Customer Loyalty Programs: The Present and the Future

Earlier customer loyalty programs used to come into focus seasonally especially during festivals, but now they are more omnipresent throughout the year. This has largely been driven by the cut-throat competitions between the different digital apps prevalent in the marketplace.

Rajneesh De, Group Editor, APAC Media and CXO Media dissects the dynamics of these customer loyalty programs in the first article and more importantly deliberates on the new shapes and contours that could enhance business profits.

Amresh Acharya, MD & CEO, Loylty Rewardz also advises in the second article why just giving points is not enough for BFSI loyalty anymore.

Making your loyalty program more valuable and energetic 

Devise Outstanding Rewards: Loyalty programs must offer perks and rewards that are very attractive and alluring to the customers. You must ensure that monetary rewards enhance your brand experience too compelling customers to move to your brand and then stick with it. You can use incentives like customized products, exclusives services and merchandise to motivate your customers to engage and interact with your brand.

Emotionally Connect Customers: If you can connect your customer to your brand, there is a higher probability that he/she will remain in your loyalty program.  Customers are loyal to a loyalty program if he feels

• The brand cares about him/her
• The brand cares about the surrounding environment
• The brand understands him/her
• The brand resonates within his peer group
• The brand makes him/her feel special

Going Beyond Transactions:  If the loyalty program focuses only on transaction, then chances are that it will not create the desired connect with the customer.  Instead the loyalty program should engage the customer with activities other than mere transaction. Ask customers for digital feedbacks, share your social media posts, write reviews, download apps could be some of these engagement activities.

Optimize Loyalty Programs Digitally: This is now imperative in this era of digital transformation especially on mobile. Please ensure customers have comfortable and easy to use experience of your loyalty programs on mobiles. Integrate smoothly with all mobile specific features like WhatsApp and Messenger so that customers can share them freely. The loyalty program also needs to be more interactive.

Create a Feel-Good Factor: The importance of this got particularly emphasized during the pandemic. Brands that stood for some causes or associated with philanthropic missions and charities generated enough goodwill amongst customers. This was true even if the customers have not benefited directly from the loyalty programs.

Getting More out of your Loyalty Programs and Making them Purposeful

Focused Study of Customer Profile:  Profile and map the customers based on following parameters

• How much do they buy?
• Which products do they buy?
• How frequently do they buy?
• How much do they buy from your competitors?
• How do they pay you?
• How much profitable are these customers?

Segregate & Prioritize Target Customers:  Based on an extensive customer study, prioritize your customers in different categories. The evaluation criteria could depend on

• Volume of Purchases by the Customer
• Customer Profitability
• Customer Payment Patterns
• Ability to Purchase More
• Loyalty Duration

Align Goals with CRM: Set your goals for the loyalty program from the beginning based on CRM data. A customer who purchases on average X times a year, set a goal of 1.1X times a year that would ensure you 10% profitability. Partner with solution providers for effective CRM programs that will take care of this.

Identify Tactics to Encourage Customer Loyalty: Tracking customer purchases are important but you have to devise tactics to enhance the quality of business relationships with the customers.

• Sales Representatives Must Visit and Engage with Premier Customers
• Personalize Invitations and Engagement with Premier Customers
• Guarantee 24×7 Premium Services to Loyal Customers
• Offer Additional Discounts on Personal Milestones

Design Customer Loyalty Programs:  Before launching a loyalty program, you need to assess your customers’ current level of satisfaction through surveys, interviews, social media and personal interactions.  Identify employees and subsequently engage them with these prioritized customers to execute the loyalty programs optimally.

New Ideas into Existing Customer Loyalty Programs

Gamification of Loyalty Programs: Gamification is increasingly being layered within loyalty programs. The idea is to make these programs addictive to customers and to keep them engaged with them. The gamified design must be exactly aligned to the behavior the brand intends to inspire. The gaming interface should make it simple for the customers and also enable them to measure whether they are achieving their goals from the programs.

Omnichannel Loyalty Programs: The customers can connect to your loyalty program any channel—it could be websites, mobile apps, social media, in-shop visits, QR codes, videos or anything else. You must gather these data from multiple channels and build a single view of the customer. Your loyalty program’s success would depend on the customer profile and pattern selected from multiple channels.

Use of AI and Big Data in Loyalty Programs: AI helps you to analyze large volumes of data points from different sources, track customer purchase and behavioral trends, and uncover profitable co-relations. Armed with these insights, you can accurately predict the right product and promotions to showcase to a customer segment, at the right time, and through the right channel. You can also use AI for Churn Forecasting.  This can essentially predict the possibility of a customer switching to a competitor by analyzing several factors like NPS scores, purchase patterns, latency, and transaction values.

Unified and Consortium-based Loyalty Programs:  In unified loyalty programs,  a group of unrelated brands come together to offer a joint loyalty program. They are becoming increasingly popular amongst customers as these often offer them greater flexibility and choice in earning and redeeming points. Such consortiums often help offer a fully omnichannel loyalty experience for the customers. This helps you access a wider customer pool and unify customer data to build 360-degree views.  This makes business sense for large conglomerates that handle multiple brand portfolios.

Influencer Loyalty and B2B Loyalty: Till date the general nature of most customer loyalty programs focused on B2C products and services. However, even B2C brands are increasingly using loyalty programs to identify key influencers (often professionals or paid endorsers) to communicate product launches/new promotions, and reward the best performing ones. Loyalty programs have also become critical channel marketing and relationship management engines for B2B driven sectors. where the end-customer is not the primary decision-maker.

Why ‘Just Giving Points’ Isn’t Enough for BFSI Loyalty Anymore

By: Amresh Acharya, MD & CEO, Loylty Rewardz

For the longest time, loyalty in banking has been built around a simple, easy-to understand idea: spend money and earn points. It became the dominant model in the BFSI sector for good reason. From a business point of view, points are a universal currency, they are quantifiable, scalable, and easy to tie to financial metrics. For customers, they offer a clear, tangible reward for everyday spending.

But there is a flip side to this traditional model. For businesses, unredeemed points pile up as liabilities on the balance sheet. For customers, the routine often leads to passive participation. You earn points, you forget about them, and maybe you redeem them if you happen to remember.

So, why not just scrap points altogether and move to non-points-based programs, like VIP access or purely experiential rewards? Because in a high-frequency, utility-driven industry like banking, pure experiential rewards simply don’t scale well enough to keep the everyday consumer engaged. People want a tangible return on their daily transactions. The bottom line is this: points-based programs aren’t inherently flawed. The real challenge is that the industry simply hasn’t evolved past the basic premise of just giving points.

The Much-Needed Evolution

It is time for a major upgrade. The archaic model of handing out a standardized flat rate of points solely for credit or debit card swipes just doesn’t cut it anymore. What we need is a shift in focus; moving toward genuine engagement, smarter data utilization, and intelligent program design that actively tries to understand the customer.

When businesses realize this, they unlock the true superpower of a points-based program: habit building. That is something instant discounts and cashbacks simply cannot do. Discounts only train customers to chase the cheapest deal in the moment. A well-structured points system, however, builds long-term habits and emotional stickiness with a brand.

Changing the Way Points Work in BFSI

To move beyond the basic transactional model, here are five ways we need to change how points-based loyalty works:

1. Organizing the Data MessBFSI institutions sit on mountains of customer data, but having data is not the same as using it. Right now, much of it remains unorganized. Moving forward requires dedicated analytical expertise, not just basic data mining tools. We need to actively lean into AI and machine learning models to make actionable sense of customer behavior. Organising your data is the first step to understanding your customers better and using it to not just activate them but retain them in the long run. Ultimately, your loyalty program should be able to serve as a CRM as well.
2. Rewarding Behaviours, Not Just TransactionsWe need to redefine how and why people earn points. Earning shouldn’t be limited to just making a payment. Programs should be built around behavioural insights based on current and desired customer habits. Imagine rewarding a customer for setting up a systematic investment plan (SIP), maintaining a healthy balance, or completing a financial education module. By introducing milestones, tiers, and gamification, you elevate the program from a simple ledger to an engaging journey.
3. True Personalization (Going Beyond History)Points might look uniform on the surface, but how a customer earns and spends them should feel incredibly personal. This means moving beyond just looking at a customer’s historical spending and starting to leverage intent data. If a customer is looking up home loan rates, personalize their earning and redemption options around home setup or moving services. Additionally, it’s important to see where customers are in the lifecycle and make proactive recommendations and predictions to help drive business KPIs like reducing churn.
4. Building an Ecosystem, Not an IslandA loyalty program shouldn’t live in a vacuum. The future is about creating a broader ecosystem of loyalty. Banks need to partner with brands for both the accrual and redemption of points, specifically at a hyperlocal level. Whether it’s the national e-commerce giant or the local neighborhood grocery store, points need to be democratized for everyday, relevant usage so your brand is always where the customer is. Within the bank itself, the loyalty program cannot be another product in the suite. It needs to be embedded into every product and every marketing effort for it to be seamlessly integrated in customer journeys. 
5. Education Through ExperienceYou can build the best loyalty program in the world, but it is useless if the customer doesn’t know how to maximize it. Education needs to happen through the user experience itself. This requires targeted marketing, tactical campaigns, and an omnichannel engagement strategy. When you combine contextual messaging sent at the right stage of the customer lifecycle with a seamless, custom UI/UX, checking and using rewards becomes a delight rather than a chore. Remember, loyalty programs give you more instances to communicate and engage with customers. Think smart statements and point expiry communication. All of these can be leveraged to enrich the data profile and reduce your customer acquisition and retention costs.

At the end of the day, the secret to modern loyalty isn’t just rewarding your customers; it’s recognizing them. Every financial institution offers points for transactions. The brands that actually secure customer loyalty will be the ones that offer real added value. That happens when you know exactly who your customer is and customise their entire experience, whether that is through the number of points they are awarded, the hyperlocal offers they receive, the relevance of your communication, or the frictionless user experience on your app. Recognise the customer, and the loyalty. 

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