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 that make their program engagement-based are more likely to have a successful and long-lasting customer loyalty program.   

What Is The Difference Between Transactional And Relational Loyalty Programs? 

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

Transactional Loyalty Programs

Transactional loyalty programs focus primarily on transaction-based customer interactions: purchases, earnings, and 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 can achieve slightly limited. 

Relational Loyalty Programs

Relational loyalty programs utilize a more well-rounded approach to growing customer loyalty. This promotes a more emotional connection between a brand and customers. Similar to transactional loyalty, they reward purchases and transactions, but they also prioritize providing value outside of the buying cycle through customer engagement and enjoyable experiences. Relational customer loyalty programs focus on building and nurturing customer relationships using personalized experiences, promotion of shared values, tailoring rewards and offers, and other tactics. 

Why Should Brands Want A Relational Loyalty Program? 

Businesses tend to lean towards transactional programs for a number of reasons. They're more straightforward and easier to manage. They also tend to cost less to run. Transactional loyalty programs can be a great way for brands to start when launching a loyalty program for the first time, but they rarely make good long-term strategies. Here are some things to take into consideration for 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. The lack of emotional connection makes it easy for customers to switch to a different brand when they find one that provides more value or fulfills a certain need. That can cause an increase in customer churn which is something you want to avoid. 
• Customer priorities are changing.  Compared to past years, customers are more value-driven and purpose-driven than ever before; as such it's important that loyalty programs evolve to meet these new expectations. Customers want brands to provide them with relevant offers, rewards, and services. They want to see personalized experiences and interactions with the brands they frequent.
• Transactional-based loyalty programs can become boring very quickly. Most businesses that offer transaction-based loyalty programs tend to follow the same format and offer the same rewards; so how can your loyalty program stand out from a competitor? Relying solely on standard rewards won't be enough, and attempting to outperform competitors by offering higher discounts can put too much financial strain on your program. Relational loyalty programs can offer value through gamification, content, or soft benefits like special access or exclusive perks that transaction-only programs don't. 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”. 

Relational loyalty programs may require more time, effort, and involvement to execute properly, but their long-term benefits include greater customer loyalty and retention, increased revenue, and higher program ROI. 

How To Switch Your Loyalty Program From Transactional To Relational

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 Customer Engagement You Want To Increase Or Goals You Have For Your Brand

You should go into this change with a game plan for what you want your loyalty program to accomplish or the types of customer actions and behaviors you want to drive. Do you want to drive more traffic across 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 of questions to ask to know where to get started. Once you have your goals listed out, you can then focus on finding ways to achieve them through getting customers engaged in your loyalty program. 

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

Allow Members To Link Social Media Accounts With Loyalty Program Accounts 

More customers are active on social media than ever before. You can drive customer engagement by letting customers to connect their social media accounts to their loyalty program account and allowing them to earn points or badges for posting to dedicated brand hashtags. If your customers can earn rewards while doing something that is already in their routine it is more likely that they will participate. 

Utilize Gamification

You want your customers to enjoy their experience with your brand, a great way to do that is to make it fun! Gamification can be a major driver of customer engagement because it takes simple, everyday actions and turns them into a fun and exciting experience. You can incorporate gamification into your loyalty program through badges or trophies, games like scavenger hunts, missions, or challenges, or seasonal events. Gamification can make your loyalty programs stand out from your competitors and keep the customers regularly coming back. 

Host Member-Only Events

Making your members feel like they are a part of something exclusive is important. Hosting member-only events can reward them for their loyalty and also give them a valuable benefit for staying loyal. One example of this is the outdoor brand REI, which offers in-person and online events specifically for loyalty program members, discounts on classes and day trips, and exclusive gear. 

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 

There are different types of customer engagement you can reward in a loyalty program, from logging in once a day to completing a purchase. Some customer engagement is more valuable than others, but you can drive more customer engagement by offering different valued incentives for different actions. For example, some engagements could earn progress toward achievement badges, higher-value engagements could let the user earn bonus points, and the highest-value engagements could be rewarded with special gifts or discounts. This is why it's important to take the time to identify your desired customer actions and behaviors, and then prioritize different types of customer engagement. 

4. Build A Loyalty Communication Strategy 

Communication is a core part of a relational loyalty program because relevant and consistent communication is key to building customer loyalty. If you send lackluster or generic communications to your customers it is unlikely that they will stay customers very long. When businesses engage directly with their customers through personalized messages and relevant updates, they create a stronger emotional connection and foster brand loyalty. By keeping customers informed about exclusive deals, rewards options, and loyalty program benefits, companies can enhance the overall customer experience and drive repeat engagement. 

5. Track & Measure Loyalty Program Performance 

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 loyalty program and what isn't so you can adjust accordingly. 

While it seems daunting to change from being a transaction-based loyalty program to being an engagement-based loyalty program, it only takes a few changes and you will quickly see the benefits that those changes offer. Start with these five steps and your program will soon evolve into a stronger, more impactful loyalty program that your customers love. 

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!