Transactional Loyalty: Why These Points-For-Purchase Programs Fall Short

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Brands looking to cultivate real emotional connections with their customers to drive customer lifetime value, retention, and revenue need more than a transaction-based loyalty program. With a looming recession and possible budget cuts on the horizon, investing in loyalty has never been more important for marketers.

Loyalty can determine the success of a brand – 72% of U.S. consumers will pay more to purchase from their favored brand. But building a strong, authentic connection with customers means moving away from transactional loyalty. 

What exactly is a “transactional loyalty program” and what is the alternative?

We’ll be examining the foundations of loyalty programs to determine how transactional loyalty falls short and where brands can leverage advanced, non-transactional loyalty that extends beyond points and tiers to actively engage your audience with personalized, dynamic experiences.


Transactional Loyalty

Gaining a new loyalty member is a big deal. You convert a previously unknown customer into a known customer, thus creating a direct avenue to build a relationship with them.

However, most loyalty programs gather basic identity data– name, email, birthday, location– and call it a day. Not only is this experience monotonous for the customer, the brand is also missing out on valuable preference data that can enrich a customer’s continued experience.

Without a new user journey that triggers after sign-up, loyalty members do not have any incentive to engage with the brand until they decide to initiate a future transaction. This lack-luster on-boarding has missed key moments to engage and learn about the new loyalty member.

Advanced Loyalty

When a brand has a customer’s attention, they need to take advantage of it. Brands should prioritize creating a robust profile of the new user. By incorporating preference surveys, product recommendation quizzes, and more interactive elements upon sign up, brands can collect valuable first and zero-party data. This creates a fun sign up process for the customer and will inform a brand’s personalization strategy later.

Brands should also automatically reward new loyalty members after sign-up. This serves multiple purposes: it is a “thank you” to gratify the customer, a signifier of the value this program will bring, and incentivizes re-engagement. This offer can and should be personalized based on information gathered during sign-up, making the customer feel seen and appreciated.

Points, Status, & Tiers

Transactional Loyalty

Transactional loyalty is based on a simple “points for purchase” model. One dollar in spend equates to a designated number of points. You accrue these points with each purchase to eventually unlock rewards.

This model can exist with a singular tier that has one, unchanging ruleset. Alternatively, there can be a few hierarchical tiers, each with more lucrative rulesets that customers can graduate into after hitting a specified spend quota.

Each customer is treated the same: Sign up, spend money, accrue points, receive reward, graduate to higher tier, earn more per spend, and so the cycle goes.

This model does not incentivize participation and can simply be used as an accompaniment to normal spending habits. There are also no alternative opportunities to engage with the brand beyond spend, which means brands are limiting customer engagement.

Furthermore, each customer is given an identical experience and not treated as an individual. Considering that 86% of consumers favor a brand that treats them like an individual, brands are missing out on ripe opportunities to connect with their audience in meaningful ways.

Advanced Loyalty

Your points engine and tier structure should not be one-size-fits-all. By leveraging a flexible rules engine, brands can create sophisticated rulesets that consider a customer’s entire activity history to drive powerful rewards. A dynamic tier structure allows brands to recognize and offer special treatment to their best customers and provide customers with unique earning opportunities based on their loyalty status. 

These personalized experiences incentivize participation because the opportunity type, channel of deployment, and reward for engaging are all informed by each customer’s unique persona.

Beyond this, you can also allow your customers to earn points by engaging with content, sharing on socials, giving feedback and more. You can incentivize brand advocacy, ensure customers are updated on new launches, features or brand initiatives, and open up a dialogue. This makes your customers feel heard and listened to, and it demonstrates that you value your customers beyond the transaction.

Offers and Rewards

Transactional Loyalty

Rewards in transactional loyalty programs are standardized, not accounting for an individual’s preferences– whether that be for the type of product or type of offer being pushed as a reward.

Aside from individual preferences, personalization can be informed from broader information that still takes into account who the offer or reward is going to. For instance, even generations have stark differences in what they consider valuable– Of the 61% of U.S. consumers who find discounts highly valuable in loyalty programs, Boomers account for 89% more of those consumers than Millennials. Comparatively, 74% more of millennials value personalized, recommended products based on their preferences compared to Boomers. Standardizing rewards means gambling with whether or not customers will even want to engage with your program.

Transactional loyalty programs also seldom have offers beyond the standard rewards. This means users have no incentive to open the app unless they are in-store or shopping online, making a purchase they would have already executed without incentive from a loyalty program.

If there is an offer, it is non-dynamic. The same coupon or free item is offered across the entire program. Redemption is based on chance, as individual behaviors and actions didn’t inform the content of the offer.

This makes customers feel “marketed to” instead of seen by a brand that understands their individual wants, needs and desires. It is no different than a mass advertisement or coupon in the newspaper. 

78% of consumers favor a brand that surprises them with rewards they don’t expect– but the conventions of “transactional loyalty” are to simply reward the transaction, not to provide real value to customers in order to foster authentic connections and build loyalty. This means customers might be participating, but are not necessarily developing an affinity for the brand.

Advanced Loyalty

Having a home on your customer’s smartphone or in their inbox is a privilege brands should actively justify with each interaction. The robust profiling and data collection loyalty programs facilitate should be fuelling personalization at scale, so each loyalty member is getting value from every interaction with your brand.

Brands can leverage user data to target highly personalized offers across channels. This drives repeat purchases, increases CLV, and lets your audience know you get them. Over half of U.S. consumers felt frustration when they received irrelevant content or offers, so it’s important for brands to avoid mass sending. 

Integrations with POS and eCommerce platforms, in conjunction with a real time, omnichannel strategy means that brands can meet each customer where they’re at, at the right moment, with a relevant offer that the customer is more than likely to engage with. 

In action, this looks like:

  • Multi-step punch card offers that are integrated with POS and eCommerce platforms.
  • Managing stored value and gift card balances in mobile wallets that can be reloaded.
  • Receiving personalized offers triggered by geo-location when close to a store.
  • Deploying interactive challenges informed by preferences or transaction history.
  • And so much more.

These fun, personalized, engaging elements ensure customers receive value, have an incentive to participate, and can engage with the brand beyond the transaction to foster real loyalty.

Why Advanced Loyalty Wins

Transactional loyalty provides zero intrinsic value and only nominal extrinsic value for customers. The give-to-get “points for purchase” convention fails to actively engage users, oftentimes becoming a mere accompaniment to normal, pre-loyalty membership spending behaviors. 

Advanced loyalty engages customers beyond the transaction, provides personalized experiences, and incentivizes participation. These are the building blocks to fostering real connections with your audience to create brand advocates and cultivate authentic emotional loyalty, which is invaluable for brands. If you want to learn more about how advanced loyalty can drive acquisition, CLV, and revenue for your brand, download our guide!

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