2023 Customer Loyalty Trends and Perspectives: Loyalty360 Research & Reports 

Customer loyalty should be a crucial aspect of any company’s business strategy. In the ever-evolving landscape of technology and customer expectations, it’s more complex than ever for brands, agencies, and supplier partners to stay up-to-date and informed on the latest trends in loyalty.

This report explores the key trends that could shape the industry in 2023 and beyond, including insights on how marketers can leverage these trends to build customer loyalty and improve customer engagement.

From the continued rise of personalization to best practices on how brands can differentiate their loyalty strategies to stand out in the “Sea of Sameness,” this report will provide valuable information for brands looking to improve their customer loyalty strategies in the year ahead based on the unbiased and unique insight gleaned from research with brand marketers and interviews with supplier partners.

Thank you to our Loyalty360 supplier members that contributed their time and valuable insights:
• Zsuzsa Kecsmar, Co-founder and Chief Strategy Officer, Antavo
• Nancy Gordon, Chief Product Officer, Loyalty & Rewards, Bakkt
• Don Smith, Executive Vice President, Chief Consulting Officer, Brierley
• Tim Glomb, VP of Global Content, Cheetah Digital
• Tom Madden, Managing Partner of Loyalty and CRM, ICF Next
• Bindu Gupta, Senior Director of Customer Strategy, Insights, and Research, ICF Next
• Ravi Srinivasan, President & CEO, Group FiO
• Nina Rose, Senior Director, Strategic Services, The Lacek Group
• Todd Gulbransen, Senior Vice President, Consumer Marketing, PDI Technologies
• Linnea Geiss, Chief Operating Officer, PDI Technologies
• Padmashwini Raghunathan, Product Manager of CI&I Retail, TCS Interactive
• Uma Narayanan, Principal Innovation Evangelist, TCS Interactive

With changing customer preferences and advancements in technology, it’s essential for companies to keep their loyalty strategies up to date to remain relevant and appealing. Customers are seeking more personalized and meaningful offers, rewards, and brand experiences. Traditional loyalty or rewards programs that only offer points for purchases no longer meet the expectations of today’s consumers.

According to Loyalty360’s 2022 State of Customer Loyalty report, 78% of surveyed marketers are interested in redoing, enhancing, or updating their customer loyalty offerings. Loyalty360 supplier members support this statistic, with many of their clients showing interest in updating their customer loyalty programs and strategies for various reasons.

Nancy Gordon, Chief Product Officer, Loyalty & Rewards for Bakkt, shares, “From my experience, there are many reasons brands redo their customer loyalty programs, and this is certainly something we see in the market as of lately. Loyalty has always been and remains a rich area for innovation, allowing brands to stimulate usage from current customers and attract new markets, segments, or demographics.”

Antavo’s Co-founder and Chief Strategy Officer, Zsuzsa Kescmar, adds, “Companies are now re-evaluating their existing technology and solutions, and there is a significant appetite for relaunch in the market. As part of our yearly Global Customer Loyalty Report, I think two numbers are very relevant. In 2022, 7 out of 10 companies stated they wanted to revamp their loyalty program in the next three years. In the 2023 edition of the report, that number increased to 8 out of 10 companies who want to revamp their loyalty program in the next three years. Clearly, ambitious loyalty managers and professionals know customer loyalty is worth investing in.”

Keeping up with the competition and remaining relevant are two critical considerations for brands, but many are also looking to differentiate themselves. Many within the industry feel there is a “Sea of Sameness” when it comes to customer loyalty programs — stale discounts, points for transactions, and dated program structures that give off a “me too” feeling, with no uniqueness to draw customers’ attention.

While requiring dedicated time, budget, and expertise, investing in enhanced technology and new strategies can help brands stand out from competitors and tailor their loyalty programs in an authentic manner, further enhancing their effectiveness.

“Loyalty has become what we call table stakes. Everybody does it, everybody gets points, and they become meaningless after a while,” says Ravi Srinivasan, President and CEO, Group FiO. “We’re seeing trends around experiential rewards, paid loyalty programs with premier benefits, improving in-store and e-comm experience and improving communications. All of these things can separate a brand from the ‘Sea of Sameness’.”

The Lacek Group’s Nina Rose, Senior Director, Strategic Services, agrees, sharing, “It’s true that a lot of programs are very similar. The way around that is to understand what unique experiences your brand has to offer. What do you have that can’t easily be replicated? Is it the best selection, the best service, the highest quality, a fun design? Whatever it is, ideally, it’s something that customers want or something that addresses a pain point, and programs need to find a way to bring that in – that’s the way to differentiate.”

Revamping Loyalty and Standing Out in the “Sea of Sameness” (Con’t)

For brands that find themselves “swimming in the Sea of Sameness,” Don Smith, Brierley Executive Vice President and Chief Consulting Officer, shares, “Brands have two choices. They can either give the best deal or discount, but then there is concern about diluting financial mechanics, and that’s a race to the bottom. The other choice is for brands to say, ‘I’m going to take my program out of the Sea of Sameness and project it into new waters, and what I want to do is find features that will be hard for my competitors to copy.’ To do this, brands should leverage the unique assets of their brand in a way that will give a competitive advantage. These can be perks, experiences, or special status, for example. Find ways to take what you have and delight the guest with that.”

Smith recommends that brands focus on their unique assets and amplify them through their loyalty programs. “Find benefits that members will value, things that show authenticity,” he says. “Try leveraging the data to figure out what those benefits are and what the next move is for each guest and member.”

Customer Loyalty Challenges and Putting Trends and Plans into Action

Over the past three years, the customer loyalty industry has changed rapidly. COVID pushed brands and technology suppliers to or past their limits. Despite the difficulties, many found silver linings through innovations, such as digital transformations and customer experience enhancements. After some time to fine-tune and iron out details, brands found that customer expectations are vastly different than they were a few years ago.

In Loyalty360’s State of Customer Loyalty Report, 71% of brand respondents feel that customers have higher expectations of their customer loyalty efforts today than in the past. Additionally, 62% said that they have a good understanding of how their customers are changing for their brand or industry.

However, the challenges and pain points are apparent when it comes to the technology, strategy, and
expertise to execute, incorporate trends, and put plans into action. The top challenges brands mentioned are:

• Understanding technology integrations (75%)
• Internal resource allocation (58%)
• Competing marketing priorities (46%)

“The environment is changing rapidly, and consumers are constantly being exposed to new technologies in their personal lives,” says Gordon, Bakkt. “As a practitioner, it can be hard to understand and to differentiate what is worth applying versus what’s simply a technology fad. Emerging out of COVID, we saw the continued proliferation of loyalty programs. There are a lot of rewards to manage, and consumers are now demanding stacked promotions and offers on top of the base loyalty offerings. It’s challenging for brands to balance all of this in the marketing and investment mix.”

With so much “noise” in the industry, how can brands cut through and determine what’s best for their organization and loyalty efforts? Cheetah Digital’s VP of Content, Tim Glomb, has a few recommendations for brands. “Be first. If you are budget focused, you probably are not on a truly agile platform that allows your brand to differentiate in value and actual functionality as needed,” he says. “This means you get new features when everyone else does, including your potential competitors. So be first. Adopt, test, and fail fast while giving careful consideration for the negative impacts if a feature does indeed fail.”

While keeping up with technologies is one challenge, understanding how to incorporate and integrate technologies is another. In previous Loyalty360 research, 70% of brands shared that they do not have the technical acumen or bench strength internally to understand the technologies needed to administer effective CX and customer loyalty offerings.

“We are trying to address these challenges with our clients, but I think a lot of businesses don’t have the core skill set [on how to analyze a loyalty program],” says Srinivasan, Group FiO. “The big companies have data scientists, and they can do a lot of work, but the core ability to combine business analytics with data analytics and hit a marketing or sales objective — we have seen significant gaps in this skill set, and there’s a need for more education.”

Customer Loyalty Challenges and Putting Trends and Plans into Action (Con’t)

Cheetah Digital’s Glomb continues, “Lean on the services of your technology partner when you can, as that’s all they do, every day. It’s important to have a platform that has vertical experts in your field. Technology is only part of the solution for brands. Get people on your side that know your business.”

As many brands mentioned, competing internal priorities, internal buy-in, and budget constraints can side track or derail marketers’ loyalty plans. Padmashwini Raghunathan, Product Manager of CI&I Retail, and Uma Narayanan, Principal Innovation Evangelist, TCS Interactive, say, “Convincing stakeholders that loyalty is an opportunity and investment and building a business case in its support is a key challenge. A way to address this will be to measure the effectiveness of loyalty and have targeted initiatives to improve the effectiveness aligned with overall organizational goals.”

Antavo’s Kecsmar noted her organization has seen similar trends, as some brands have a difficult time getting final buy-in from stakeholders and loyalty programs and strategies are still viewed as a cost center within some organizations. However, research has shown that loyalty does pay off. According to Antavo’s 2023 Global Customer Loyalty Report, 80% of brands who measure the ROI of their loyalty program reported a positive ROI with 4.9x more revenue than what they spend on average.

Brierley’s Smith recommends that brands “don’t boil the ocean” when it comes to loyalty, but instead start small, see what works, and build upon their successes.

“One of the things that we’ve learned is you often don’t want to come out with 500 bells and whistles and plan for all of your enhancements to launch on day one. What makes a lot of sense is to have a progressive roadmap as marketers move through it because programs need that ‘next thing’ that gets injected every once in a while,” says Smith. “Here’s the latest and greatest that keeps the program fun and relevant, so I think you can take a lot of functionality and stage it out over time so that you don’t have to have this big upfront development effort and cost. From here, brands can progressively introduce additional features that make sense, but all of this needs to come down to financial modeling to figure out if the juice is worth the squeeze.”

Data and Privacy Trends for 2023

The need for brands to balance data privacy, security, and access is at an all-time high, with the global rise in data privacy regulations, increased scrutiny of brands due to data breaches, new U.S. state-based legislation going into effect this year, and proposed measures focused on personal data protection that could impact companies around the world.

As such, brands have started the process of shifting their data and marketing strategies to focus more on first- and zero-party data — including information that comes directly from customer web activity or that customers share freely through surveys and polls — instead of relying on third-party data, which is aggregated data that a customer may not have given consensually. Third-party cookies have helped organizations create targeted ads for years, but with Google phasing out cookies by the end of 2024, marketers will need to adapt in order to serve up personalized and targeted ads, messages, and offers.

ICF Next’s Tom Madden, Managing Partner of Loyalty and CRM, shares, “I would say that when it comes to data and privacy management, play to the lowest common denominator. What I mean by that is, whoever the most stringent is in their practices at the moment, whether it’s GRDP, California laws (CCPA/CPRA), GDPR, or whatever the case may be, establish your standards towards that because things are going to continue to get stronger for the consumer over time.”

Bakkt’s Gordon adds, “It’s important that brands obtain consent as it provides customers with transparency, control, and choice over how their data is used. There should be no mystery around privacy and brands should be respectful of each customer’s personal information.”

While changes in data collection and management practices will make more work for marketers in the short term, the results should benefit brands in the long run. Madden continues, “Look, consumers are getting smarter and want control of their own data. I think the brands that jump ahead of that and enable that in a true and honest way first will be paid dividends for many years to come from those customers.”

By changing their approach to data collection and management now, brands can better position themselves for future success. Research shows that customers heavily prefer recommendations made on past purchases and targeted offers after browsing a brand’s website instead of location-based or retargeted ads that may come off as “creepy.” This can be good news for marketers, as consumers want relevant content, but it is on the brand to create a value exchange to earn first- and zero-party data.

Data and Privacy Trends for 2023 (Con’t)

According to Cheetah Digital’s 2023 Consumer Trends Index, 93% of consumers are prepared to trade data for a discount, 91% for loyalty rewards, and 83% for the opportunity to win a prize. Additionally, many consumers will share their personal, psychographic, and behavioral data in return for unlocking content (61%), to feel part of a brand’s community (59%), and for early or exclusive access to products and services (86%).

“Consumers know they can demand value for their data,” says Cheetah Digital’s Glomb. “A brand’s value exchange offering needs to be solid in order to gain the data they need. Brands must also be transparent about what they plan to do with customers’ data, as trust is key. Providing value back as soon as possible upon being given customer data is a great way to show brands intend to use the data for good. Keep the conversation quick and timely to prove you listened and reciprocated.”

While some brands have started shifting their strategies to focus more on first- and zero-party data — with a few doing it very well — many are in the early stages or even still working to familiarize themselves with best practices on how to collect these types of data. In the 2023 Loyalty360 Brand Member Research report on Preference Centers & Privacy, 61% of brands said they are working on obtaining zero-party data through their preference centers.

“I think we still have not seen enough zero-party data, preference center, and census data that live as part of a customer loyalty program,” says Smith, Brierley. “If we can explain to a member, ‘Thanks for signing up, we would like to make our communications a little more relevant to you, tell us about the things that you love’ brands can offer up points or some other incentive for customers doing that. If members take the time to give you information about themselves, you now have an authentic relationship.”

Smith continues, “It’s about zero-party data and first-party data. We are going to have fewer third-party overlays. It is much more powerful to hear from the customers themselves. I think that is customer-centric, it’s empowering for the member, and it will be empowering for the brand because everyone wins from this authenticity.”

Customer Loyalty Trends for 2023: What’s the Next “Big Thing” ?

With the rapid change of pace and innovation over the last three years, marketers may want to stop and catch their breath while at the same time ask themselves, “What’s next?” As we know, customer loyalty is constantly evolving and keeping up is critical.

Customers are demanding more from brands, with many expecting personalized experiences, instant gratification, and seamless interactions across channels. There are also economic considerations at play, with brands feeling pressure to make calculated investments but also incentivize price conscious customers through their loyalty strategies using valuable rewards and offers. Lastly, advances in technology have the potential to transform the ways brands engage with customers but finding the “right” technology is key.

“In this three-year period, there has been the equivalent of change of the last 15 to 18 years in the customer loyalty space. I’ve never seen anything change this much, this fast,” says ICF Next’s Madden.

“There are so many new technologies, and there is always a shiny object versus what you really should be investing in,” continues Bindu Gupta, Senior Director of Customer Strategy, Insights, and Research for ICF Next. “I think every brand needs to assess individual situations and figure out what they have today, identify what technology stack they have, and understand their goals. If an enhancement or capability is going to benefit a minuscule size of your overall member base, it should receive a minuscule amount of your focus.”

While economic uncertainty will certainly play a role in brands’ decision making, the importance of customer loyalty strategies and programs can’t be understated. Lacek’s Rose suggests, “Brands need to ask themselves how can they make their loyalty program worth their customers’ time? We’ve seen that upwards of 80% of shoppers say knowing they got a good deal is important to them when deciding which brand to buy from. I believe this year there is an opportunity for brands to refine some assumptions that were made at the program’s launch using current data and think about whether any adjustments might need to be made.”

Perspectives on the effectiveness of emerging technologies are certainly mixed, but many expect to see clarity on their benefits, or lack of, in the coming months.

“We are beginning to see NFTs being incorporated into brand programs, and although this may take more time to catch on, I think this is an area to watch in 2024 as more experimentation unfolds,” says Gordon, Bakkt. “Additionally, we expect to see more crypto rewards being offered. Bakkt’s recent study reveals that acquiring crypto through a favorite brand’s loyalty program is rated as more trustworthy than traditional crypto trading platforms and apps by both current crypto owners and those who are crypto curious. As loyalty currency is already a digital currency, we believe it’s a pathway for more comfort in onboarding a crypto customer.”

Beyond emerging technologies, many suppliers see opportunities for personalization and going beyond transactions in brands’ loyalty strategies. Cheetah Digital’s Glomb believes, “Many brands launch ‘rewards’ programs that offer value based on financial transactions. This simply gives any consumer value based on spend. However, successful programs track, reward, and trigger more value when a consumer takes other actions with the brand. Keeping a record of any given customer’s interactions and triggering personalized ‘next step’ actions based on their history is the next step.”

Customer Loyalty Trends for 2023: What’s the Next “Big Thing” ? (Con’t)

Raghunathan and Narayanan, TCS Interactive, add, “There is a huge opportunity for brands to differentiate themselves by creating hyper-personalized loyalty programs that set them apart from the competition. A successful brand is one that stays true to its brand promise, is transparent, and offers loyalty experiences its customers cannot get elsewhere.”

PDI’s Todd Gulbransen, Senior Vice President, Consumer Marketing, and Linnea Geiss, Chief Operating Officer, share similar thoughts, “Over the past several years, consumer shopping behavior has entirely transformed due to inflationary pressures and the pandemic. One challenge we hear a lot is getting to know your consumer better, which can be met by building off your loyalty or CRM data to deliver greater personalization. The more data and insights you can extract, the better you can predict and influence their behavior—and ultimately deliver a more personalized loyalty experience.”

When it comes to managing technology, resources, loyalty strategy, and keeping up with competitors, brands have their work cut out for them in the coming year, while marketers remain focused on the enhancements, experiences, and offers that will truly bring value to their best customers. Ultimately, the brands that can stay ahead of the curve in technology, resources, and loyalty strategy while also delivering exceptional value to their best customers, are the ones that will be most successful in the long term.