Why are so many loyalty programs still focused on transactional incentives?

People like me and others in the loyalty space have been preaching for years about the value of the customer experience, the need for customer engagement, creating a two way value exchange, the recognition and relevance.

Similar to the mass discounting that we see across retailers, particularly department stores today, is the same reason loyalty programs aren’t changing as fast they could be. Retail today is addicted to the traffic and sales seen when discounts are offered. Once you’ve conditioned your customer, a bit like pavlov’s dog, the customer expects these discounts. What happens if you take it away? They customer will go somewhere else. At least, that’s the fear.

Take GAP. Having just listened to GAP CEO, Richard Dickerson at Shoptalk, it’s possible to move away from the discounts and increase revenues. He spoke about the Old Navy he witnessed when he took the helm. Walking in a store, blasted with discounts of all shapes and sizes, overwhelming the customer. Today, they’ve reduced the noise and simplified the value.

Now think of loyalty programs. Shifting away from this chronic discounting as the core of the program is the fundamental shift that needs to occur.

If you pull back the discounting noise and you replace with real, relevant value, you will see positive shifts and gains to your bottom line.

This doesn’t have to be done as a drastic shift, it can be made over time. Here are 3 tips you can employ today to help you start your journey:

1. Start recognizing for your members for interacting with your brand. You can use points or badging for this recognition. As an example, offer a member bonus points for connecting with your brand on social.
   
   
2. Start collecting data on your members – what do they like to do, are there others in their household. You can do this through fun interactive surveys where you can give your members incentives to complete the surveys.
   
   
3. Once you’ve collected some data points, you can now incorporate these into your marketing efforts, being more relevant and meaningful to your customer. Make their life easier by serving up purchase ideas that help them reach their goals or improve their experience with your brand.

Doing these things is the first step in moving from a purely transactional program to encouraging true engagement with your brand. Customers who interact with your brand, in addition to transacting with your brand will spend 250% more than those who don’t. Following these 3 simple tips will put you on your way to building those interactions that increase in revenue.

The good news? We’re seeing more retailers shift from transactional loyalty to engagement-focused strategies. Programs are limiting discounts, moving away from points, and incorporating gamification to drive member challenges and interactions. By 2028, I predict most loyalty strategies will be engagement-based.