Inside & Outside

Loyalty Programs

A field guide to looking at loyalty programs from Gartner L2 research

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When evaluating loyalty programs, Gartner L2 asks two questions:

1) What different types of relationships can brands have with customers?

Outside
Customer Loyalty

Transactional

Emotional

Fundamental

Inside
Loyalty Programs

Experiential

Transactional

Blend

2) How can brands build loyalty programs to cultivate these different loyalty relationships?

Transactional

Emotional

Fundamental

Experiential

Transactional

Blend

Outside:
Customer Loyalty

Drivers of fundamental loyalty include quality, reliability and price. To foster brand advocacy, brands should focus on these core characteristics.

Top Brand Traits That Create Customer Loyalty
n = 1,501 US Respondents, Source: CEB Iconoculture Loyalty Survey

Emotional loyalty is tied to psychological levers such as the feelings that products engender upon purchase. Brands tap into emotional loyalty — which Gartner L2 recognizes as more robust and long-lasting than either fundamental or transactional loyalty — by delivering more than just transactional value via tactics like experiences.

Being Loyal to a Brand Means...
n = 1,501 US Respondents, Source: CEB Iconoculture Loyalty Survey

Transactional loyalty is based on price and is relative to value.

Being Loyal to a Brand Means...
n = 1,501 US Respondents, Source: CEB Iconoculture Loyalty Survey

Inside:
Loyalty Program Models

To meet the needs of customer loyalty, Gartner L2 found that brands employ three types of loyalty programs, each with their own strengths: experiential, transactional and blended.

One way that brands grow members' emotional affinity is through experiential rewards. To augment the loyalty experience, brands also make loyalty programs the focal point of the in-store experience.

Adoption of Incentives and Year-Over-Year Change:
Experiential Benefits
n = 82 Brands, Source: Gartner L2 Intelligence Report Loyalty 2019

To sustain member engagement, transactional loyalty programs are reliant on a points-for-purchases model. This type of loyalty structure is beneficial for brands with members who value cash rewards and have higher purchase frequencies.

Adoption of Incentives and Year-Over-Year Change:
Monetary Benefits
n = 82 Brands, Source: Gartner L2 Intelligence Report Loyalty 2019

Blended loyalty programs possess both unique offerings that enhance the member experience and digital features that streamline interactions. Brands that adopt this model tend to have a balanced rewards mix and cater to a wider audience.

Outside
Customer Loyalty

Transactional

Emotional

Fundamental

Inside
Loyalty Programs

Experiential

Transactional

Blend

Case Studies

dunkin brand logo

Restaurant brand programs, including LevelUp and others run by third parties, incorporate features that seamlessly track purchases and automatically redeem rewards for members. Dunkin' recently piloted a multitender loyalty program, allowing members to earn points regardless of their payment method, streamlining purchases through the app's mobile ordering service.

dunkin brand logo

Brands that give members opportunities to connect with certain philanthropic missions and motivational brand purposes can activate emotional loyalty. TOMS, a brand that heavily focuses on experiences in its loyalty program, allows loyalty members to donate collected rewards to support a cause of their choice.

dunkin brand logo

In addition to having a diverse range of rewards, including access to exclusive products and race entries, New Balance fully integrates loyalty features within its app, including a rewards tracker and a preferences setting. The activewear brand then leverages these app functionalities to aggregate valuable member-specific data that helps personalize rewards and messaging.

Preferences Setting
Personalized Product & Rewards Email Content
dunkin brand logo

Sephora drives continued engagement across its stores and digital properties with its Beauty Insider program, which has an award-winning app. The specialty retailer also takes advantage of tracking at every stage of the consumer journey, tracking customers on the account itself and as they shop to inform algorithmic recommendations, retargeting and enhanced segmentation through member tiers. This is all balanced by the inclusion of valuable reward points that can be exchanged for valued products and exclusive experiences.

Account and Social
Activity Tracking
Enhanced Segments
Valuable Rewards

The third annual Gartner L2 Intelligence Report: Loyalty 2019 covers 187 brands across six sectors and evaluates their promotional tactics, loyalty program models, multichannel deployment and mobile integration.

Credits: Lili Meng (research); Minh-Anh Nguyen (design); Wright Rickman (development)