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Creating A Customer Engagement Strategy
For Your Loyalty Program

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4 min read

Moving from transaction-based to engagement-based loyalty programs

Moving from transaction-based to engagement-based loyalty programs

When a loyalty program is solely focused on rewarding transactional behaviors they are missing out on the chance to build real long-lasting customer loyalty. When a program is focused on building relationships (relational loyalty programs) it is important that they reward the customers for their engagement and behaviors outside of the buying cycle. Brands who make their program engagement based are more likely to have a successful and long-lasting program.   

The first step to making sure your program is focusing on the right strategy is understanding the difference between Transactional & Relational Loyalty Programs. 

Transactional loyalty programs focus primarily on customer interactions that are transaction-based: purchases, earning, redemptions. They’re more traditional and easier to manage due to their one-size-fits-all approach because the only time the members are actively engaging with the program is when they’re spending money which makes what they are able to achieve slightly limited. 

Relational loyalty programs utilize a more well rounded approach to growing customer loyalty. This promotes a more emotional connection between a brand and customer. Similar to transactional loyalty, they reward purchases and transactions, but they also prioritize providing value outside of the buying cycle through not only engagement but also experiences. Relational loyalty programs focus on building and nurturing customer relationships using personalized experiences, promotion shared values, tailoring rewards and offers, and other tactics. 

Here are some things to take into consideration if you have a transactional-based loyalty program: 

  • Transactional “earn-and-burn” programs may get initial customer buy-in but they are not enough to create true customer loyalty. Having a transactional relationship with your customers can only last for so long. At a certain point they will get bored of the rewards that you are offering them, or they will create a stronger relationship with a different brand. That can cause an increase in customer churn which is something you want to avoid. A study shows that 77% of programs like this actually fail in the first two years. If your customers become reliant on the transactional rewards-only program it can make your program look substandard.
  • The priorities of customers are changing, so it is important that the loyalty programs that they are a part of change with them. Compared to past years, customers are more value-driven and purpose-driven than ever before- they want to see relevant offers, rewards, and service. They want to see personalized experiences and interactions from the brands that they frequent. Customers have such a strong voice and power to influence other customers in a positive or negative way- by posting a product review on Amazon, referring the brand to a friend over Messenger, or recommending it proudly through Instagram. And they exert this power not because they want to buy something but because they want to engage, express and emote feelings.
  • Transactional based programs can become boring very quickly. Most businesses that offer rewards programs are probably offering the same rewards as you, so what will make customers choose you over a competitor? That puts pressure on the marketing and branding of your program to stand out because the rewards won’t be doing that. Along with that, the rewards need to be exciting and transaction rewards can become dull quickly. If you only ever get $10 back on a $50 purchase then that loses its newness fast. If you are able to bring variety to your program then your rewards are less likely to fall into the stigma of “the more you consume the less satisfied you will be after each use”. 

Once you decide to make the change towards an engagement-based loyalty program, here are 5 things you can do to see your loyalty program grow: 

1. Identify What Types Of Engagement You Want To Increase Or Goals You Have For Your Brand

It is important that you go into this change having a game plan. Knowing whether you want to drive more traffic across the brand sites or social media accounts. Do you want to collect more product reviews or referrals? Would you like to increase customer participation in brand-hosted events or activities? These are just a couple questions to ask to know where to get started. Having these goals clearly listed helps to then identify or come up with ideas for driving engagement in your loyalty program. 

2. Create More Opportunities For Customers To Engage With Your Brand And Program

Allow them to attach social media handles to their member account

People are posting on social media very frequently so if your customers are able to earn rewards while doing something that is already in their routine it is more likely that they will utilize it. 

Utilize gamification

You want your customers to enjoy their experience with your brand, a great way to do that is to make it fun! Turning things that are normally boring and mundane into an exciting experience will make your company stand out from your competitors and keep the customers engaged. 

 Host member events

Making your members feel like they are a part of something exclusive is important. If you are able to host things that are special to the members then it is a chance to thank them for their loyalty to your brand. REI is a great example, they offer in person and online events specifically for their members, discounts on classes and day trips, and exclusive gear! Who doesn't want to get discounts and new products just for being a member?

Incorporate partner programs

Teaming up with other brands is a great way to market to a different audience. Throwing an event with different companies will get your name out to people who might not have heard of your company but also expose your regular audience to a new brand. Some examples could be an art class paired with a wine tasting or a workout class paired with an athletic brand. Both brands have their own audience but they work well together to create an even bigger one. 

3. Recognize And Reward Positive And Meaningful Member Engagement 

It is important to encourage all different types of engagement so you can offer different bonus points, free gifts, achievement badges, etc in return for customer engagement. Sending thank-you emails or badges when a customer posts a product review or is giving referrals is a great way to show your appreciation to your members. 

4. Communicate Clearly 

If you do not have clear communication with your customers it is unlikely that they will stay a customer long. You need to make sure that you are very clear on the benefits of engaging with your program and what that will get them in return. Make sure they know their reward options, status increase, and that they have access to exclusive opportunities. 

5. Track & Measure Customer Progress

It is important to make sure that your customers can always track their progress but also make sure that you are able to monitor and measure your efforts. You need to establish which KPIs or metrics you want to track so that you can identify what is working for your program and what isn't so you can adjust accordingly. 

While it seems daunting to change from being transaction-based to being engagement-based, it only takes a few changes and you will quickly see the benefits that those changes offer. This information and these 5 steps are just a couple of things that will help you get started on this transition. 

Want to learn more about how your company can make this transition? Reach out to us today and we would love to help you get started!