Evolution of Loyalty Programs Struggles to Meet Growing Customer Demands
In a pivotal moment for the retail industry, shoppers are calling for relevance and recognition, according to a recent study by dunnhumby, a global provider of AI and customer data science. The study, titled "How to Keep Hold of Your Customers," was released by the company and sheds light on the evolving expectations of shoppers and the strategies retailers can employ to meet these needs.
The study, which interviewed senior retail leaders throughout North America and Europe, including Ashwin Prasad, CEO of Tesco UK, reveals an industry at a turning point. Prasad, in his interview, emphasised that loyalty is about serving customers better and is not abstract—it's about being useful, relevant, and fair.
One of the key strategies highlighted in the report is the need for retailers to redefine and enhance their loyalty programs. By leveraging seamless enrollment, personalized and tiered rewards, AI-driven personalization, and omnichannel integration, retailers can effectively meet changing customer expectations and improve business performance.
To make enrollment seamless and visible, retailers should allow customers to join easily at checkout, auto-enroll where possible, and promote the loyalty program across all site areas and marketing channels to boost awareness and participation.
Modern loyalty programs should harness AI and machine learning to analyze customer behavior, enabling tailored rewards and offers that resonate with individual preferences. This deep personalization fosters emotional connections and higher retention.
Tiered and flexible reward structures can incentivize increased lifetime spending and create exclusivity with perks like VIP service or early access. Points systems remain popular but should emphasise redeeming points for meaningful products or experiences rather than just discounts.
Integrating loyalty with all marketing channels drives continuous engagement and makes earning and redeeming rewards effortless. Incorporating loyalty messaging into email, SMS, ads, and across the customer journey can help achieve this.
Continuously measuring key performance metrics and optimising is also crucial. Tracking retention rate, customer lifetime value (CLV), redemption rates, referral activity, and participation rate can help evaluate program effectiveness. Using A/B testing and data insights to refine rewards and program design for maximum ROI is essential.
Effective loyalty programs spur business performance, with successful retailers having a deeper emotional connection with customers, experiencing stronger commercial performance, and achieving a higher CAGR than their competitors.
Retailers are seeking inspiration beyond grocery, with beauty and lifestyle brands commonly identified as innovation inspirations. Dunnhumby, for instance, employs more than 2,500 experts in offices across Europe, Asia, Africa, and the Americas, working for brands such as Meijer, Raley's, and L'Oréal.
In a significant move, dunnhumby and Bridg have revealed a strategic partnership aimed at enhancing retailers' and brands' customer reach, engagement, and retail media activation. The partnership will leverage predictive AI to help retailers better understand their customers and deliver personalised, relevant experiences.
Dunnhumby has also enhanced its retail media platform in partnership with AdTech partner Osmos, allowing retailers to leverage predictive AI and rapidly deploy RMNs. This partnership will further enable retailers to deliver personalised, relevant ads to their customers, fostering deeper connections and driving business growth.
In conclusion, retailers successful in 2025 and beyond create easy-to-access, AI-powered, personalized loyalty programs with tiered, meaningful rewards integrated across touchpoints and continuously optimised through data. This approach directly boosts customer retention, spending, and emotional engagement, thereby improving overall business performance.
Technology plays a crucial role in the transformation of modern loyalty programs, as AI and machine learning enable personalized rewards and offers that resonate with individual preferences (Key strategy).
The strategic partnership between dunnhumby and Bridg, aiming to enhance customer reach, engagement, and retail media activation, is a testament to the growing influence of technology in the retail industry (Significant move).
