Skift Take

In today’s age of personalization and emotion-driven commerce, loyalty is less about transactions and more about connections. As the industry gets more competitive, brands need to tap into the power of emotional engagement and shared values to stay ahead.

This sponsored content was created in collaboration with a Skift partner.

As the travel industry navigates the currents of digital transformation, we’re witnessing more than just the advent of innovative technology and business models — we’re observing the transformation of values and principles that have long underpinned consumer behavior and brand relationships. The digital era is simplifying customer experiences, and the role loyalty plays in the relationship between brands and consumers is shifting. Instead of points and transaction-based rewards defining its domain, loyalty is now founded on a more holistic approach that covers a broader array of customer touchpoints.

In a recent roundtable hosted by IAG Loyalty, “The New Loyalty Landscape,” industry leaders from Google, Uber, and IAG Loyalty spoke about the shifting definitions of loyalty and how these new paradigms are prompting brands to rethink their strategies.

Creating True Customer Loyalty

“There are two types of loyalty. There’s attitudinal loyalty — for example when you ask people which brands they book travel with, they’ll give you a list of names. But behavioral loyalty is the holy grail that every brand aims for. This means that a person is making consistent, repeat bookings with the same brand because it’s their behavior,” said Finnbar Cornwall, sector leader, Travel & Auto, at Google.

Cornwall’s insights highlight an essential distinction within loyalty: the difference between what customers say and what they do. The ultimate goal for any brand is not simply to be a name on a list, but to become a preferred brand consumers repeatedly engage with over others.

The Role of Emotion in Loyalty

Until recently, loyalty was a straightforward proposition: make a purchase, earn points, and redeem them for desired rewards. Today’s consumers want more than just transactional interactions — they want companies to get to know them. According to a recent Merkle report, 76 percent of people are willing to share their data with brands in exchange for a more personalized experience.

Consequently, the impact on loyalty programs has been profound. Customers now gravitate toward brands that strike a chord with them emotionally, creating value that can’t be quantified in points or encapsulated in a voucher. It’s about ease, personalization, a sense of belonging, acknowledgment, and above all, a deeper purpose.

“This emotional value is related to the notion of getting something for free or the perception that you’re receiving something for free. Consider, for instance, accumulating points through frequent flights or Uber rides. As your balance builds, you feel as though you’ve amassed this ‘free’ value to treat yourself. This sense of gratification gives a customer a disproportionate emotional boost and excitement,” said Andrew Brem, UK general manager at Uber, during the roundtable.

This transformation is not just evident but amplified in industries that stand at the frontline of consumer interaction, such as retail, airlines, and hotels, due to the intimate consumer touchpoints and intense competition within these sectors. Even for the most established brands, continued growth and relevance are not a function of legacy but their ability to connect emotionally through experiences that resonate with customers on a human level.

“Giving cashback to a customer is transactional, whereas offering something aspirational brings an emotional value. For example, airline points carry the promise of a memorable trip with friends or family — something that psychologically holds more value than simple cashback or product-specific discounts,” said Silvia Espinosa de los Monteros, chief customer officer at IAG Loyalty.

These deeper connections not only drive customer retention but business growth. According to Skift Research, loyalty members offer a significant profit margin for hotels, contributing between 30 to 60 percent of room nights, surpassing non-members in this aspect. This is the same for airlines: Skift Research found that for 7 out of the ten largest airline loyalty programs, 70 percent or more of their ancillary income comes from loyalty revenues.

Balancing Data and Trust

Data stands at the intersection of technology and loyalty. In today’s digital age, brands have access to a wealth of customer information. But the real litmus test lies in using it effectively to deliver personalized experiences that resonate with customers.

“It’s not merely about possessing data, which is obviously very powerful. It’s about knowing how to use it, build the infrastructure around it, and understand its analytic capabilities so you can pull the insights out of that data,” Espinosa de los Monteros said.

While technology and the innovative use of data offer businesses opportunities, it also presents considerable risks from a customer perspective. In a world where data breaches and misuse are major concerns, customers often question how their information is being used. Transparency in how brands use technologies like AI has also become a major concern. Clear communication about these policies is critical for building trust.

“Trust is a key theme for consumers, particularly in travel. It’s about how businesses use data and technology to deliver relevant experiences in a trust-building way. Technology, therefore, is a double-edged sword. While it empowers brands to enhance customer experiences, it also sets a higher bar for the delivery of these experiences,” Cornwall said.

Businesses need to balance data-driven customer experience with strict data ethics as they grapple with new technologies. How well a brand navigates this digital journey reflects its commitment to customers, which builds loyalty, not only now, but into the future.

The New Frontiers of Customer Loyalty

Once primarily the domain of large businesses, local businesses are increasingly stepping into the ring thanks to the availability of sophisticated yet user-friendly technology. This leveling of the playing field has intensified competition, forcing companies of all sizes to up their game. Now, it’s not just about being the best-known brand, but about being the best fit for each customer’s unique needs.

“Over time, we’ve observed that the use of ‘best’ as a modifier in searches has gradually replaced ‘cheap.’ We’ve also seen people moving away from brand-led searches to exploration-type queries such as ‘which hotel’ or ‘which airline,’” Cornwall said.

This changing landscape presents an immense, multi-faceted opportunity for brands. Now, more than ever, the ability to adapt, listen, and deliver on these shifting consumer expectations is one of the differentiating factors that determine a brand’s value. This differentiation can stem from a variety of factors, be it through personalized rewards, seamless customer experiences, or alignment with social or sustainability causes.

Looking ahead, the success of loyalty programs will depend on recognizing their two-way nature. The more businesses put into their customers, the more they get back. It’s a cycle of investment, return, and growth. As the bar continues to be raised, simplicity, value, and a focus on customer needs will be the keys to building a compelling loyalty program that can stand the test of time.

This content was created collaboratively by IAG Loyalty and Skift’s branded content studio, SkiftX.

Have a confidential tip for Skift? Get in touch

Tags: customer experience, iag loyalty, loyalty, rewards programs, SkiftX Showcase: Technology

Up Next

Loading next stories