Loyalty or engagement: Which program best connects customers to your brand?

Customer loyalty and customer engagement are often treated as separate strategies, but the strongest customer retention programs rely on both. Loyalty programs drive behavior through rewards, while engagement programs build the emotional connections that keep customers coming back.

Understanding the role of each is critical to creating a program that drives both immediate results and long-term customer value. In this article, we'll examine the differences between loyalty and engagement programs and explain why the most effective strategies combine both approaches. 

Customer loyalty vs. customer engagement: What’s the difference?

Customer loyalty and engagement programs are marketing strategies that encourage customers to purchase or participate in brand offerings. The key difference between the two is in the approach.

• Loyalty programs focus on driving volume and frequency of purchases, often through rewards. These transactional tactics might look like offering frequent flyer miles, exclusive airport lounge access, special discounts and coupons, or early access to products.
• Engagement programs focus on nurturing relationships to create a deeper emotional connection with customers, building advocacy for your brand. Think: A post-flight personalized thank-you note, an unexpected gift, virtual communities and special event opportunities.

To maximize the impact of loyalty and engagement efforts, brands could focus on the following strategies.

Characteristics of high-performing customer loyalty programs 

• Focus on driving frequency of purchase and incremental spend
• Clearly define the benefits and rewards offered to customers
• Personalize the rewards and offers based on customer behavior and preferences
• Make it easy for customers to redeem awards and track their progress
• Offer exclusive benefits and experiences to loyalty program members
• Continuously communicate and promote the program to customers
• Collect and use customer data to improve the program over time

Customer engagement strategies that strengthen brand relationships

• Focus on driving the key behaviors from customers that lead to incremental customer value
• Set clear goals and objectives
• Understand your audience and their needs
• Provide valuable content, awards or experiences
• Use multiple channels to reach your audience
• Encourage two-way communication and feedback

Related: 3 insights shaping the future of customer loyalty programs

Why customer engagement improves loyalty program performance

Historically, brands have siloed these two approaches, missing opportunities to build lasting loyalty. But our research shows that customers now expect experiences that go beyond points and feel more tailored to their interests.

We believe this distinction matters less to customers than it does to marketers. Customers judge every interaction as part of a single brand relationship, without separating rewards, recognition, content and experiences into different categories. Programs that reflect this reality are often better positioned to drive both engagement and retention.

Blending loyalty and engagement strategies creates a more dynamic and customer-centric program. By integrating aspects from both, brands can:  

• Reward reliable customers while encouraging deeper interaction
• Build emotional connections with customers to keep them coming back
• Offer more personalized rewards and experiences that excite and motivate

Related: How improving functional benefits can increase perceived value and drive customer retention

How to build a successful loyalty program with engagement strategies

When brands combine loyalty and engagement strategies, they create a more holistic and data-driven customer retention approach. One recommendation we consistently make is to start with the customer behaviors that create value for both the customer and the brand. Rewards, communications and experiences should be designed to reinforce those behaviors rather than simply increase program activity.

ITA Group’s goal is to help you connect with customers. This requires:

• Brand differentiation and customer engagement strategies
• A technology solution that facilitates the program
• Assistance to manage the day-to-day business of a program
• The ability to collect and act on data to deliver rewards your customers value
• Beyond-digital-only tactics to deliver unique experiences for your customers
• Continuous improvement and adjustment to your approach
• Measurement and analysis of the success of your program

The time it takes to recognize results from a loyalty or engagement program can vary depending on several factors, such as the program's design and the target audience. Designing programs that deliver begins with identifying program KPIs and goals.

Steps to increase customer retention through loyalty and engagement

1. Define your organization’s goals and the target audience for your loyalty and/or engagement programs
2. Research and analyze competitors' programs, and determine the resources and budget needed for implementation and ongoing management
3. Factor in the technology or platform you’ll use to track and measure program success, and the types of awards or incentives that will be offered
4. Gather insights from customers through surveys and focus groups to determine what rewards are relevant to them
5. Use data analysis around redemption patterns and purchasing behavior to understand the loyalty program aspects most important to customers (to then deliver a more personalized customer experience)
6. Listen to their challenges and make improvements accordingly
7. Seek out and share testimonials and stories of exceptional customer service to inspire even more brand-building behavior

The good news? Well-designed loyalty and engagement solutions can change that. By blending elements of both, brands can better understand what matters most to their customers and deliver on those expectations.

In our experience, the biggest challenge is preventing that program from becoming purely transactional. When rewards become the only reason customers participate, brands miss opportunities to build the emotional connections that sustain loyalty over time.

Every loyalty program has opportunities to create more value for customers and the business. Complete ITA Group’s Customer loyalty program benchmarking tool to uncover strengths, identify improvement areas and prioritize the changes that can drive stronger results.