Retailers are tightening policies in 2026 as a response to snowballing returns that totaled nearly $850 billion last year, roughly 15.8% of annual sales. But while it’s true that brands have to do something to protect shrinking margins, the question is whether introducing shorter return windows, additional fees, and extra hoops for all customers is the right move.

Imagine a longtime shopper, one who’s spent thousands with your brand over the years, trying to return a pair of shoes that didn’t fit, only to be met with obstacle after obstacle. From their perspective, nothing changed — except that a brand they trusted suddenly stopped trusting them. 

Stricter returns can help deter abusers, but they can also drive loyal customers to spend with a competitor whose policies feel fairer. The retailers that see return policies as a CX advantage in 2026 won’t aim to have the most lenient or the strictest rules. Instead, they’ll strive for precision: cracking down on fraudsters while maintaining a frictionless return experience for customers who’ve demonstrated trust over time. ​

Blanket Policies Punish Your Best Shoppers

For years, retailers raced to make returns as quick and painless as possible. But as the gap between when a refund was issued and when a return was validated continued to grow, “no questions asked” began to turn into “no consequences.” 

The line between normal shopping behavior and policy gaming has blurred. Many shoppers believe practices like wardrobing (wearing and then returning clothing) and bracketing (ordering multiple sizes or colors to try on) are acceptable.

Now, with margins under pressure, retailers are pushing back. In 2024, returns and claims cost retailers about $103 billion. Those are real losses, and stricter return policies are a knee-jerk reaction many retailers are already putting into place.

But blanket policies that tighten everything at once and are easy to roll out tend to punish loyal, low-risk customers while repeat abusers just find new ways around the rules. Not only that, but refunds slow down, exceptions become inconsistent, and customers shift future spending to brands that still feel easy to deal with. 

How Brands Can Protect CX Without Encouraging Abuse

The key to getting returns right in 2026 is using automated decisioning to maintain the same CX that loyal shoppers have come to expect while adapting quickly as abuse patterns evolve.

Risk-Based Routing

Instead of a blanket policy that treats repeat customers and repeat abusers the same way, risk-based routing segments shoppers by trust levels (trusted, standard, and high-risk) based on signals such as their return rate, claim history, support interactions, and ordering behavior. This moves loyal shoppers through the process quickly, while those exhibiting potential harm hit a speed bump.

Automated Approvals

With unified post-purchase visibility, patterns can be spotted in real-time. When a refund is initiated, the trusted customer is automatically approved, while the high-risk request triggers additional verification steps or manual review. The result is seamless CX for the customer you want to keep, without extending the same ease to likely abusers.

Personalization Through Automation

Not only could two shoppers be routed and approved differently, but they could also receive different offers. The loyal customer may receive a prepaid shipping label and an instant refund, while a repeat offender may be limited to store credit or required to cover their own return shipping. Therefore, leniency can no longer be assumed; it must be earned.

Putting Friction Where It Belongs

The customer journey doesn’t end when the package is marked as delivered. What happens next, whether your return policy feels effortless or frustrating, could be the moment a shopper decides if it’s worth coming back.

In 2026, protecting your margins won’t come from being the strictest, nor from staying the most lenient. It will come from using data to create trust-based experiences and being precise about where to place friction. Instead of building your customer experience around bad actors, provide loyal shoppers with the seamless CX they’re used to, and set guardrails against high-risk behaviors. This sends a clear message: trust is a two-way street, and we’ll still make returns easy for the customers who’ve earned ours.

The post Protecting Loyal Customers From Your Own Return Policies appeared first on MartechView.

Consumer prices have jumped more than 24% since February 2020, from groceries to gas, forcing many consumers to rethink how and where they spend. Over one-third of Americans have delayed, downgraded, or canceled major purchase plans for homes and cars this year. 

It’s clear that shoppers are replacing big splurges and luxury items with the “treat economy”: small indulgences that feel good without the guilt. A Bank of America report found that 57% of Gen Z buy themselves a “small treat” at least once a week, from mini lip balms to $30 Labubu blind boxes, whether it’s a reward for staying on budget or a quick dopamine lift after a stressful day.

With the holiday season approaching, retailers can expect this trend of consumers moving away from extravagant shopping to continue. Between gifting, self-gifting, and last-minute impulse buys, the appetite for affordable luxuries is expected to persist, making this the ideal time for retailers to capture consumer demand.

Why the treat economy is booming

At its core, the treat economy is powered by three psychological drivers:

• Reward: A small indulgence feels earned after a long workday, a stressful news cycle, or sticking to a budget elsewhere. 94% of consumers say they have a snack as a reward or treat. 
• Control: When prices rise across the board, buying one little thing can feel like reclaiming agency.
• Mood: Some treats are all about the dopamine hit, whether it’s the sugary rush of premium chocolate, the sensory hit of a new lip gloss, or the fizz of a sparkling drink. 

How retailers can tap into the treat economy this holiday season

With gifting and self-gifting colliding with the emotional tug of the holidays, these buying behaviors will likely spike in Q4. Experts have already predicted that the average planned holiday spend per person is $1,552, 5.3% less than in 2024. Gift budgets, in particular, are expected to shrink by 11%, and for Gen Z, the drop is even steeper at 23%.

This means that retailers who focus on little treats are more than ever positioned to capture both margin and loyalty. Here are three ways to turn small luxuries into big wins this holiday season.

Make impulse irresistible at every touchpoint

Impulse isn’t accidental; it’s engineered. 54% of holiday shoppers make impulsive purchases, with the highest rates among Gen Z (70%) and Millennials (65%). Holiday impulse thrives on scarcity and seasonality — a limited-edition flavor or festive design can turn a casual browse into a must-have.

For brands selling on platforms like Walmart, Amazon, and Target, lean into the mechanics that drive visibility: bid on seasonal search terms like “stocking stuffer” or “Secret Santa,” activate sponsored product ads around high-traffic categories, and ensure your items are tagged into the right holiday storefronts and “gift under $20” hubs where impulse buying is highest.

Behind the scenes, analytics and automation tools can help retailers monitor which SKUs perform in high-traffic placements and flag when performance starts to slip. Agentic AI tools can analyze dozens of signals (such as search trends, competitor activity, and conversion patterns), automatically adjust bids, and update content so that the right products surface at the right time without manual intervention.

Reframe value, not just price

In an era of inflation fatigue, messaging focusing solely on “cheap” risks devalues the product experience. Instead, lean into language that reframes value as emotional payoff: “affordable indulgence,” “a little moment of joy,” or “premium feel without the premium price tag.”

This is especially powerful in gifting, where perceived effort often outweighs actual spending. An artisanal chocolate bar with a story behind it can feel more intentional than a bottle of mid-shelf wine. The effect multiplies when the product itself is designed for gifting. 

Mini sets, sampler boxes, and deluxe trial sizes de-risk the purchase by lowering both the price point and the commitment, making these formats ideal for Secret Santa exchanges, hostess gifts, or stocking stuffers.

Multiply the moments, not just the margin

Large carts are built one little treat at a time, but the real unlock is when shoppers buy in multiples — one for a friend, one for a coworker, one for themselves. 

Retailers can encourage larger basket sizes while preserving the illusion of thrift by planning SKUs that are easy to grab in bundles, like multipacks of candles or curated “buy one for me, one for them” offers. 

Planning for this at scale often requires demand-forecasting tools to spot when and why a product is trending — a keyword surge, a competitor promotion, or a content gap — and recommend the right adjustments to capture that lift before it’s gone.

This holiday season, rethink the shopping basket

Treat culture offers a powerful lens for understanding what today’s consumers want: joy in small doses, meaning without excess. 

For retailers, it’s also a strategic opportunity. By analyzing the emotions and behaviors driving these purchases and utilizing AI tools that dynamically adjust pricing, promotions, and placement in real time, brands can boost basket size and frequency without holding their breath for big-ticket wins that may not come. 

The post The Treat Economy: How Small Luxuries Boost Retail Returns appeared first on MartechView.

In retail, AI is already powering everything from personalized product feeds to dynamic pricing and virtual shopping assistants. But in the rush to adopt these tools, many brands overlook a critical factor: trust.

Retailers are under pressure. Store closures, rising costs, and the continued shift to online shopping have forced many to rethink their operations. AI offers new ways to improve efficiency and deliver value, but only if customers trust how it’s being used. Transparency has become essential as consumers become more aware of data practices and skeptical of opaque algorithms. Retailers must be upfront about using AI and data to shape the customer experience.

The question isn’t whether retailers should use AI. That ship has sailed. The real challenge is implementing AI to strengthen, rather than erode, customer relationships. Brands that get this right will build a loyal, data-savvy customer base. Those that don’t risk backlash, regulatory scrutiny, and damaged reputations.

A new retail environment

AI is no longer experimental in retail. It’s embedded. Behind the scenes, AI powers supply chains, predicts demand, manages inventory, and adjusts real-time pricing. These backend systems tend to operate unnoticed by consumers and rarely raise concerns.

The front end is different. Here, AI interacts directly with shoppers, helping them find the right size, suggesting alternatives, or personalizing offers through websites, apps, and in-store kiosks. This is where trust becomes critical.

Today’s retail environment is shaped as much by algorithms as by aesthetics. Consumers expect convenience and personalization, but they also want transparency and control. They’ll often welcome a more tailored experience, as long as they feel it’s secure, respectful, and in line with their values.

For example, when you walk into a store with the retailer’s app on your phone, AI might recognize you (with permission), access your preferences, and prompt a sales associate to assist you based on your recent online activity. This interaction can feel genuinely helpful when AI is implemented with transparency and permission. Without consent, the same experience can come across as invasive. What makes the difference is clear communication and customer choice.

Also Read: Rewriting the Rules: Gen Z, Authenticity, and the Future of Loyalty

Ethical AI is good business

As AI shapes more of the retail experience—from product recommendations to pricing—trust has become a key factor in customer loyalty. That’s where ethical AI comes in. 

Ethical AI means more than checking boxes for compliance. It’s about building systems that prioritize transparency, fairness, and accountability. That includes being transparent about algorithms, using data responsibly, and actively reducing bias. For retailers, this isn’t just a moral stance – it’s a practical way to strengthen customer relationships.

Too often, the conversation stops at internal safeguards—things like fairness audits, data handling protocols, and model validation. But those efforts mean little if customers are left in the dark. When brands clearly explain how AI influences the customer experience—and where it doesn’t—they earn greater confidence and long-term loyalty. Transparency becomes part of the brand promise.

A roadmap for implementation

Ethical AI in retail isn’t just an abstract ideal. It’s a concrete strategy that requires deliberate action. Here are four steps retailers can take today to put trust at the center of their AI strategy:

1. Communicate clearly how you’re using AI.
   Don’t hide disclosures at the bottom of privacy policies or bury them in legalese. Make it easy for customers to understand when and how AI is shaping their experience, whether through a brief explainer, a label noting “AI-assisted recommendation,” or a prompt explaining how AI can help them learn more or adjust their preferences.
   
2. Audit personalization and pricing for bias.
   AI models are only as good as the data they’re trained on. If you’re not routinely testing your systems for unfair outcomes, such as different prices based on zip code, gender, or previous browsing behavior, you’re not just risking reputational damage. You’re betraying the very trust you’re trying to earn.
   
3. Let customers shape their AI experience.
   The most ethical AI is user-centered. That means giving customers choices: to opt out of personalization, to correct data assumptions, or to set preferences about what’s recommended and how often. Empowered users are loyal users.
   
4. Make privacy a visible part of your brand promise.
   Don’t just comply with privacy laws – compete on privacy. Make it a cornerstone of your customer value proposition. Retailers who visibly invest in privacy and make those efforts part of the brand story will have a head start as regulations tighten and consumer expectations rise.

Also Read: Personalized Travel Rewards: The Key to Customer Loyalty

Looking ahead

As AI becomes more embedded in retail, expectations around transparency and personalization will keep rising. The brands that thrive will build trust through clear communication, ethical practices, and meaningful customer engagement, not those chasing the latest tool.

The retailers pulling ahead ask more thoughtful questions: “How does this improve the customer relationship?” instead of simply “What can we automate?” The future of AI in retail isn’t defined by technology alone. It’s defined by the trust you earn with every interaction.

The post Can AI in Retail Win Trust Before It Loses Customers? appeared first on MartechView.

The loyalty landscape is undergoing a seismic shift. The model was simple for decades: accumulate points through purchases, redeem them for discounts, and repeat. But a new generation, shaped by a world of instant gratification and a growing consciousness, is demanding more. Gen Z, the digital natives who have come of age in an era of social responsibility and personalized experiences, are rewriting the rules of brand loyalty, and businesses, especially in the travel sector, are scrambling to keep up.

“Value in loyalty programs isn’t one-size-fits-all,” says Jeff Zotara, Chief Marketing Officer at arrivia. “While it’s commonly associated with discounts or savings, it also includes perks like upgrades and, for Gen Z, rewards that reflect their commitment to sustainability and unique, experience-driven experiences like exclusive events.”

At the heart of this transformation lies a fundamental redefinition of value. While previous generations may have been primarily motivated by straightforward transactional benefits—the allure of a free flight or a discounted hotel stay—Gen Z’s priorities are more nuanced. They seek authenticity, sustainability, and experiences that resonate with their values. This presents a significant challenge for brands: how can these principles be integrated into loyalty programs without alienating older, more traditionally oriented demographics?

Beyond the Transaction: The Gen Z Value Equation

The traditional view of loyalty as a purely transactional exchange is rapidly becoming obsolete. As Zotara points out, value extends beyond discounts and savings for Gen Z. They are drawn to perks that align with their commitment to sustainability, such as eco-friendly accommodations. They crave unique, experience-driven rewards, like exclusive access to events or curated local adventures.

This doesn’t mean that older generations have suddenly abandoned the pursuit of value. Instead, it highlights the increasing fragmentation of consumer preferences. Millennials, Gen X, and Baby Boomers also have distinct needs and desires shaped by their life experiences and priorities. To navigate this complexity, brands must move away from a monolithic approach to loyalty and embrace a more personalized, data-driven strategy.

Also Read: Personalized Travel Rewards: The Key to Customer Loyalty

The Power of Personalization: Tailoring Loyalty to the Individual

The key to success lies in understanding that there is significant diversity even within a single generation. As Zotara emphasizes, “While Gen Z overall values sustainability, they aren’t a monolith—neither are Millennials, Gen X or Boomers—and we shouldn’t treat them as such. Instead, loyalty providers must use data collected across multiple touchpoints to craft personalized engagement strategies that appeal to individual values, improving the relevancy of the loyalty program in their eyes.”

By collecting data across multiple touchpoints—from online browsing behavior to social media interactions to in-store purchases—brands can develop a comprehensive understanding of individual customer preferences. This data can craft targeted offers and rewards that resonate with customers’ values and interests.

For instance, a Gen Z customer who frequently engages with a brand’s social media posts about environmental initiatives might be rewarded with sustainable travel options or donations to environmental causes. Conversely, an older customer who values convenience and efficiency might be offered expedited services or exclusive access to premium support channels.

Zotara highlights the importance of authenticity in this process. “To maintain authenticity, loyalty programs must be transparent about their practices and rewards. For instance, if a loyalty provider offers sustainable accommodations on its platform, it can leverage hotels’ sustainability certificates to appeal to eco-conscious members and ensure they actively support responsible environmental practices. Or, if they want to offer experiences through their platform to a travel destination, they can partner with a local influencer to curate these experiences, therefore adding credibility and authenticity to the benefit.” Brands must be willing to provide detailed information about their products’ sourcing, their operations’ environmental impact, and the partners they collaborate with.

For example, a travel brand offering sustainable accommodations could showcase hotels’ sustainability certifications, assuring customers that they support responsible environmental practices. Similarly, brands offering experiential rewards, such as curated travel itineraries, could partner with local influencers to add credibility and authenticity to their offerings.

While these initiatives may not appeal to every customer, a sophisticated personalization strategy ensures opportunities are presented to the most interested consumers, minimizing the risk of alienating any group.

Also Read: From Legacy to LaaS: The Evolution of Loyalty Programs

The Travel Industry’s Gen Z Challenge: Beyond the Flight

The travel industry faces a particularly acute challenge in adapting to Gen Z’s evolving expectations. Research indicates that this generation is “less likely to enroll in airline loyalty programs than older generations due to inconsistent travel behavior.” This suggests that traditional travel loyalty programs, focused primarily on rewarding frequent flyers, fail to resonate with younger consumers.

Gen Z’s travel behavior is often characterized by shorter, more frequent trips and a preference for unique, experience-driven travel. They are also more likely to prioritize non-travel redemptions, such as merchandise, gift cards, or access to exclusive events.

To engage this generation, travel brands must expand their loyalty offerings beyond the traditional realm of flights and hotel stays. As Zotara suggests, “Travel brands that want to engage Gen Z should be looking for partners that can provide them with a wide array of redemption options across diverse suppliers.”

This could involve partnerships with various businesses, including restaurants, entertainment venues, local tour operators, and retailers. By offering a wider array of redemption options, travel brands can cater to Gen Z consumers’ diverse interests and lifestyles.

The Need for Speed: Real-Time Rewards and Seamless Experiences

Another key factor in engaging Gen Z is the need for speed and convenience. Having grown up in an era of same-day delivery and instant access to information, this generation expects seamless, real-time experiences. This expectation extends to loyalty programs.

Zotara emphasizes the importance of modern travel loyalty technology in meeting this demand. “For instance, brands that can update members’ points and status in real-time can also offer real-time add-ons such as room upgrades or free Wi-Fi when members check in to their hotel via their loyalty app. This type of instantaneous reward is crucial to resonate with a generation that grew up during an era of same-day delivery.”

Furthermore, travel brands can enhance the value of their loyalty programs by offering flexible earning opportunities. Zotara states, “A travel loyalty platform with a flexible structure that allows members to earn points across different vendors and for different behaviors (as opposed to just travel) will help them earn faster, thereby encouraging higher redemption rates and improving the program’s value.”

This could involve allowing members to earn points for booking activities, dining at partner restaurants, or engaging with the brand on social media. By providing more opportunities to earn points, travel brands can increase program engagement and make their loyalty programs more appealing to Gen Z.

Also Read: Beyond Rewards: Redesigning Loyalty Programs for the Modern Customer

The Future of Loyalty: A Human-Centered Approach

As brands navigate the evolving landscape of loyalty, one thing is clear: the future belongs to those who embrace a human-centered approach. This means putting the customer at the heart of every decision, understanding their needs and values, and delivering personalized experiences that build genuine connections.

Gen Z leads the transformation, demanding authenticity, sustainability, and experiences that resonate with their unique identities. Brands willing to listen, adapt, and embrace these values will be best positioned to win the loyalty of this influential generation and build lasting relationships that drive long-term success. The era of one-size-fits-all loyalty is over. The future of loyalty is personal, authentic, and deeply human.

The post Rewriting the Rules: Gen Z, Authenticity, and the Future of Loyalty appeared first on MartechView.

It’s no secret that long-term engagement is the key to improving customer lifetime value. However, to achieve this, brands must connect with customers by catering to their unique wants and consistently delivering relevant offers and recommendations. 

This level of personalization is nearly impossible without the right data and the tools to turn it into actionable insights. Leveraging loyalty technology solutions with built-in AI and automation capabilities allows brands to align their content with a customer’s preferences and purchasing behavior at every encounter. Even more importantly, it allows them to anticipate and address customer needs before they’ve even fully formed, providing them the opportunity to deliver unique value that encourages consistent customer interactions. 

So, if personalized marketing is so effective, why do some companies still lean on broad strategies? Marketers used third-party cookies to personalize content in the past, but evolving privacy laws, such as those in Canada and Europe, are making this more challenging. Though no such law exists on the federal level in the United States, state laws such as the California Consumer Privacy Act and Google’s decision to elevate user choice around privacy when it comes to third-party cookies in its Chrome browser mean that marketers will need to push for first-party data wherever possible. 

This shift has fueled the rise of loyalty programs. According to consulting firm Gartner, one in three businesses without current loyalty programs will establish one by 2027 precisely because they can gather first-party data. We’re also seeing a rise in strategic loyalty partnerships, which enables brands to share user data as well as expand their earning and redemption opportunities. For instance, Lyft and Delta Sky Miles members can link their accounts to earn additional frequent flyer points with every ride. As loyalty programs expand these opportunities, marketers will be privy to streams of customer-supplied data to further refine and personalize their loyalty offerings to encourage maximum engagement. 

Also Read: From Legacy to LaaS: The Evolution of Loyalty Programs

Within the pantheon of loyalty rewards, travel perks are the most coveted by consumers and brands alike. According to arrivia’s 2024 Travel Loyalty Outlook Report, 95% of companies surveyed now offer travel rewards as part of their loyalty programs, compared to just 65% in 2022. Through strategic partnerships and with the help of travel loyalty technology providers, offering these types of rewards is no longer the domain of just travel companies. 

The benefits of travel perks

Imagine this scenario: a customer walks into a Starbucks, orders a mezzo latte via the Starbucks app, schedules an Uber to bring them to the airport later in the day, and finally books a hotel via T-Mobile’s travel site — all the while earning points that can be later exchanged for travel perks. 

The demonstrable value to the consumer illustrated in that scenario partially explains why travel rewards are booming. However, they also confer advantages to the brands that offer them. Say you’re Starbucks, and your loyalty rewards are limited to free coffee or branded merchandise. Are these valuable enough to incentivize customer spending and encourage frequent store visits? Consider how the coffee retailer has recently expanded its loyalty program via partnerships. In a 2024 earnings call, Starbucks CEO Laxman Narasimhan credited the company’s partnership with Delta’s Sky Miles program with driving deeper “connection and engagement” from loyalty members. By offering its members the opportunity to earn travel rewards with specific purchases, Starbucks now delivers value that consumers, especially millennials and Gen Z, increasingly prioritize— experiences. And experiences can be highly personalized. 

While a Starbucks Rewards and Delta Sky Miles member in a lower income bracket might value travel discounts more than any other travel perk, a business traveler might be more interested in rewards that streamline the travel process, such as free lounge access or expedited security clearance. 

Using AI to Augment Travel Rewards

These brands can identify travel patterns, favorite destinations, and user behavior by leveraging the customer data from these programs through data-sharing agreements, AI-powered tools, and marketing automation capabilities. This allows them to dynamically generate personalized rewards at the exact moment when the member is most likely to engage with them.

In other words, marketing technology enables brands to offer their loyalty members curated experiences. For example, Marriott Bonvoy, the hotel chain’s popular loyalty program, integrates AI-driven personalization tools to generate offers based on a traveler’s unique profile, whether free nights in their preferred hotel locations or exclusive packages tailored to their past travel behavior. This kind of data-driven precision and personalization separates leading brands from those still using traditional, broad marketing strategies. 

Also Read: Beyond Rewards: Redesigning Loyalty Programs for the Modern Customer

As marketers, we know that sending the right message to the right person at the right time and in their preferred channel is the key to higher conversion and engagement rates. That’s why organizations must consider how a loyalty program and modern marketing technology solutions can help them achieve these goals. With high-quality, first-party data from their loyalty programs, brands can train their predictive AI models to anticipate what types of messaging, offers, and experiences a customer will most likely respond to. By leaning into personalized marketing strategies that utilize highly valued rewards such as travel, marketers can achieve the only real prerequisite to increased customer lifetime value: long-term loyalty.

The post Personalized Travel Rewards: The Key to Customer Loyalty appeared first on MartechView.

Loyalty programs have evolved over the past few decades, with Loyalty-as-a-Service (LaaS) as the latest strategy for creating a modern loyalty experience. 

Long recognized as a powerful customer retention strategy, the first loyalty programs were simple but effective at engaging consumers. It is hard to imagine punch card-style tactics gaining much traction today, but the novelty of those early programs encouraged repeat purchases and built brand loyalty. 

The emergence of the modern loyalty program 

The ‘80s saw the emergence of the modern loyalty programs that still dominate the landscape. In 1981, American Airlines paved the way with its AAdvantage travel loyalty program, making it the first brand to start collecting data and encouraging customer retention by offering rewards for the number of miles flown. The then-innovative approach to incentivizing travelers’ loyalty quickly became popular with consumers worldwide, and other carriers rapidly followed suit. 

Other industries eventually adopted and adapted their loyalty programs to meet customer engagement and retention goals. Banks and credit card issuers began offering transaction points, and supermarket chains introduced loyalty initiatives in the ‘90s. 

Also Read: Beyond Rewards: Redesigning Loyalty Programs for the Modern Customer

The constraints of early loyalty programs (and legacy tech) 

Early loyalty programs – and many legacy loyalty technology systems still in use – employ various tactics, allowing brands to track consumer behavior more closely and collect detailed data. While this is a core component of any successful loyalty strategy, limitations exist. These older and likely complex systems rarely provide the flexibility necessary to leverage customer data to create better and more meaningful loyalty experiences that scale and meet the needs of today’s savvy consumers.

It is challenging for these legacy programs to adapt to changing customer preferences because adding functionality to existing platforms or integrating them with other systems requires time, money, and development resources—making the juice not worth the squeeze. Legacy programs also struggled to provide customers with anything remotely personalized or tailored due to architecture rigidity, limited data capabilities, and inadequate scalability. As a result, most early loyalty programs fell short of fully engaging customers or delivering real value beyond basic discounts and mass offers. 

How loyalty-as-a-service is surpassing traditional loyalty programs 

The rapid advancement of digital technologies in the 2000s (starting around 2010) created new opportunities to develop more sophisticated loyalty programs. Thanks to the significant growth of ecommerce and mobile apps, brands had newfound opportunities to collect data about customers they had only dreamt of before. This led to a greater understanding of their customers through data-driven insights and the ability to develop rewards targeted to narrower customer segments. 

Tech-savvy consumers also began demanding greater value and more personalized experiences from loyalty programs. At iSeatz, we published a report earlier this year based on a survey of US consumers and loyalty program professionals, which found that 65% of loyalty program members would engage more with those programs if offered better discounts. Another 22% would book travel through their loyalty programs more often if they received more personalized offers and recommendations. These findings suggest that brands must improve their programs’ ability to demonstrate value and create customized interactions to capture consumer attention effectively. 

Enter Loyalty-as-a-Service (LaaS), a cloud-based loyalty solution that applies the SaaS model to loyalty programs. Developed in response to the limitations (and expense) of building in-house loyalty programs, LaaS platforms provide scalability, flexibility, and seamless integration across myriad technology and loyalty systems, supplier and aggregator networks, as well as data and analytics platforms,  eliminating the need for time-, cost-, and labor-intensive internal development.  

Also Read: Loyalty and Data: Building Trust in Privacy

The LaaS model is designed to help companies increase customer engagement with more personalized rewards and offers. It delivers seamless and intuitive user experiences, making it easier for customers to track their rewards, redeem points, and view new offers. LaaS achieves this by making gathering and manipulating data for insights much easier than traditional loyalty platform deployments, all through a constantly updated, agile framework that can be implemented with faster time to market. 

With LaaS, brands can redefine loyalty strategies and offer customers a more dynamic and relevant experience. 

What LaaS means for brands moving forward 

LaaS is taking customer retention strategies to the next level by enabling brands to provide more customization and diversity in reward options. LaaS can quickly innovate and adapt to changing customer needs and wants as a cloud-based solution. LaaS also levels the playing field, enabling businesses of all sizes (not just the big brands) to create advanced loyalty programs that drive customer retention.  

According to the iSeatz report, in 2022, 67% of companies surveyed said they developed their loyalty programs in-house. By 2024, that number had dropped to 37%, with the percentage of companies contracting with an external provider rising from 22% to 33%. Today’s brands want to maximize returns (and investments) by partnering with loyalty technology companies that already have the best solutions built and are raring to go and can provide strategic support at every step of the way, from program design to management and rewards fulfillment. 

A Solution for the future of loyalty  

LaaS is poised to redefine brands’ approaches to loyalty program implementation and set a new standard for how effective customer retention and engagement strategies can be. As consumer expectations and competition among loyalty programs increase, LaaS is the solution to staying flexible enough to anticipate shifting customer demands and technologically capable enough to engage them optimally.  

Also Read: Personalized Experiences Key to Success in Fragmented Landscape

This makes LaaS the current peak of loyalty program evolution, one that can truly release the shackles of traditional program construction and unleash the power of consumer-brand relationships.  

The post From Legacy to LaaS: The Evolution of Loyalty Programs appeared first on MartechView.

Tim Hortons recently updated its loyalty program, More Tims, More Rewards. The program was redesigned to make it easy to get rewarded. The previous Tims Rewards program was visit-based, and guests earned the same points per eligible transaction – whether they made a 50-cent purchase or bought beverages and donuts for the whole family.

In the new program, points are earned for every $0.10. For example, a Tims Rewards member who spends $6.36 will earn 64 Tims Rewards points, whereas previously, they would have earned 10 points. Guests now earn ten points for every dollar they spend on their favorite Tim Hortons products. Loyalty programs function purely as an extension of larger business goals. The redesign of the redemption mechanics reflects this shift.

When implementing a rewards program to keep customers engaged and loyal, one eye must be on the future. Rewards, perks, and interaction methods that won’t scale with your company’s growth can present problems in future years.

The biggest obstacle is winning over the organization and gaining its acceptance and support. You might unknowingly be building the bottleneck preventing your business from creating a meaningful omnichannel connection with your consumers by harboring superficial reservations about loyalty programs.

For your rewards program to be fruitful in the long run, it should be consistently enjoyable for customers to interact with. That should remain true even as your audience increases and individual customers remain with the business for years.

Let’s start by addressing some of the typical issues with loyalty programs that your company could encounter.

Challenge: Loyalty programs lose money

“Loyalty programs are too expensive to implement; they will kill our margins; they are nothing more than loss leader initiatives, and that’s not our company’s game.”

Unless the program is poorly run or created, these statements are myths at best.

These claims are untrue for many businesses offering loyalty programs. The fact is that most firms that launch these programs will experience a return on their investment (ROI).

It all boils down to design and implementation, just as with any company project. Your return on investment is determined by how successfully your loyalty programs are designed and implemented and whether they are carried out per what’s ideal for your business and industry. Customers may find loyalty programs with significant discounts more tempting, but you risk seeing your margins suffer. The opposite is true: clients won’t be enticed to join your loyalty program and divulge their information (data) if you don’t offer them many reward points or price discounts.

Brands must constantly ensure that customer expectation is met. Sanjeev Nichani, Head – CRM and Loyalty at Apparel Group, explains how putting your customer at the center is essential to success. “You know the expectation is not met when a customer returns and tells you,” he said.

To manage customer feedback internally, it must be distributed across teams, customer-facing and otherwise. Loyalty teams must lead this charge, Nichani explains. “You are responsible for ensuring that the customer’s concern has been addressed appropriately. It’s not just the domain of an existing established brand; everyone who intends to drive a repeat customer has to do this,” Nichani adds.

The best strategy is to balance advantages or offers that appeal to customers the most and those with the least negative impact on profit margins. This is one of many reasons your company’s operators and financial staff must sit at the loyalty program table and participate in the discussion.

Challenge: Providing one size fits all value missing the customer value

If each consumer in your sector has distinct expectations, you might not want to offer a one-size-fits-all product or service. People don’t like to pay for something they don’t need, and if you provide one kind of service package or an excessively customized product, you risk making clients feel overpriced. In addition, if other companies in your industry have abandoned the one-size-fits-all approach, your lack of customization may put you at a competitive disadvantage. Customers who know they can obtain what they want from someone else will be left on the table.

“You cannot upsell more robust products and services using the “good, better, best” pricing model when you choose a one-size-fits-all approach. By varying your goods and services, you may access new revenue sources,” says Collin Larijani, Head of Solution Consulting, APAC-MEA Region, at Epsilon.

For instance, imagine how much money Levi’s would save if everyone wore the same size and style of jeans. Regardless of the trend, they would only need one template to work from and fewer and simpler machines and processes to manage the production. Yet we know this is a silly notion. Even with the best intentions and even data to back it up, this is what we frequently see in the loyalty space: A one-size-fits-all program that forgets the customer.

What does Levi’s do?

They invest in powerful machines with integrated processes that allow them to create thousands of combinations across size, style, color, and fabric. Then, they give the customers the power to choose what they want.

What can we, as marketers, do?

• Ensure we have a process and governance that allows for flexibility and can adapt to trends.
• Ensure our flexibility doesn’t ignore cost. The platform should grow alongside your brand and enable the marketing team to execute what they need, not wait for an expensive change request process and customized feature to be developed.
• Ensure we have the right set of diverse opinions, thoughts, and ideas coupled with proper data, insights, and segmentation to give the members the choice they want. The loyalty platform should be the enabler in identifying these insights.

Challenge: Loyalty programs are too complicated

“Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple.” – Richard Branson

Loyalty programs aren’t always complicated. They might be if you build them that way or rely on other parties and several data silos and are compelled to devise some complex, flimsy method of bringing them all together. However, some of the most successful loyalty programs have straightforward designs that align with one or more important corporate objectives.

Examples of frequent metrics are revenue, client retention, and engagement. However, it relies on your business’s requirements, and marketing shouldn’t always be in charge of choosing those goals. Loyalty programs address corporate demands that go beyond those of marketing alone.

Planning a loyalty program with other leadership involvement improves alignment to meaningful business results and measurable business outcomes.

Challenge: Not monitoring the holistic business value of your program

“Oh no. Our member’s wallet share has decreased from last year – the program is doomed.” Not quite. Business value is driven more than any single metric or even a collection of metrics. And this is especially true when it comes to measuring a loyalty program. We have found that a single set of metrics often hides the actual value of a program. Value comes in multiple formats and differs for every brand.

“Start by creating a more holistic view by defining and using a diverse set of metrics at a segment level. To do this, you must activate the knowledge that every customer provides value to your business and use your brand’s unique insights to define a segment-level objective strategy,” says Larijani.

For example, do your best customers advocate engines more than revenue drivers? Are your consistent customers increasing their average spend? Are you measuring your new customer segment separately to ensure it grows and funnels into your repeat customers? Once you have clear objectives, what is the value of an incremental increase for each objective? Does a one percent intake in advocate referrals move the needle?

The technology you have should be embracing your ability to do this. Does it allow you to segment and measure at the segment level? Does it allow you to set benchmarks and alerts? Does it give you granular offer- insights while also providing the C-suite dashboards? If not, it may be time to look for technology that does.

Challenge: Loyalty program efficacy is difficult to measure

It may be easy to think of loyalty programs as solely UX initiatives, making it challenging to quantify their direct effects on a company’s bottom line. However, a well-designed loyalty program has several benefits for the company that you can track and compare against.

Check if your marketing department hasn’t already switched from using operational KPIs to monitoring success using more strategic KPIs. This will guarantee that marketing initiatives are in line with overall corporate goals. It is necessary to use KPIs focused on marketing that correlate with sales growth, client lifetime value, and revenue.

You might need to turn to outside organizations for assistance if your business cannot track and evaluate your marketing activities in this manner.

Conclusion

Brands should constantly search for methods to optimize elements like expiry windows and breaking points to encourage members to improve their behavior, even though it’s vital to incorporate challenges along the path. Finding the ideal limitations is essential to get the maximum additional income. Long after the initial program design, the practice of ongoing optimization continues.

Having the appropriate data to gauge a loyalty programme’s success is the key to unleashing its potential. These helpful activities lay the informational groundwork for additional worthwhile projects like data-driven marketing and enhancing the client experience. Your ability to create efficient redemption obstacles depends on having access to information about specific customers’ historical behavior, just like with any customer segmentation approach.

The post Beyond Rewards: Redesigning Loyalty Programs for the Modern Customer appeared first on MartechView.

The Irish Data Protection Commission recently ordered Facebook’s parent company, Meta, to pay two fines totaling €390 million for breaching the EU’s overarching privacy law. The ruling is significant as data-protection history is being written as we speak. How enterprises react toward data privacy from a compliance or trust-building approach will decide the future of the brand and impact relationships with consumers. It’s important to note consumers are watching closely.

January 28th is celebrated as Data Privacy Day (DPD) worldwide to sensitize individuals and disseminate privacy practices and principles. It encourages those who handle, store, and use data to remain committed to the culture of privacy.

Obtaining third-party data is a looming challenge as consumers become increasingly aware of their data privacy rights.

Privacy has never been a larger priority for the brand-consumer relationship. With regulations like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) in place, those handling consumer data must obtain users’ explicit permission to share and use the data generated through digital interactions.

It’s a trend here to stay, and brands that get ahead of the curve will be at a competitive advantage.

Stringent data privacy rules and regulations make it difficult for brands to engage with their users effectively. Loyalty programs are the way forward. These programs help brands effectively engage with their customers, gauge their needs and desires, and collect data to feed design and execute targeted marketing campaigns.

One of the inherent benefits of loyalty programs is the data and insights marketers can glean about their best customers. Data fuels customer identity so loyalty marketers can better understand the behavior of their members, predict future behaviors and, as a result, drive more loyalty to their brand.

Marketers regard first-party data in higher esteem as it is collected directly from the audience and is easy to manage and store.

This data type consists of customer interactions on the website and the app. It also comprises consumer purchase history, contact information, like email, phone numbers and addresses, SMS, point-of-sale (PoS) and CRM data at call centers, subscription information, and social media data. This data is collected directly from customer transactions and placing a pixel code on the brand website, mobile app, product, or social channels. This information gets recorded on CRM or DMP platforms.

Traditionally, a cosmetics manufacturer looking for prospective consumers to purchase their bold makeup product range will try to obtain data from a consumer segment of women between 20 and 35 who prefer bold colors in lip shades or nail colors while purchasing at stores. Most brands buy this third-party data to find critical demographic information about prospective customers, such as their age, income, gender, and interests, that help them create brands’ richer customer profiles and improve their personalization strategies.

First-Party Data

Data that provides significant insights into customer behavior helps brands improve customer engagement. By adopting effective customer data collection, storage, and usage methods, brands can enhance their personalization strategies and send tailor-made messages to customers, pivoting around their needs and wants.

First-party data is essential for maintaining direct customer relations and can boost cross-selling and upselling of products. With this data type, marketers can segment their target customers far better and thus connect with them using relevant messaging, like informing customers about new products and services from their preferred category. Moreover, as this data is collected from the source, it is privacy protected.

Consumers are protective about how brands collect, store, and share information and are skeptical if their data is collected without consent. But a recent YouGov poll showed that US adults would happily share personal information with brands if they received discounts, free products, or rewards in return.

Second Party Data

Unlike first-party, second-party data is non-proprietary and is first-party data collected by entities outside organizations. Brands obtain second-party data from trusted partners with whom they share a mutually beneficial relationship. Second-party data measures performance for specific vertices, such as Consumer Packaged Goods (CPG), and partnering with retailers allows them to measure the performance of campaigns and what consumers purchase in-store.

Zero-Party Data

Forrester, a research and advisory company, coined the term zero-party data to speak about data shared voluntarily by customers with the brands. When brands collect first-party data by tracking customer interactions and behaviors on their website, they build first-party data assets. Customers are not openly disclosing information about their every move, so marketers and customer experience experts are tasked to observe and predict customer behaviors. In the case of zero-party data, there is no room for inference.

Zero-party data consists of loyalty program memberships, data collected from interactive quizzes and game responses, preference data, and purchase intentions shared by customers.

Marketers refer to zero-party data as a gold mine as it is definitive and trustworthy. While dealing with zero-party data, brands must trust what customers share with them. Using this data, brands can directly access customer intentions. This data is not collected by keeping customers in the dark.

Conclusion

When dealing with customer data, the biggest concern is to convert it meaningfully, which will maintain control of the data and help brands establish a worthwhile relationship with their customers. When there are gaps in understanding consumer sentiments, brands cannot succeed in making a real change.

To create and sustain lifelong relationships, marketers must have the right setup to enable relationships to interact with consumers on their terms. Naturally, more data-driven brands will have a competitive advantage for insights and reach vs those relying more heavily on walled gardens. It becomes imperative to adhere to regulatory scrutiny and ensure that your data is safe from any breaches to safeguard the interests of your consumers.

The post Loyalty and Data: Building Trust in Privacy appeared first on MartechView.

Brands that evolve their loyalty strategy to create more personalized, engaging experiences for their consumers are the ones who will thrive in the new, more fragmented marketing landscape.

Data-driven loyalty strategies allow marketers to drive impact at scale and meet the ever-shifting needs of their consumers and the business. This is a time to innovate and develop mutually beneficial brand-consumer connections that will stand the test of time.

Customer data is valuable; however, making sense of data is much different than simply possessing it.

Customers leave a trail of breadcrumbs – data like demographic details, online/offline purchases, website visits, email opens, and more. The pain point remains combining these disparate data sets and connecting them to the representation of particular customers. Anticipating consumer value and taking actions to nudge them through a personalized journey starts with a holistic view of your customer via data points that can paint a picture. Besides first-party data, this may include transactional data on competitive and channel spending and category purchases, according to Shivkumar Ananthakrishnan, Director of Strategic Consulting at Epsilon APAC and MEA.

The volume of data is constantly growing, and while it is accessible in real time, brands still struggle to unify such disparate data and make actionable insights.

Unassembled jigsaw puzzle pieces don’t make sense, but they reveal a complete picture. Data must also be integrated to paint a 360-degree view of the customers, combining qualitative, quantitative and predictive behaviors.

The first step is identifying various data owners and sources across the organization, analyzing whether the data outputs are relevant, and the scope for optimization.

The second step will be crucial, where brands must create a road map to meet their future data objectives, including decisions like technology and personnel.

The third step, and often the toughest, is to create an action plan for putting the connected data to work to make the brand’s loyalty program connect with their customers financially and form a personal connection with them.

Aim for a unified, marketing-optimized view of every consumer. Linking the bits and bytes of customers’ actions will help realize the value of the loyalty programme’s members and their preferences. Poor data utilization eventually impacts member value understanding and personalization, raising the possibility of attrition due to inadequate interaction.

Using tech to drive business

Making consumer experiences frictionless and engaging justifies why firms invest enormous sums of money in creating machine learning models. However, Gartner says that through 2022, 85% of machine learning models will fail to provide the desired outcomes.

Marketers must understand that business requirements should drive their data management systems and procedures instead of letting technology dictate their customer strategy. There should be a focus on ensuring proper channels for the consumers to voice their opinions, listen to them, and make adjustments wherever necessary. Keeping existing customers is considerably more valuable than acquiring new ones. An intelligent Customer Data Platform like Epsilon’s PeopleCloud Customer combines all the data, makes it accessible at scale, and can power real-time recommendations that can be activated across channels.

Loyalty programs must look for methods to put members in charge of their experience while delivering true moments of gratitude and recognition. Customers want real-time, meaningful, and personalized loyalty connections across their life cycles.

Maintain financial efficiency

While running a loyalty program, marketing teams look at two financial objectives: optimizing the cost of the loyalty program and driving more revenue. Unlike popular perception, one does not have to be at the expense of the other. Member engagement improves when first-party data is efficiently used to deploy the right personalization strategies. This sets the tone for reduced Cost Per Point (CPP).

The balance that brands need to find is not between the cost of the loyalty program and the revenue targets. It needs to be between revenue goals and customer delight. Today’s Platform capabilities can set up brands and customers for success, creating a win-win for all.

To conclude

The best loyalty programs may increase annual revenue from consumers who redeem points by 15 to 25% by boosting either their frequency of purchases, the size of their baskets, or both, as per research by McKinsey & Company.

All loyalty programs have members who don’t use their points, leading to their expiration. This “breakage” usually lowers a programme’s liability on its balance sheet, which is good news for program economics but can lead to high customer dissatisfaction. Brands need to design programs that give consumers compelling reasons to redeem their points and gain loyalty benefits. But that only sometimes tells the whole tale. Breakage can also occur for tactical and entirely avoidable reasons, such as difficulty in redeeming points, participants forgetting they are registered in a program, unappealing or irrelevant prizes, and impractical or high reward levels.

Loyalty programs must overcome obstacles and demonstrate their value. Loyalty executives can increase program value and delight their customers and businesses by knowing the levers that advance them and optimizing their value.

The post Personalized Experiences Key to Success in Fragmented Landscape appeared first on MartechView.

The American Express SmartEarn Credit Card gives you some cashback as a welcome gift if you spend a certain amount during the first 90 days. Then, you earn Amazon or other gift vouchers on reaching certain spending milestones. It’s a simple points-based loyalty program.

How do traditional rewards differ from intelligent loyalty programs? Traditional rewards programs are often card-based and provide customers with tangible benefits – a free item with each purchase or a reward for return visits. The psychology is simple – the more you spend, the more points you earn.

While these are relatively easy to implement, their reach is often limited, leaning towards customers showing up in person. Also, these programs rarely have the bandwidth for data analysis, which means personalized rewards and targeted marketing are challenging.

Digital loyalty programs, on the other hand, rely as much on emotional perks as on transactional ones, if not more so. Here, there’s no need to dig around for cards or be present in person at the store. Your information, preferences, etc., are already stored; everything from rewards to communication about sales and new items comes with a personalized tag. It’s as simple as an SMS or an email from your favorite brand with your name.

How brands are changing their system

A McKinsey study reveals a significant shift in shopping trends and consumer behavior, especially during and after the pandemic, that looks to continue. Brands needed a swift and effective strategy to retain customers and shift CX perspectives.

Shifting from a traditional system to a digital one is a tough task. Perhaps one of the best examples is beauty retail giant Sephora. Its loyalty program, Beauty Insider, was launched in 2007 and initially gave consumers free samples with each purchase. Over the years, it extended to higher tiers but remained tied to points and cards. Then came the online Beauty Insider Community in 2017. This was far more than loyalty based on transactional rewards. Consumers asked questions, posted reviews and makeup looks, and swapped tips.

Sephora still has its cards-based system and even its own Sephora credit card now. But all of this is now shored up by the emotional loyalty that comes through the online community.

An eye on the bottom line

When campaigns are designed based on segments that consider revenue-generating behaviors, it’s easier to measure ROI.

While most brands/marketers focus on the return on investment (ROI), ensuring superior customer experience (CX) is the key to customer loyalty and retention. A recent study showed that 71% of companies invest 2% of their revenue in loyalty programs and customer relationship management. Another study by Bain showed that a mere 5% increase in customer retention could increase revenue by as much as 95%.

The technology underpinning customer loyalty programs

The efficiency of digital loyalty programs relies heavily on the underlying technology used to keep things running smoothly and keep customers coming back. Coffee behemoth Starbucks, for instance, uses in-app rewards. If you have the Starbucks app, you can order ahead, pay using the barcode, earn a star for every order, and keep track of your rewards (a free drink or an upgraded size, for example) through one simple app. Again, while Starbucks has a loyalty card, the app simplifies things to a great degree.

Another bit of technology that’s swiftly making waves in customer experience is artificial intelligence (AI). E-commerce sites use AI to analyze customer data, predict future purchases, and even ensure a seamless customer service experience. If the Kindle store recommends books to you based on past purchases, it’s because Amazon keeps track of your reading habits and preferences.

Then, there are mobile wallets. It’s almost impossible to imagine a world without Google Pay, Apple Pay, and others that have made the transfer of funds so easy and cash transactions nearly a thing of the past. These wallets also keep offering rewards such as coupons, discounts, and cashback to lure customers.

The success scales

How does one measure customer satisfaction through loyalty programs? There are two metrics to check – enrollment and active engagement. Enrollment is about the number of customers signing up for the loyalty program. Active engagement becomes more in-depth since you check the customers participating in the program. So, many of us sign up for multiple loyalty programs and either forget about them or barely take advantage of them.

Enrollment focuses on growing your membership, while engagement ensures customers remain excited and active in the program. The more personalized and seamless your customer experience, the more innovative and engaging it is, and the greater your chances of retaining loyal customers and attracting new ones.

Conclusion

Digital loyalty management is now about omnichannel experiences, ensuring the customer journey remains uninterrupted and meaningful at every touchpoint. While traditional, points-based programs haven’t faded out yet, there is a definite shift towards the digital side, or at least giving customers the option of both.

Holistic personalization, i.e., a single, complete view of the customer, is integral to maintaining loyalty programs, no matter their form. Upgrading to an intelligent digital format allows brands to stay relevant and provide increased customer value.

The post How Brands are Building Deeper Connections with Intelligent Rewards appeared first on MartechView.