Why loyalty programs are changing (and how to keep up!)
If you look at a typical customer journey, you will almost always see ‘loyalty’ placed at the end of it. While building a reliable userbase continues to be a crucial goal for every business, the rules that determine loyalty programs are changing. Loyalty programs have always had some sort of reward system, but before it was usually based around point collection and discounts, which made it very unscalable. The use of gamification features like challenges, raffles, or badges adds an extra layer of motivation that doesn’t exponentially increase retention costs.
Look at leaders from across the app market like Duolingo in education, Sweatcoin in fitness, or Revolut in banking. They all used gamification to reach the top and generate more loyal users than their competitors. For sure, their examples are leading the way.
In this article, let’s review how gamification is improving loyalty programs and how using gamification building blocks can enhance your customer loyalty.
Why a change in how loyalty systems work is inevitable
Long-held business wisdom states that the top 20% of customers make up 80% of your revenue, a phenomenon known as the Pareto Principle. That statistic is why businesses have always focused on developing effective loyalty programs. It makes financial sense to build a reward system around those who have the most impact on your wallet!
But while the loyalty programs of old were hugely successful at the time, (as well as creating the rulebook many still follow), they are not optimized for today’s digital age. In 2006, Coca-Cola started pioneering gamification features like loyalty points and prizes as part of ‘My Coke Rewards’. The campaign retained 20 million lifetime members!
Of course, that’s a success by any measure. However, loyalty programs like My Coke Rewards were based on a transactional relationship, and today’s consumers expect more than that. Building a reward system around offers like ‘buy 10 drinks, and your 11th is free’ doesn’t take advantage of the incredible toolkit app developers and commercial teams have access to now.
So much more can be done, and indeed must be done to thrive in the app market today. There is one important reason why that is so:
Gen Z wants more interaction from loyalty programs
The young ‘digital native’ Gen Z demographic, aged around 10-24, care more about brand loyalty than any other generation. Studies show that 60% of Gen Z members remain loyal to a brand if involved in their loyalty program. This is up from 48% for the general population. In other words, a loyal Gen Z member is more likely to stick by you. But their loyalty isn’t free – they want to be heard! Gen Z’ers are very forgiving if your product or service is not perfect, but they want to see that you care about them. Most importantly, they are looking for an authentic brand whose values align with theirs.
Why else would they buy merchandise from their favorite YouTuber for instance? They do it because they love to watch them and want to support or even represent them! There’s a clear reason why apps have to pay attention to Gen Z and their expectations. Compared to other generations, Gen Z spends more time and money on mobile. Gen Z is online 8 hours a day and mobile purchases account for 1/3 of all their transactions! So this demographic is an ideal target for loyalty programs, but Gen Z wants the exciting interaction and engagement that they expect online. Luckily, there is a solution.
What is loyalty 4.0- and how is it changing app development
Loyalty 4.0 is the new attitude to loyalty programs that embraces these shifts. The world is moving away from a transactional model, and on forward to a more interactive and experiential method of engagement. The best loyalty programs today use gamification features like points and levels to create a genuinely engaging reward system. Gamification examples like these are a huge part of what makes loyalty 4.0 so effective – and most importantly for apps looking to grow – scalable.
Annual expenditures in loyalty programs number €66 million, and that’s no small sum. It costs to give out discounts, perks, and financial incentives. Given this, it is no wonder that businesses are looking for incentives that are more affordable, but just as effective. Gamification features do one better, and can actually be more effective! For example, a simple sprinkle of digital confetti to celebrate a user’s achievement is both cheaper AND more motivating than offering cash prizes. So what’s the deal?
Intrinsic motivators are based on complex goals like personal growth, purpose, and fun. To foster long-term customer loyalty, this intrinsic motivation is essential. Gamification is so motivating because it makes your app experience and reward system fun and worthwhile.
In short, the journey matters more than the destination! That means less emphasis on transactional discount offers that focus on results – what we call extrinsic motivators – and more on intrinsic motivators. Indeed, studies show that while extrinsic motivators push users through the discovery phase, intrinsic drivers sustain long-term loyalty.
How to implement loyalty 4.0 in your app
So loyalty 4.0 is all about making your app both fun and scalable. This is crucial to cementing your app’s future! But how do you do it? As experts say – you need a clear strategy from the beginning. To offer the user experience you wish, and be capable of customer growth, your app development needs to be user-centric and flexible.
These needs were in mind when creating StriveCloud’s gamification building blocks. It is a nimble strategy of app development, where product managers can construct their app a step at a time – optimizing as they go. Building blocks allow you to easily create synergetic and consistent gamification features that are highly customizable and adaptable so that you can stay close to your customers’ needs.
Success is already being created using building blocks to generate customer loyalty. Take HumanForest, an e-bike operated who launched in 2019 with the aim of making London a greener city. Since their founding, they have had a loyal user community of 35,000, and StriveCloud’s gamification building blocks form a part of the app’s fabric:
An in-app currency that incentivizes green mobility (and gives users power!)
Challenges keep the user experience fresh and exciting
Building blocks allow for personalized challenges, and HumanForest is taking full advantage of that. For example, users are challenged to cross over the River Thames that famously bisects London and are rewarded by upgrading their personal level.
Leveling systems tailored the app’s identity
Users enjoy being able to level up! It tracks progress, demonstrates personal growth, and can be a way of bragging about your social status! All of these are basic intrinsic needs. HumanForest takes advantage of StriveCloud’s building blocks and customizes their levels to their brand identity – the top level is not gold, but wood. Suitable for a forest!
Leaderboards that rank how many trees users have saved
HumanForest ranks the Treecoins that every user in the community earns, and this makes users feel more motivated! Together, the in-app currency and leaderboard work to enhance each other. Building blocks make new features work together in an integrated way – which is important in creating a streamlined user experience.