The past year provided a wealth of challenges for brands looking to connect with consumers—and 2023 may be just as challenging. Between rising economic concerns and geopolitical issues, brands and customers alike face a near constant state of disruption.
Despite this, there remains a unique opportunity for brands to redefine their relationships with consumers—showing up for them when they need it most with relevant messaging and offerings to make their lives easier.
As we look forward to the year ahead, we are optimistic that, amid the uncertainty, we will continue to see organizations and agencies respond in innovative and empathetic ways. In 2023, we predict loyalty will become an increasingly successful mechanism to achieving positive business outcomes. Our experts weigh in on the loyalty landscape and how it will continue to evolve in the coming year.
1. “Loyalty partnerships will be key for providing enhanced value and utility to program members."
— Bindu Gupta, Senior Director, Strategy
Customers expect more from brands. They want relevant offers, experiences, communications, and loyalty program benefits. However, not all brands are able to keep up with these expectations. Loyalty program members are frustrated by a lack of valuable rewards, variety, and the often-complex processes required to earn and redeem points or miles. Brands should look to loyalty partnerships to not only bring value and utility for their loyal customers but also to reach new audiences and markets, increase revenue, and reduce costs.
I predict that more brands will embrace loyalty partnerships to enhance brand affinity and boost loyalty by being more present in members' daily lives. For instance, the loyalty partnership between Delta Airlines and Starbucks allows members to earn one mile per $1 spent on eligible purchases at Starbucks. And on days when enrolled members have a scheduled flight with Delta, they will earn double stars on eligible purchases at participating Starbucks stores. This helps increase the value of being a loyalty member of both brands and the utility of their loyalty currency.
To find success in loyalty partnerships, brands should seek partners with shared values that also collect accurate and reliable data—and can complement their own brand’s specific strengths.
2. “Program tier benefits will be overhauled to meet loyalty member demand."
— Tom Madden, Managing Partner, Loyalty and CRM
By the fall of 2022, business travel increased to nearly two-thirds of pre-pandemic levels while leisure travel remained strong. Many of the largest travel and hospitality brands are bullish on continued business travel demand despite the shadow of inflation.
From a loyalty program member benefits perspective, the increase in travelers—in addition to program benefit extensions over the last two and a half years—created increased member demand for a stable benefit supply. Whether it’s upgrades, companion benefits, or even club access, there are more members competing for the same benefits.
To ensure the best customers continue to have great experiences that keep them engaged with their brand and loyalty program, organizations will begin to reevaluate what they offer to each membership tier. As lower-tiered members can access many of the benefits via the program’s co-brand cards, programs can pull back on status extensions and tighten other benefits for lower-tier members. This will allow brands to better focus and align their benefits with the higher-tier customers who continue to be the most engaged with the brand.
The result is that status will feel unique and special again for those who are most engaged with brands and their programs.
3. “Loyalty programs will face new challenges due to economic slowdown and changes to program rules."
— Deb Hillstrom, Senior Director, Customer Strategy and Loyalty and Alexis Kvamme, Associate Director, Customer Strategy and Loyalty
With top economists warning of a possible global recession in 2023, brands must prepare for impending shifts in consumer spending. And as we near the end of 2022, loyalty programs are adjusting their program rules back to pre-pandemic requirements for the start of the new year. As a result, members can no longer rely on elite-tier status extensions or reduced thresholds to reach tier levels and will instead need to revert to pre-pandemic behaviors to attain them. While some will still qualify for their accustomed benefits, many will find the pre-pandemic thresholds no longer achievable with their decline in travel activity and retail spending
As brands begin to monitor market dynamics in early 2023, the knee-jerk reaction to short-term consumer behavior changes attributable to these reverted program rules and the economic slowdown might be to quickly adjust to rebalance. Savvy brands won’t immediately shift program rules again, but will instead continue to monitor consumer behavior, lean into consumer preferences, and adjust with a lens to their long-term loyalty strategies.
From a loyalty platform perspective, it’s important for the infrastructure to be as nimble as possible to support testing of segmented audience offers and benefit mixes during evaluation of program changes. Member tier and redemption thresholds may need to shift. Targeted and personalized promotions may need to hit the market more quickly. New strategic partnerships need to have swift and seamless integrations. And a variety of communication preferences should be offered and actioned upon.
Economic downturns can be an opportunity for brands to create emotional connections and nurture existing consumer relationships. Ultimately, brands that lead with empathy, connect with consumers in a personalized and unique way, and deliver on meaningful offerings and experiences, come out as winners once the economy stabilizes.
4. “Brands who focus on building emotional loyalty with their customers by communicating their values front-and-center will thrive.”
— Connie Sisco, Senior Connections Strategist
Today’s customers are savvy and have access to countless product options at their fingertips. With all of the choice and convenience available, it is no longer enough for a brand to provide a good quality product or service. Customers crave authenticity and want to see themselves reflected in the products and brands they choose. Many brands already bring this to life by leveraging influencers with aligned values, but I predict that the way brands will really make their mark is by communicating their values.
While not all brands can or need to go so far as giving away the company’s profits—like Patagonia, for example—talking directly with customers about your brand values will resonate. For some brands, this will take shape via product packaging or the company’s online presence. For others, taking the time to evaluate what values matter to a brand may lead to changes in company structure and employee experiences.
Regardless of how this comes to life, clearly communicating values to customers opens the door for customers to find common ground and relate to the brand through shared values. And when a customer can relate to a brand, that emotional connection will build a loyalty that can turn transactional customers into lifelong advocates.
5. “Brand advocates seek flexibility in their loyalty programs."
— Englash Redmond, Partner, Customer Strategy and Loyalty
With travel returning in a big way, travel and hospitality loyalty members have been increasingly frustrated with the value and variety of program rewards. In 2023, brands should look to combat these frustrations by optimizing their loyalty programs to provide varied, valuable rewards through simple and customer-focused experiences. Successful programs will add flexibility, increase earning and redemption options (typically through partnerships), and bring more value and recognition or exclusivity for top tier members.
We suggest proactively leveling up your loyalty offering by trying out subscriptions; increasing point utility that incentivizes members to plan and engage with the program months in advance; extending “pay with points” to cover travel fees and in-expensive amenities; leveraging gamification and badges; or even supplementing experiences with brand-produced and minted NFTs. Exploring a wide variety of partnerships will enable you to test and tweak how your customers engage, earn, and burn—keeping your program relevant and valuable as member needs and wants evolve.
6. “No longer a ‘nice to have’—2023 is the year of analytics."
— Emily Merkle, Partner, Analytics and Data Science
As the economy continues to head toward a recession and inflation rises, brands (across all industries) will need to double down on leveraging analytics to drive the experiences consumers expect and need. Once a “nice to have,” analytics will rise to a key differentiator and a major driver of customer loyalty and retention. Brands will need strong analytics as a core strategic foundation to not only help them understand their business and their customers but help them make the most out of more limited resources, particularly in terms of prioritizing efforts that drive the most return on investment.
As customers feel the pinch of our current economic reality and become more judicious in their spending, brands will need to lean into data and analytics more and more to show up for customers in all the right ways and demonstrate their value in everyday lives. Insights-driven strategy will enable more effective and scalable personalized loyalty efforts, within the confines of a traditional program and beyond, to deliver meaningful experiences and connect with consumers with empathy. The result is using data to bring a feeling of being seen, heard, and known to consumers who are facing so many challenges.
7. “More brands will use blockchain to track points."
— Lauren Sutherland, Senior Strategist
The utility of points—the number of ways in which points can be earned and redeemed or spent outside a brand’s core product or service offering—has grown, especially within the past few years. The primary reasons are due to brands trying to stay competitive by delivering more value to their members and members becoming more program-savvy.
Another increasing challenge is program fraud as the result of account takeovers—significantly more than member fraud or staff fraud. Account takeovers can happen when accounts have weak security. But fraudsters also continue to evolve their ways of breaking into accounts through phishing, credential stuffing, and cheap tools to seize points. While there are certainly issues with crypto—including the recent FTX collapse and NFT fraud—the value behind the concept of blockchain as a public ledger still holds promise. Granted that member identity stays encrypted and the energy consumption isn’t astronomical, it could be feasible to track points at an individual level. If blockchain could publicly track point movement, perhaps the issue of account takeovers—or any fraudulent points seizure—would be lessened significantly.
In the meantime, I predict that loyalty accounts whose points or rewards carry cash value will become more commonly integrated into digital payments—a part of digital wallets (MGM Rewards, for example) or as a payment option during the checkout process (such as Wells Fargo Rewards).
8. “Personalization and customer loyalty will be increasingly intertwined—and ethical data use will be more critical than ever."
— Colin Eagan, Partner, Experience Design
As personalization tech continues to evolve rapidly, everyday brands will be able to customize digital interactions not only at point-of-sale, but across entire customer journeys. Users increasingly expect these connected experiences that travel across devices and channels, as well as into long-term brand interactions. This merging of micro-personalized information design with macro brand loyalty will put a renewed emphasis on organizations to create personalization programs that scale—across content creation and delivery, AI/ML-driven campaigns, and synchronization with authenticated apps and portals.
All of these experiences are driven by data, and the merging of personalization and loyalty will put a heightened emphasis on data privacy. In the upcoming year, expect delivery platforms like web browsers to become increasingly restrictive, aimed at giving users more control over what they share. For example, Google continues to threaten to eliminate support for third-party cookies only to be replaced by tools like Privacy Sandbox. And while it looks like organizations will get a respite on this cut-over until 2024, the upcoming year will be a critical time for transition planning. We expect more organizations to adopt data strategies built on trust, such as transparent terms-of-use, opt-out mechanisms, and the use of zero-party data.