Different implementations and the effectiveness of loyalty programs.

Author: Oscar Gustafsson

Loyalty programs are a widely used customer relationship marketing technique to retain loyal customers. While loyalty programs have been extensively studied, there is little research with published results that discuss their effectiveness, benefits, uses, or measurements. 

Loyalty program failure can be divided into seven factors, including loyalty program aims, employee and workers, customer target, budget, planning, reward types offered, and promotional tools used. This suggests that companies should design loyalty programs properly, especially in their early stages, and that both parties involved should be committed to the process to ensure success. Furthermore, loyalty programs can serve different purposes, such as making customers more loyal, pushing customer behaviour to reach a certain level, forming a group of behaviourally loyal customers, increasing the number of customers who are solely loyal buyers to a specific brand, and increasing customer retention or even customer development. (Muhammad, Anwar, Gouher, Haitham, & Barween, 2020)

Loyalty programs are an essential tool for creating value for both customers and businesses. By giving back to customers, businesses gain valuable insights into their customer base. Through this data, businesses can create more direct and personal marketing strategies that create a better experience for both parties. New technologies like AI and digitalization offer new opportunities for loyalty program management but bring with them challenges like data security and data management. (Chen, Mandler, & Meyer-Waarden, 2021)

Engagement

The gamification of loyalty programs has shown increased customer engagement due to its tendency to awake intrinsic and extrinsic motivation. Intrinsic motivation comes from within, such as enjoyment or personal satisfaction, while extrinsic motivation is driven by external rewards.

These programs incorporate game-like elements to enhance customer engagement and loyalty. They are designed to be more interactive and enjoyable, encouraging customers to participate actively. High engagement is often linked to increased customer loyalty and brand advocacy.

Engaging customers through gamified experiences can lead to higher brand engagement value, as customers are more likely to interact with the brand, share their experiences, and become brand advocates. This, in turn, can drive long-term profitability and customer loyalty. These elements work together to create a dynamic and effective approach to customer loyalty and engagement, leveraging the innate human desire for achievement and recognition. (Hollebeek, Das, & Shukla, 2021)

Instil a habit. That is the common goal among brands that develop and launch mobile apps, whether they have an app for sport, entertainment of customer loyalty, the goal is still the same. To make the customer come back because of convenience, usefulness or simply because they enjoy the experience. The challenge of engagement is the most critical part of the mobile app lifecycle.

Typically, the activation phase occurs within 30 days of the app download and is the first part of the engagement phase. If the user of a mobile app activates their account, they’ve seen enough potential within the apps functions to not only download it, but to also identify themselves. The question that follows is, will they keep coming back? Now it’s all about engagement. (Airship, 2024)

Research conducted by Airship shows the top reasons customers delete a mobile app. 

- Too many in-app ads (30%)

- Expectations not met (25%)

- Confusing, broken, or slow experiences (19%)

- Too many notifications or in-app messaging (18%)

- Replaced with a better app (18%)

Key takeaways from a survey done on the usage of Near Field Communication (NFC)

A survey performed by the NFC forum, who is a community with the goal of increasing awareness of NFC technology and to define specifications and the future of NFC technology. The study took in a total of 2632 total responses across 9 countries with most answers coming from the United States and Asia. The survey only targeted people with prior experience in the usage of a smartphone or smartwatch to make contactless payments. A similar survey had been conducted in 2022 which gave way for interesting comparisons.

The survey considered the preferred payment solution among its respondents where the contactless payment card came in as the most preferred with 45%, followed by the smartphone with 39%. This indicates an increase in smartphone use for payment. It also indicates that the payment card isn’t going anywhere anytime soon.

When considering the experience of using the payment wallet within the modern smartphone, the survey showed increased positivity with the most common user rating was 4 out of 5 (45%) and the second being 5 out of 5 (29%). Assuming 3 out of 5 is a positive rating, 93% of respondents would rate their experience as positive. This is a significant increase in positivity when compared to previous surveys.

NFC technology is considered one of the most secure forms of payment and data communication and that is very much reflected in the survey. If the same assumption is taken that 3 out of 5 is considered being confident in the safety and security of NFC technology, 94% of respondents fall into this category. This also shows an increase in confidence when compared to previous surveys. This shows that the work that NFC forum conducts in educating the population on NFC technology is working as intended. When compared to payment solutions such as QR codes, credit cards, and cash, NFC contactless payments find itself on the top in security, convenience, reliability, and ease of use. This gives further props to the perceived safety and security of NFC technology.

Beyond being used for payment, NFC technology can be used in a wide range of applications, with the most common ones being transportation, event tickets, and membership cards. The least common ones are digital keys and ID cards, which reflect a significant market opportunity for contactless technology and should be accelerated in years to come.

Sources

Airship. (2024). Mobile Lifecycle Benchmark: Engagement. Retrieved from Growth.airship.com: https://growth.airship.com/rs/313-QPJ-195/images/Airship-Mobile-Lifecyle-Benchmarks-Engagement-en.pdf?version=0

Chen, Y., Mandler, T., & Meyer-Waarden, L. (2021). Three decades of research on loyalty programs: A literature review and . Journal of Business Research, 179-197.

Hollebeek, L. D., Das, K., & Shukla, Y. (2021). Game on! How gamified loyalty programs boost customer engagement value. International Journal of Information Management.

Khairawati, S. (2020). Effect of customer loyalty program on customer satisfaction and its impact on customer loyalty. International journal of research in business and social science, 15-23.

Muhammad, A., Anwar, G., Gouher, A., Haitham, A., & Barween, A. K. (2020). Loyalty program effectiveness: Theoretical reviews and practical proofs. Growing Science, 599-612.

Zignani, A., & Sealy, P. (2024). NFC Forum survey results. NFC Forum.