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#460: 2025 State of Customer Loyalty Report (Part 1) | Leaders in Customer Loyalty: The CEO's Desk · Leaders in Customer Loyalty, Powered by Loyalty360

• 0:05
  Speaker 1: Good afternoon and good morning everyone.
• 0:06
  Speaker 1: Welcome to another episode of the CEO's Desk, Loyalty360's exclusive podcast, where we dive into the trends, challenges and opportunities shaping the future of customer loyalty.
• 0:17
  Speaker 1: I'm here, as always, with Mark Johnson, CEO of Loyalty360, and today we're taking a closer look at the 2025 State of Customer Loyalty Report, specifically, the year-over-year shifts we've seen since our study in 2024.
• 0:30
  Speaker 1: This is one of our most anticipated studies every year because it really reflects the brand members and all the brand marketers' insights from their programs, and it offers some really really valuable insights into how brand priorities are evolving, how internal dynamics are shifting and where loyalty is gaining or, in some cases, losing momentum.
• 0:51
  Speaker 1: So let's jump into the key themes and what they mean for loyalty leaders.
• 0:55
  Speaker 1: Mark, I want to start, I think, with one surprising data point.
• 0:59
  Speaker 1: In 2024, we saw 79% of brands told us they were planning to update, enhance or completely overhaul their loyalty programs.
• 1:07
  Speaker 1: This year, that number dropped a bit to only 64%.
• 1:11
  Speaker 1: What do you think is behind the 15-point decrease in responses on that one?
• 1:16
  Speaker 2: Yeah, I think the biggest challenge there is that there are some kind of headwinds that impact a brand's decisions with regard to kind of how they look at customer loyalty.
• 1:25
  Speaker 2: But one of the big things we are seeing and hearing about is kind of operationalizing customer loyalty.
• 1:30
  Speaker 2: So you know, if 80% of them had an interest in redoing, enhancing or completely revamping, you know that's a pretty big number Right now.
• 1:38
  Speaker 2: You know all those people that may have added incremental functionality, redone their program last year, are really focused on operationalizing the customer loyalty program and we heard that at the conference as well.
• 1:49
  Speaker 2: Should I bring on more partners or should I optimize and make sure the ones I have now are actually the right ones?
• 1:55
  Speaker 2: So I think that that's a big piece of what we're seeing and making sure they have that internal alignment, but making sure the program is working in the manner that it was designed to do.
• 2:08
  Speaker 1: So do you see this as a sign that brands are finally stabilizing their loyalty strategies?
• 2:13
  Speaker 1: Or is it possible that we're just seeing some hesitation on that one due to the economic pressures or scrutiny of the ROI for loyalty programs?
• 2:22
  Speaker 2: Yeah, ethan, I think it's a little bit of both.
• 2:24
  Speaker 2: I think there are some challenges with regard to the economic headwinds uncertainty, tariffs, no tariffs, you know, do you have product, not having product?
• 2:32
  Speaker 2: But getting back to that operationalizing the program, making sure that everyone within the organization understands the program, understands its goals, objectives and how it should be being viewed right, and one of the things that we saw at the 2025 Loyalty Expo, too, is that this idea of leaning into customer loyalty so not offering discounts, not offering special offers to people who aren't part of the program Truly again operationalizing.
• 2:59
  Speaker 2: Making the program as effective and efficient as it can be.
• 3:02
  Speaker 2: Knowing that you may require a 3% discount to shop at American Eagle or you may just want the new product extension that Sephora has for your wife.
• 3:12
  Speaker 2: It's really understanding the data and that takes a significant amount of time, investment, but also continued focus on the organization.
• 3:20
  Speaker 2: But more brands are saving all the offers for their customer loyalty members right, and they're truly leaning in, so moving money away from traditional acquisition, maybe paid search, and then they're focused on.
• 3:34
  Speaker 2: You know, if we have 45 million people on our program, how do we get the most out of them?
• 3:39
  Speaker 2: How can we optimize that program again to get the best performance we can see.
• 3:44
  Speaker 1: So, at the same time that we're seeing some of this increased scrutiny and some internal re-strategizing about how to invest in the programs, we're also seeing that internal support for loyalty is growing.
• 3:54
  Speaker 1: Brands reporting high or exceptional support rose from 49% to 59% year over year.
• 4:03
  Speaker 1: What do you think is driving this increase in executive?
• 4:05
  Speaker 2: buy-in.
• 4:06
  Speaker 2: I think there are a couple things there.
• 4:07
  Speaker 2: Having an executive buy-in has been a big focus for the members of Loyalty360.
• 4:13
  Speaker 2: And most of the people who take this program either come to the conference or this survey.
• 4:19
  Speaker 2: Either come to the conference or are members.
• 4:20
  Speaker 2: So I think there's a little bit of maybe some confirmation bias in there.
• 4:24
  Speaker 2: But also there is kind of growing focus on customer loyalty.
• 4:30
  Speaker 2: The brands that are doing well, they have the metrics, they have kind of a culture that allows them to make some quick decisions fail, fail fast.
• 4:39
  Speaker 2: But there is definitely more and more people we hear, that view their program as a leader.
• 4:46
  Speaker 2: Oftentimes in the past and we've seen that in a couple of surveys too there's kind of a brand envy.
• 4:51
  Speaker 2: Right, a person works at brand X and brand Y is their competitor.
• 4:54
  Speaker 2: They feel they have better resources, better alignment, the program is funded better, it's more differentiated, it's not suffering from that sea of sameness thing.
• 5:03
  Speaker 2: But over the last couple of years we've started to see that switch a little bit, where there is internal pride within the programs that they're running and they feel that they're doing better than you know, than their competitors.
• 5:14
  Speaker 2: So that's really really good to see.
• 5:16
  Speaker 1: That's awesome.
• 5:16
  Speaker 1: Yeah, I mean, do you think that that's a sign that we're finally seeing customer loyalty break out of the marketing silo and becoming more of an enterprise-wide asset for companies?
• 5:27
  Speaker 2: Yeah, absolutely.
• 5:28
  Speaker 2: And for those who are leaders in customer loyalty quote unquote those are the brands that continue to set that bar right.
• 5:35
  Speaker 2: They have a customer-centered, customer loyalty focus.
• 5:38
  Speaker 2: They have one individual, whether it's a CMO or chief customer officer, that truly has all things rolling up that pertain to the customer, to them.
• 5:49
  Speaker 2: So they have great line of sight in it.
• 5:50
  Speaker 2: Again, they have the organizational alignment there's executive buy-in, they're making strategic investments that are driving the engagement with their customers but, most importantly, they're listening to and understanding the customers and trying to respond in kind.
• 6:01
  Speaker 2: So there is kind of a focus of a holistic approach to the customer.
• 6:07
  Speaker 2: And I think the brands that do that, even from pod structures they have within the organization that are diverse, where they have marketing, operation, finance, the focus on customer loyalty, as we've talked about, is pretty significant and continues to grow.
• 6:21
  Speaker 2: And the silos, at least for the brands that are doing well and have highly performing programs, they seem to be viewing it much more as an enterprise-wide asset programs.
• 6:32
  Speaker 1: They seem to be viewing it much more as an enterprise-wide asset.
• 6:34
  Speaker 1: That's awesome.
• 6:38
  Speaker 1: So, speaking of the improvements everyone's making, last year we saw everyone talking about new reward options.
• 6:40
  Speaker 1: That topped the list of enhancement priorities with 88%, but this year that dropped to just 58% of respondents saying it was their top priority.
• 6:48
  Speaker 1: Meanwhile, we saw enhanced personalization rise to the top.
• 6:52
  Speaker 1: Why do you think that new reward innovation is no longer the lead focus for a lot of these programs?
• 6:59
  Speaker 2: Again, I think it gets back to that operationalizing the programs, right.
• 7:02
  Speaker 2: So so many people have looked at new reward options.
• 7:07
  Speaker 2: They want enhanced opportunities for engagement, right.
• 7:12
  Speaker 2: They want a higher perceived value in the product.
• 7:14
  Speaker 2: But there's challenges there and we've heard that at the conferences over the last couple of years is integrating new technologies, reward options can be a problem, especially in maybe a highly regulated industry like finance.
• 7:26
  Speaker 2: So a bank may not be able to integrate a new reward option.
• 7:31
  Speaker 2: So they've been asking the current vendors they're working with to help support that.
• 7:35
  Speaker 2: So if you have more personalized rewards or more unique redemption options that allow an earlier engagement, it requires integration.
• 7:46
  Speaker 2: So, and I think again, you know, if there are some economic headwinds, it's going to drop off a little bit because there's a cost associated with integrating these pieces into the program, not only cost of the program itself but that whole marketing awareness, understanding of the customer.
• 8:03
  Speaker 2: And in times of kind of economic uncertainty we've been hearing just value, value, value, value is what customers are asking for and we've heard this pretty consistently.
• 8:12
  Speaker 2: Too Many customers are coming to the brands that are running these programs saying how can you help me?
• 8:18
  Speaker 2: Right, so a new reward option may not be applicable or apropos.
• 8:23
  Speaker 2: Right now it may be.
• 8:24
  Speaker 2: You know how does a grocer go back to their CPG partners to offer a little more?
• 8:29
  Speaker 2: You know income or value in that program to help them get through that daily or weekly grocery purchase.
• 8:39
  Speaker 1: Yeah, awesome.
• 8:39
  Speaker 1: So as you're thinking about those things, are you seeing that brands are shifting their attention more to like optimizing the delivery rather than just expanding the reward portfolio?
• 8:49
  Speaker 2: Yeah, absolutely, because you know there was a clarion call probably two years back for simplification in the programs.
• 8:54
  Speaker 2: Right, a number of programs, a lot of airlines redid the program, simplified it and made it less valuable to the customer and we all saw the blowback that was associated with that.
• 9:05
  Speaker 2: But yeah, this whole idea of operationalizing, making sure that customers understand the program, making sure they understand the customers understand the program, making sure they understand the value of the program and how that customer can help them, as we mentioned, in times of this economic scarcity or uncertainty, loyalty program can be kind of a great tool to address that.
• 9:21
  Speaker 2: But if the customers don't understand the value of the program, they don't understand.
• 9:25
  Speaker 2: If you've changed it 14 times over the last three years, making sure they understand that value in the communication, consistent communication and making sure that there's alignment again with the products and services, I think that that's a big push because again you don't want to bring on something new, a new partnership, a new strategic offering, if it's not resonating with your current customers.
• 9:46
  Speaker 2: So this whole optimization is kind of the lead point for many brands now.
• 9:53
  Speaker 1: Yeah, definitely I know.
• 9:54
  Speaker 1: I've heard that from a few people during interviews and I've heard people talking about ways that they're trying to simplify the explanation and also just create content, to create explainers for how to use reward programs so that people know what they can do with them, because so many people were still struggling with that.
• 10:11
  Speaker 1: That we continue to hear about is gamification.
• 10:13
  Speaker 1: Those numbers remain relatively stable from year to year in our report, and digital experience actually slightly declined as an enhancement desired enhancement from 61% to 58%.
• 10:28
  Speaker 1: Are these initiatives leveling off because they've just reached saturation or are brands running into too many executional hurdles?
• 10:36
  Speaker 1: What do you think is going on with that offer?
• 10:39
  Speaker 1: Yeah, I think there's a couple of things and I think it's pretty similar year over year.
• 10:42
  Speaker 2: So gamification, zero party data, using quiz, commerce, leaderboard, whatever it may be to kind of initiate and ingratiate yourself with a customer is still very important.
• 10:53
  Speaker 2: But at the end of the day, it's how do those systems work with your current systems right?
• 10:59
  Speaker 2: Great platforms out there Take, for example, cataboom.
• 11:03
  Speaker 2: They do great work with the customers.
• 11:05
  Speaker 2: They can integrate with websites or they can offer kind of more standalone swipe to win spin.
• 11:10
  Speaker 2: You know the spinning wheel you see on the discounts asking you.
• 11:14
  Speaker 2: You know what your interests are, what your family's interests may be, but really many brands still struggle with regard to how your marketing orchestration engine can really get that into market to the right customers.
• 11:26
  Speaker 2: So I think it's pretty consistent year over year.
• 11:28
  Speaker 2: Gamefication we continue to see those who are running programs seem to be getting a good short and longer term list.
• 11:35
  Speaker 2: A good short and longer term list because it does add a fairly rich data set, that zero party data that can truly impact the efficacy of the program.
• 11:47
  Speaker 1: Awesome.
• 11:47
  Speaker 1: Well, one other shift that's worth noting.
• 11:49
  Speaker 1: We saw brand to brand partnerships fell a bit from 57% to 51% as a prioritized enhancement.
• 11:58
  Speaker 1: Do you think that's because partnership strategies are just becoming more selective, or do you think that brands are turning inward and focusing more on internal experience development in-house?
• 12:09
  Speaker 2: It's a little bit of both.
• 12:10
  Speaker 2: Development, in-house it's a little bit both.
• 12:14
  Speaker 2: But with partnerships we've had this trend over the last three or four years where brands are moving away from kind of mass or affiliate-based partnerships.
• 12:19
  Speaker 2: Where the car rental companies have the same airline offer right, they're looking to differentiate it.
• 12:24
  Speaker 2: But that becomes complex.
• 12:25
  Speaker 2: Right, it becomes complex in a number of ways.
• 12:27
  Speaker 2: Do you have the technology that enables you to do that?
• 12:31
  Speaker 2: Do you have alignment with that brand?
• 12:33
  Speaker 2: And that can be a significant challenge even getting kind of marketing buy-in from both to co-promote the program.
• 12:39
  Speaker 2: So they're significantly more challenging than they were before.
• 12:42
  Speaker 2: I mean, we had a conference session two years ago with Bank of America, accor and Campgrounds of America and just even the marketing partnerships that used to be one or two pages now are six, seven, eight pages, significant legal sign-off, knowing your customer financial due diligence.
• 12:59
  Speaker 2: That's needed.
• 13:00
  Speaker 2: It's significantly greater.
• 13:01
  Speaker 2: And brands are still talking about partnerships.
• 13:04
  Speaker 2: But again, going back to that reward integration, they're looking for ways that they can leverage current technologies to make partnerships work.
• 13:12
  Speaker 2: Right, because the more customized the offering is, it's more challenging from an ROI initially to kind of map out what the return will be.
• 13:21
  Speaker 2: But also there is a challenge with regard to getting it into not only the technology queue but into the marketing queue as well, and I think that that provides a little bit of reticence from brands to do that right, so they have to get it doubly approved, and that can provide challenge Awesome.
• 13:43
  Speaker 1: Well, I think that that's all the time we've got for today, mark, but I wanted to make sure that everyone comes back.
• 13:49
  Speaker 1: Next week we're going to continue diving into the state of customer loyalty report.
• 13:53
  Speaker 1: We're going to look at more statistics from our brand marketers, talk about things like team structures and strategic priorities and effectiveness and how you measure those things within a customer loyalty program.
• 14:05
  Speaker 1: So be sure you join us next Monday for the second half of this awesome episode of the CEO's Desk.
• 14:13
  Speaker 1: Thanks, mark.
• 14:15
  Speaker 2: Thanks everyone.