.

Moving forward, we can expect to see an increased focus on developing technology that will further enhance personalization through segmentation, as well as a continuing shift towards customer lifetime value based on the consumer experience, rather than the value of the product.

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