Loyalty programs have become a crucial element of the customer experience, and in 2023, numerous emerging trends transformed the loyalty landscape. This blog will delve into some of the leading program trends that are anticipated to persist and emerge in 2024, as identified by the loyalty experts at Loyalty & Reward Co.

1. Expansion of Strategic Partnerships

One of the key trends that emerged last year was the rise in strategic partnerships. Companies realised the importance of collaboration to enhance their loyalty offerings and provide customers with more value. By partnering with other brands, loyalty programs were able to offer a wider range of complementary rewards and benefits. For example, a hotel loyalty program might partner with an airline, allowing members to earn points for both hotel stays and flights. This collaboration not only increases the attractiveness of the loyalty program but also provides customers with the flexibility and opportunity to earn and redeem rewards.

Such collaborations are expected to flourish even further, with more multi-brand and coalition programs predicted to rise in 2024.

Examples:

• Delta Air Lines x Starbucks
  In August 2023, Delta Air Lines and Starbucks announced a new partnership that allows SkyMiles members to earn miles on Starbucks purchases and Starbucks Rewards members to earn Stars on Delta flights. The partnership also includes exclusive benefits for members of both programs, such as early access to new products and services.

• Expedia’s One Key
  Expedia One Key launched in May of 2023 providing a range of offers, rewards and benefits across Expedia, Hotels.com and Vrbo. Members can earn and redeem points for several offers within the ever-expanding partner ecosystem e.g., for hotels, flights, cruises, vacation rentals, and activities.

• Amazon Prime x One Medical
  As part of the Amazon Prime offering, Prime members are now able to access high-quality medical care from partner One Medical. By entering their Prime number at checkout, members access up to 50% off the original membership rate. Benefits include 24/7 on-demand virtual care and in-office appointment scheduling.

2. Luxury Loyalty & Virtual Technology

Luxury brand programs gained significant traction in 2023, recognising the potential of loyalty programs to build long-term relationships with their customers and create a sense of exclusivity. These programs offered personalised clienteling experiences and VIP access to events that are catered specifically to the preferences of high-end customers. Clienteling within luxury loyalty has also expanded into the Metaverse with many brands offering virtual spaces to conduct virtual consultations, as well as utilising unique rewards such as NFTs to foster loyalty. By offering exceptional benefits and experiences, luxury brand programs aim to drive loyalty and create brand advocates among their discerning clientele.

• Ralph Lauren
  In April 2023, Ralph Lauren unveiled its Miami store as the first location to embrace cryptocurrency as a valid payment method. To mark this milestone, Ralph Lauren organized an exclusive event and distributed Ethereum NFTs as invitations, signalling the brand’s embrace of this innovative new era.

• Hugo Boss Experience
  The Hugo Boss Experience has expanded the clienteling experience across the digital and physical realm through unique rewards such as exclusive access to member-only styles and products, returns without receipts, personalised gifts, alteration services as well as digital and in-store styling opportunities.

• Prada Metaverse
  Prada is leveraging the metaverse to enhance the shopping experience, aiming to make it more interactive and tailored to individual preferences. This initiative includes the introduction of “Prada Virtual,” a virtual pop-up store that enables customers to immerse themselves in the brand’s offerings and collections within a digital environment. Additionally, the store offers a virtual personal shopping service, allowing customers to engage in personalized one-on-one consultations with Prada’s experts.

3. Sustainability

In 2024, sustainability is expected to remain a major focus for many loyalty programs. Customers are increasingly conscious of their environmental footprint and expect brands to take responsibility for their impact on the planet. Loyalty programs responded by incorporating sustainability initiatives into their offerings. For example, some programs allowed members to redeem points for eco-friendly products or donate points to environmental causes. By aligning with sustainability values, loyalty programs not only attract environmentally conscious customers but also demonstrate their commitment to making a positive difference.

• Sephora Beauty Pass Sephora (AU) has partnered with recycling company, Teracycle, to reward members for returning their cosmetic containers to Sephora Stores. All Sephora Beauty Pass members will earn points based on the number of containers they return for recycling. The returned containers are processed and broken down into raw materials that can be recycled as opposed to being thrown into landfills.

• Levi’s Second Hand Customers can book a “trade-in” appointment to donate second-hand Levi’s denim and clothing items. Customers can trade in up to 5 items in one appointment. Customers will receive a Levi’s gift voucher if the item’s condition qualifies for re-sale. Items that do not qualify will not be rewarded but can be donated on behalf of the customer. Levi’s also enables customers to access a blog that includes DIY workshops and crafty posts to teach shoppers how to repurpose old denim at home.

4. Application of AI technology

Artificial Intelligence (AI) technology also played a significant role in shaping loyalty programs in 2023. AI-powered algorithms were used to analyse customer data and tailor rewards and offers based on individual preferences. This level of personalisation allowed loyalty programs to deliver highly targeted and relevant experiences to their members. Additionally, AI chatbots were deployed to provide instant customer support and assistance, enhancing the overall customer experience. The application of AI technology not only improved program effectiveness but also increased customer engagement and satisfaction and is expected to experience widespread adoption in 2024.

• McDonalds x Google AI
  QSR giant McDonald’s has recently unveiled its intent to partner with Google AI in 2024 to expand its loyalty base to 250 million members, amongst other objectives such as the scale of its delivery capabilities, seamless mobile order experience and creation of new menu items.

• Starbucks Rewards
  Starbucks has recently announced its intent to invest heavily in AI over the coming months. This includes partnerships with Microsoft to analyse and ingest global food trends from social media and use Starbucks’ transaction data to understand consumer preferences.

5. Ongoing Rise of Subscriptions

Another notable trend in loyalty programs was the increase in subscription-based models. Many companies transitioned from traditional points-based systems to subscription-based loyalty programs. Customers paid a monthly or annual fee to access exclusive benefits and perks. This model appealed to customers who sought ongoing value and convenience, as it provided a predictable and consistent experience. Subscription-based loyalty programs also fostered a sense of belonging and exclusivity among members, creating a community of loyal customers.

• Meta Subscription (Facebook & Instagram)
  Social media giant Meta has announced that they will provide customers across the EU, EEA, and Switzerland with the option to subscribe monthly for an ad-free experience on Facebook and Instagram in 2024. Alternatively, they can continue using the services for free with relevant ads.

• Samsung Galaxy S24 “Subscription Rumour”
  Samsung is anticipated to introduce the new Galaxy S24 in early 2024, rumoured to incorporate on-device generative AI for photos, messages, voice recognition, and other functions. Speculation online suggests that Samsung is considering activating AI phone features as part of a new subscription offering to create an additional channel for monetisation.

6. The Rewards VS Recognition Debate

The end of 2023 saw a rising debate amongst clients on whether their customers needed a rewards program vs a recognition program. This debate is expected to spill into 2024, reflecting the ongoing discourse around the most effective methods for motivating and retaining customers. While rewards programs offer tangible incentives to drive performance, recognition programs focus on acknowledging and appreciating member contributions, facilitating a much stronger emotional relationship with the customer base.

But what is the difference?

Rewards Programs are programs whereby members accumulate loyalty currency (e.g., points, credits) when spending or completing tasks, which are then redeemed on rewards.

Recognition Programs, however, are typically invite-only and often covert. A key segment of customers is provided with select, tailored experiences designed to build emotional connections by providing a deep sense of recognition and demonstrating their importance to the brand.

The industry in which a business operates is a crucial consideration when choosing the type of program to implement. For instance, QSR, Retail and Groceries may benefit more from immediate, tangible rewards programs due to higher repeat purchase rates. However, luxury brands, casinos, and health & pharmaceutical industries may derive greater benefits from a recognition-based program. This type of program involves a quieter approach, whereby valuable members are hand-picked for acknowledgment and is generally more aligned with overall brand messaging or the nature of the product or service.

This debate underscores the need for organizations to strike a balance between providing material benefits and fostering a culture of appreciation and acknowledgment, as both play crucial roles in employee engagement and satisfaction.

• Fendi
  The Palazzo Privé is an extravagant three-room apartment located on Palazzo Fendi’s second floor in Rome and dedicated to the brand’s top clients. It provides the perfect retreat for the brand’s most ardent clientele to immerse themselves in the house’s signature opulence. The lavish apartment is used by VIP’s for private fittings and events.

• Bulgari
  Bulgari is known to unveil its high jewellery collection annually to an exclusive group of VIPs at all-expense-paid lavish locations which vary each year such as Capri. VIPs include celebrities and entertainment is often by A-grade international artists (e.g., cocktails, runway shows, and Michelin star chef-curated dinners)

7. Data Capture and Privacy

In 2024, data capture and data protection are set to become significant talking points for loyalty programs. This is driven by the closure of Google cookies from January this year, alongside the aftermath of major data breaches experienced globally in 2023.

With the impending demise of cookies, businesses have long since begun seeking alternative methods to capture and utilise customer data effectively. This saw loyalty programs rise as the ‘go-to’ method for brands to capture zero and first-party data collection, all whilst adhering to customer consent, prioritising privacy and ensuring transparency.

The public fallout from data breaches experienced by multiple major companies in 2023 (e.g., Optus, Medibank and Latitude) has also heightened consumer mistrust about data security, prompting loyalty programs to implement robust measures for safeguarding customer information. In response to these developments, loyalty programs in 2024 are poised to adopt innovative data protection strategies and technologies to ensure compliance with evolving privacy regulations as well as to rebuild consumer trust in the handling of personal data.

• Caesars Rewards Casino Data Breach
  On September 7th, 2023, it was reported that Caesars Entertainment was successfully hacked by a cybercriminal group that demanded $30M in ransom. Critical personal information of more than 65 million rewards program members had been stolen, including full names, addresses, mobile numbers, credit card numbers, social security numbers, passport details, license numbers and more.

The loyalty program landscape is expected to evolve rapidly in 2024, with several key trends shaping the industry, and businesses are reimagining their loyalty strategies to meet the changing needs of consumers. As we move forward, it’s clear that customer-centric approaches and innovative technologies will continue to drive the future of loyalty programs. By staying ahead of these trends and embracing a customer-first mindset, businesses can build lasting connections with their customers and drive sustainable growth. It’s an exciting time for loyalty programs, and the possibilities for creating engaging and rewarding experiences for customers are endless.

Looking to launch a loyalty program in 2024?

Our expert loyalty consultants have supported brands in designing trending and one-of-a-kind loyalty programs across the globe. Utilise our expertise to support the ongoing operation of your program. Contact us to learn more about our comprehensive loyalty services and talk with our loyalty consultants to understand how to develop or optimise your loyalty program strategy.