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 user base 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 on 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 programs 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!

gamification features reward system coke
This is what a loyalty program looked like in 2006.

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 need more than that to have rewarding experiences. 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, cares more about brand loyalty than any other generation. To stay loyal, Generation Z members expect consistent engagement and chances to interact with the brand, rather than just being targeted for sales. In other words, engaged Gen Z members are more likely to stick by you. But you need to do more than that to earn their loyalty – they want to be heard! Gen Z’ers are very forgiving if your product or service is not perfect, but they want to see be able to personalize their experience. Most importantly, they are looking for an authentic brand whose values align with theirs.

Customer loyalty program

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 way to leverage your efforts.

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 forward to a more interactive and experiential method of engagement. The best loyalty programs today use gamification rewards like points and badges 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.

The cost of building a loyalty program for large companies reaches up to $30 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 more affordable incentives, but just as effective. Gamification rewards do one better, and can 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?

Gamification means implementing game-like elements into a non-game context. In doing so, research shows that you inspire a very human and powerful sense of intrinsic motivation that compels users to participate and engage in your app.

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 rewards are so motivating because they make your app experience and reward system fun and worthwhile.

Just getting started with gamification? Catch up to speed on our What is Gamification page!

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, reward systems with 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.

How to design for customer loyalty? Get yourself a value-packed gamification workshop & go home with a roadmap tailored to your app goals!

Success is already being created using building blocks to generate customer loyalty. Take HumanForest, an e-bike-operated company that launched in 2019 to make 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!)

Users earn TreeCoins by riding e-bikes, which show how many trees worth of CO2 their cycling has saved! This means that in addition to a value-based reward system, HumanForest includes the customer’s impact on helping the planet. This gives users the intrinsic motivation needed to keep going – indeed, knowing that your actions have power is an extremely powerful motivator!

gamification features customer loyalty

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 tailor 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 reward system of in-app currency and the competition in the 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.

gamification features reward system mobile apps

Make retention a core part of your app strategy with StriveClouds’ gamification building blocks. Find out what it could mean for you!

TLDR

  • Loyalty is the end goal of every customer journey.
  • It is as important as ever, but the rules are changing because of the expectations of Gen Z, who spend more time on mobile than other generations.
  • Gen Z expects fun, interaction, and engagement from loyalty programs.

This has created Loyalty 4.0 which takes into consideration these expectations:

  • A reward system based on gamification features like digital confetti, which is more effective and more affordable than the old model of cash prizes.
  • Gamification rewards inspire the intrinsic motivation needed for long-term loyalty!

The StriveCloud gamification app brings loyalty 4.0 to you:

  • Flexible and user-centric building blocks.
  • Easily adjustable to user feedback – keeping your customers close.

HumanForest is one app that embodies loyalty 4.0, by using StriveCloud’s gamification building blocks to create features like:

  • An in-app currency that incentivizes green mobility and empowers its users!
  • Challenges that keep the user experience fresh and exciting.
  • Leveling systems tailored to the app’s identity.
  • Leaderboards that rank how many trees users have saved.

Looking to get started with Loyalty 4.0? Book an expert-led gamification workshop & set up an action plan tailored to your wants & needs!

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