What is the purpose of a loyalty program? The simple answer depends on the brand or company that implements it. For some, the primary goal will be customer retention; for others, it will be recognizing and rewarding high value customers. However, other companies may perceive their loyalty program as a mechanism to drive incremental revenue.
In aggregate, however, the goals that all brands have for their loyalty initiatives can evolve over time. It is one of the key trends that we have identified in our 2024 Travel Loyalty Outlook Reportt – that the goalposts for loyalty have moved, and they have moved towards increasing the customer lifetime value (CLV).
How can brands best leverage their loyalty programs to deliver on that goal? What are the challenges that could prevent their loyalty strategies from maximizing CLV? And what technologies can help overcome these challenges?
Evolution of loyalty goals
First, let’s examine the drivers behind brands’ changing loyalty priorities. Our survey of more than 100 loyalty professionals in the US found that 29% of brands now consider increasing CLV to be the most important goal of their loyalty strategies, up from 16% in 2021 . 2021 survey, carried out during a pandemic year, showed that loyalty providers & # 39; The primary objective was to attract new members. Given the immediate uncertainty surrounding the travel business, brands have naturally focused on expanding and preserving their customer base in order to remain viable.
As this uncertainty has diminished, brands’ priorities have turned to longer-term (and profit-related) goals, such as increasing CLV and increasing spend by program members. loyalty (9% in 2021 to 11% in the 2023 survey). Brands’ tactical goals for their loyalty programs for the coming year also reflect their strategic goal of driving customer lifetime value through increased engagement.
Encouraging existing members to level up, increasing total spend through the loyalty program, and introducing new rewards or earning redemption options—the top three objectives of the loyalty program going forward, according to our survey—all signal an orientation of loyalty focused on results.
The challenges brands face in achieving their loyalty goals
Achieving these results is not guaranteed, of course, and the challenges self-reported by brands describe significant obstacles in the race to maximize CLV. For example, the number one loyalty program challenge cited by survey respondents was maintaining adequate customer service levels (26%), followed closely by demonstrating the value of rewards to program members ( 20%).
If brands can’t trust their loyalty programs to communicate value to members or support them well when they need help, it will be challenging to keep customers long enough to enhance their lifetime value to the brand.
Brands also struggle to align their loyalty program capabilities with customer expectations. According to our survey, 21% of consumers of loyalty programs with travel rewards are frustrated by difficult or complex processes to earn and redeem points or miles, while only 14% of brands think that this is what the consumers find it more frustrating. Fortunately, loyalty program technology focused on travel rewards and booking capabilities can help close this expectation gap.
Where does the trip take place?
The trip was a year long effective reward in loyalty program portfolios; that’s why most programs (95%) offer them in one form or another. Our survey data also shows that American consumers are looking for a variety of ways to reduce travel costs, including redeeming points to lower the overall cost of their trip (46%), booking discounted travel through the booking portal of their program (31%), and using their membership to secure discounts with travel suppliers (29%).
This makes travel rewards an integral tool to provide value to members and increase their CLV to the brand through more frequent and consistent loyalty program engagement.
Loyalty technology designed to drive CLV
But not all travel awards are designed and implemented in the same way. For a travel loyalty program to successfully drive engagement and maximize CLV, it must leverage a flexible loyalty currency, employ effective marketing initiatives, and maintain quality customer service.
A flexible loyalty currency allows programs to modify the value of points, integrate new savings, and fund bonus points or miles through the margin earned on other travel products. Loyalty programs can then use this flexibility to reward or incentivize members for desired actions, such as reaching a higher membership level. Full-service marketing capabilities help loyalty programs communicate their value to members more effectively and eliminate discrepancies in expectations. And quality customer service can be the key to keeping members engaged for years to come.
Note that “years to come” is the operative phrase when it comes to customer lifetime value. Brands can only maximize this vital metric by focusing on long-term customer satisfaction and affinity. A loyalty program with an attractive portfolio of travel rewards has the flexibility to engage and reward members in different ways and offer excellent customer support, which can be a critical tool for maximizing CLV. To truly optimize their loyalty strategies, brands just need to identify the right travel loyalty partner to help them achieve their most important goals.
The opinions expressed by SmartBrief contributors are their own.
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