Forrester Study Shows Customer Loyalty Is Entering a New Season of Growth

WM Circle Logo

By: Wise Marketer Staff |

Posted on July 25, 2022

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

There is a false narrative circulating that the customer loyalty market is over-saturated. With so many well-known programs garnering attention from consumers — think Amazon, Sephora, Starbucks, frequent flyer programs and others — some brands may be evaluating the wisdom of launching a new loyalty program or increasing investment in the one they currently operate.

By: Łukasz Słoniewski, Comarch

A recent research study conducted by Forrester Consulting, commissioned in Q1 2022 by global loyalty provider Comarch, examined current trends in customer loyalty and offered insights that can be bundled in three key areas:

  • Customer Centricity is on the rise
  • New Structures will dominate the future
  • Provider expectations are increasing

The study is titled Loyalty Marketing & Rewards Programs – Global Market Report 2022 and in this article, we cover the key trends, insights, and expectations for customer loyalty on a global scale.

Research from many sources clearly illustrates the popularity of loyalty programs with consumers and the impact on their purchase behavior. Nielsen research found that 84% of customers are more willing to choose a retailer that runs a loyalty program. The Wise Marketer published research showing that 82% who participate in points-based programs are more likely to purchase more often and over half (52%) say the chance to earn points influences them to ignore offers from competitor brands.

A surprising finding in the research showed that the majority of programs (57%) have been operational in the market for two years or less. Considering the overall maturity of customer-centricity and loyalty marketing, it is encouraging to see many brands taking steps to create formal approaches to engaging and rewarding their customers. B2B programs reflected a similar trend, though B2B programs have twice the percentage of programs operating for more than 2 years than B2C programs.

Recognizing the resurgence of customer loyalty

The early-stage development of B2C programs supports the premise that we are witnessing a resurgence of customer loyalty as brands recognize the value they deliver to customers and to their enterprise. As a new wave of programs launch into the market, the structures we are used to seeing will begin to change. The fact that the loyalty market is poised for continued growth was also supported in the research as brands commitment for program expansion was centered on adding a portfolio of new features including gamification, value-based rewards, family householding, multi-brand offers and experiential rewards.

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

Customer expectations have evolved

Customer expectations for the way their favorite brands market to them have evolved since 2020. There is an expressed desire by consumers for simplicity, ease, and family. They want to have some fun and get to reward levels more quickly, so gamification is being readily 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 analysis of First Party Data or increased focus on insights from Zero Party Data. When combined, your brand will be in a better position to create innovative, personalized, and omni-channel programs that meet customer expectations.

Cash is still king... for now?

The Forrester research showed that even within these new structures, value propositions remained centered on cash back redeemable at the brand. Forty-nine percent of all programs examined and 59% of B2C retail programs had cash-back at the center of the value proposition. At least 37% of programs overall offered cash back redeemable in an open currency format, meaning money that can be applied to an account or used for purchase at the point-of-sale.

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

Working in a provider organization myself, I’m always seeking the magic bullet that will attract clients to work with our solution set. Unfortunately, the research did not return a singular reason why companies make the decision to join forces with a particular provider. Previous work relationships, capabilities going beyond core loyalty management, time to market, and responsible corporate and social values were highest on the research findings list. Interestingly, price was the lowest ranking selection criteria on the list of factors surveyed.

The learning from this research in terms of what makes an attractive loyalty provider is this:

We believe that providers who will excel in the market today must not just deliver strong technology but must present a more comprehensive value proposition that includes thought leadership, service, flexibility, and innovation.

Loyalty managers notice that loyalty is so much more than just rewarding. Personalizing experience, communication at every touchpoint, and understanding the clients is challenge #1. At the same time, their biggest issues are the support of their IT teams in integrations of their toolset and lack of expert resources.

That's why companies should be focusing on the providers that are able to offer a complete set of tools to drive customer loyalty and engagement, including data analytics, personalized recommendations, and complete omnichannel communication on top of just purely rewarding members for their actions. At the same time, because of high growth of loyalty programs on the market and insufficient number of experts on the market, the loyalty solution provider should be able to provide and support the brand in end-2-end management of the loyalty strategy at every stage of the project.

All of this together will serve to meet and exceed client expectations through operation of successful programs that delight consumers.

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

Summing the report findings up into concise categories, I landed on three primary areas of insight from the combined Forrester/Comarch research:

Customer Centricity is on the rise

Brands continue to emphasize interest in becoming more customer centric and are placing high value on developing effective customer loyalty strategies that deliver financial benefit to the brand while giving value to customers. There has been an acceleration of new programs introduced to the market and the nature of the program value proposition is evolving to go beyond cash back. The programs that will entice customers in the future will incorporate features including data-led personalization, gamification to drive higher reward velocity, 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 engage and delight customers in the future. Multi-brand programs allow customers to earn and redeem awards from multiple brands participating in the program, providing higher earning velocity, more access to awards, and delivering higher perceived value to members. Above all, multi-brand programs extend the opportunity to engage customers across an extended lifecycle, so relationships can develop over time and build trust.

Provider expectations are increasing

Expectations for the quality of technology and service are increasing. The capability of technology provided is important, of course, but professional support in project management, thought leadership, and program management is anticipated to be bundled with technology to make a more powerful offer. There is also a desire by brands to integrate new loyalty platforms into existing IT environments, so new platforms must have the flexibility to integrate easily into enterprise situations.

The findings of the research work by Forrester reinforced for us something fundamental that we understand well at Comarch: brands have elevated expectations from their loyalty provider and expect them to be not only a capable technology partner, but a thought partner to help them solve business challenges.

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