The Evolution of

loyalty

A Guide on Building Community-Powered Brands

Looking Back
at Loyalty

The roots of loyalty programs trace back to the S&H Green Stamps in the late 1800s and evolved with airline miles programs in the 1980s. While loyalty programs have proven successful (more on that below), like anything else in life, what's worked in the past requires innovation to keep up with the changing times. Loyalty is no exception.

Why is innovation so warranted in the brand loyalty landscape?

Over the years, traditional loyalty programs have been little more than a euphemistic term for retention marketing. They have focused primarily on driving repeat purchases from pre-existing customers with a single goal in mind: keep people buying.

Let’s be honest — these programs are not about loyalty. They function more like captivity programs, where customers “earn” benefits that are never truly theirs. Should a customer decide to leave, they have to abandon everything they “earned” behind. Moreover, traditional loyalty programs often have a limited perspective on the value customers can bring to a brand, as they primarily focus on purchases and foster a purely transactional relationship that lacks genuine loyalty.

In a world of increasing choices for consumers — and rapidly dwindling attention — the need for true loyalty is greater than ever. As the world rapidly evolves, yesterday's successful yet antiquated loyalty programs risk becoming irrelevant. Without careful attention to transformative technologies, mindsets, and strategies that drive societal change, traditional loyalty programs' longevity and impact will fade.

In this guide, we'll explore how to break free from the outdated loyalty program playbook – a one-directional, customer-focused mindset that no longer drives long-term engagement, especially for the younger generation (i.e., Gen Z) who seek more from the brands they support.

We'll embark on a journey through different types of loyalty programs and rewards, understanding how they generate value for consumers and businesses, and how to implement them effectively. Additionally, we'll introduce innovative frameworks propelling the evolution of loyalty programs, such as web3, and unveil how to unlock the power of community to build remarkable brands through ownership, interoperability, and beyond.

Why is innovation so warranted in the brand loyalty landscape?

Loyalty’s (Waning) Impact

Traditional loyalty programs have been good business. Research shows that 77% of people stick with brands that offer loyalty programs, and nearly half of customers say they're more likely to become loyal to a company if it has a loyalty program [KPMG, 2020]. Another study from Accenture found that people who are part of loyalty programs spend 12-18% more than those who aren't [Accenture, 2016].

So if loyalty programs are so successful, why do they need an upgrade? A growing body of work also highlights a shift in loyalty program engagement among younger generations, the most extreme of which shows GenZ is half as likely to be enrolled in a loyalty program compared to GenX [Marketing Charts, 2019].

It’s well known that younger consumers demand more from the brands they support. They're after captivating brand experiences, increased ownership, and heightened transparency. They aspire to be empowered as integral community members, not just numbers in a database.

The future of loyalty, powered by these community-centric sentiments, goes beyond mere transactional exchanges. It's about mutual commitments between brands and customers. Today’s best brands aren't just about the products they sell; they are about creating a culture - the vibes, the tribes — and building a community of customers who share a certain personality and aesthetic as recognizable as the products they're buying.

When customers feel that sense of belonging, that connection to your brand, they're not just more likely to keep buying from you — they're more likely to spread the word about your brand and bring others into the fold. That's the power of real loyalty.

Redefining loyalty is critical in a world saturated with endless choices and distractions. Brand leaders failing to consider the implementation of community-driven loyalty programs risk falling behind—an unforgiving mistake.

77%

of people stick with brands that offer loyalty programs

1/2 of customers

say they're more likely to become loyal to a company if it has a loyalty program

12-18%

how much more people who are part of loyalty programs spend vs. those who aren't

1:2

GenZ is half as likely to be enrolled in a loyalty program compared to GenX

The community-powered loyalty train of the future is leaving the station at warp speed. We’re going to help you make sure you don’t miss your chance to get on board.

Loyalty
Program
101

The basics

To get to where we are going, we must start with where we came from. As a foundation, let’s understand the basic structure of traditional loyalty programs: Campaigns & Rewards.

Campaigns

The actions individuals take to participate in the loyalty program (i.e., the way loyalty points or status are “earned”)

Purchases

Reward customers with points for every purchase they make. The more they buy, the more points they can accrue.

User-generated content (UGC)

Encourage customers to create and share content about your brand on their social media platforms. They can earn points for each share or for generating a certain amount of engagement.

Referrals

Give your customers points when they refer a friend who makes a purchase. This not only rewards your loyal customers but also helps you acquire new ones.

Attendance

If you host events, webinars, or workshops, reward customers who attend. This encourages participation and increases engagement.

Product reviews

Incentivize customers to write reviews of the products they've purchased. This can help to increase trust and credibility among potential customers.

Social media engagement

Reward customers for liking, commenting on, or sharing your social media posts. This can help to boost your social media presence and reach.

Email sign-ups

Give points to customers who sign up for your newsletter. This can help grow your email list and increase the reach of your marketing campaigns.

Community participatioN

If you have an online community or forum, reward members for active participation, such as posting helpful answers or starting interesting discussions.

Brand advocacy

Reward customers who defend and promote your brand on social media or other public platforms. This can enhance your brand's reputation and visibility.

Rewards

Benefits provided to those in the loyalty program (i.e., the way loyalty points or status are “redeemed”)

Discounts

Offer a percentage off or a dollar discount on future purchases.

Exclusive access

Provide loyal customers with early access to new or limited products, reinforcing their special status.

Upgrades

Offer customers product or service upgrades.

Preferential service

Provider faster or personalized customer service to loyal patrons, such as dedicated support lines.

GIFTS

Surprise customers with a free gift after accumulating a certain number of points.

Free shipping

Reward high-status customers with complimentary shipping - a compelling incentive for online shoppers.

Cash back

Allow customers to convert loyalty points into cash back on purchases - a direct, appealing financial reward.

Exclusive event invitations

Invite loyal customers to special events like product launches or VIP shopping experiences.

Charitable donations

Enable customers to use their points to support charitable causes, aligning your brand with their values.

Many loyalty programs use Membership Tiers to group higher-value rewards exclusive to those who have reached certain loyalty levels. This encourages ongoing engagement even when individuals redeem points for various benefits.

Loyalty
Rewards

How they drive consumer value

Community-driven loyalty programs revolve around mutual commitment and the exchange of value. In a world with endless options, you are asking for someone's continued patronage and, even more, their advocacy. What are you providing that warrants that loyalty? That is where rewards come in.

Rewards can be broadly
categorized into three types:

Transactional rewards

This is the classic points-based system. When customers engage or make purchases, they earn points that can be redeemed for various benefits or products.

Aspirational
rewards

These are premium rewards designed for your most faithful customers. The more consistent their loyalty, the more impressive the rewards become.

Surprising &
delightful

These are spontaneous, unanticipated rewards that offer a pleasant surprise to your customers, making them feel truly appreciated.

The success
of your campaigns is directly
proportional to the
quality of your rewards.

Exceptional rewards inspire customers to engage with your campaigns.

Beyond
the
Basics

Today's evolving consumer landscape calls for an evolution in loyalty programs. Traditional transaction-based models are gradually making way for a more interactive, co-creative, and decentralized approach. This new wave of loyalty programs is about extending the dialogue, deepening the connection, and making your consumers feel valued as active participants in your brand's journey..

Co-creation is the newest buzzword but it represents something impactful.

Increasingly, individuals are looking for ways to be actively involved and to be recognized for their contributions. When it comes to brand loyalty, this implies a shift from a passive receipt of rewards to active involvement in shaping the brand's future. But what does this look like in practice?

Surveys &
feedback

Brands invite members to provide feedback on products, services, or marketing campaigns. This insight-driven approach not only improves the brand's offerings but also makes the customers feel heard and respected.

Ideation &
beta-testing

Got a new product idea? Why not let your most loyal customers be the judge? Offering members the chance to submit product ideas, participate in beta testing, or vote on potential new releases can create a powerful sense of ownership and involvement.

Artwork & creative contributions

Brands can also invite members to contribute to the brand's aesthetic — user-generated content, design contests, or collaborative projects can bring a fresh perspective and create a vibrant, community-centric brand image.

Community
over Captivity

Web3 & the Future of Community-Powered Loyalty

Transactional loyalty programs, with fleeting glimpses of aspirational rewards and co-creation opportunities, may capture consumer engagement momentarily, but they fall short of fostering enduring brand loyalty. Forward-thinking brand leaders recognize that cultivating genuine loyalty and building a thriving community is not just a means of differentiation, but the only solution to combat rising customer acquisition costs (CAC). With community-powered programs, brands can mitigate the loss of control over consumer relationships that comes with relying solely on advertising intermediaries to reach new customers.

Web3 is the solution

Blockchain technology provides the foundation for the trust, transparency and ownership needed to unlock true loyalty. Additionally, web3 provides the added benefit of seamless cross-brand collaborations that allow for values and vision-aligned brands to partner to create value for their community and cost-effectively acquire new customers (without needing to go through an advertising intermediary).

The opportunity for loyalty innovation doesn't stop at co-creation — it goes far beyond that. The future of loyalty programs lies in tokenization, powered by blockchain technology. In a tokenized, web3-powered loyalty program, loyalty is brought on-chain, unlocking a host of benefits for brands and program members alike (more on that directly below).

Instead of traditional points, status or memberships, members earn tokens that are tracked and transferred via blockchain technology. These tokens represent various forms of value — from discounts and status upgrades to exclusive access and unique collectibles.

Web3 enables brands to unlock true loyalty amidst their consumers, who are empowered to be genuine owners of brand assets and stakeholders in a brand’s story.

Whereas traditional brand collaborations have been yet another way to sell more products to customers and boost retention, in web3, loyalty is more than just a word — it actually means something, and we have the benefits to prove it.

Web3 x
Loyalty

A new era of engagement & trust

The benefits of web3 loyalty programs are numerous. Let’s find out how they work.

Trust & transparency

Trust and transparency are key to fueling community-powered brands. With all transactions recorded on an immutable ledger, blockchain-based loyalty programs offer enhanced transparency and security for members — from the origin and status of token rewards to community metrics.

Gamification & interoperability

Web3 introduces gamification into loyalty programs, where brands can enable members to trade, sell, or hold (i.e., HODL) their tokens, adding an interactive layer for members. Due to interoperability, rewards can extend beyond the confines of a brand’s individual loyalty program, enhancing its value, attracting more users, and creating more dynamic experiences across multiple platforms and communities.

Composability

When creating web3 based loyalty programs, brands don’t need to start from scratch —developers can leverage composable, open-source tools to build integrated, highly-customizable rewards experiences. This increases efficiency and the potential to innovate on pre-existing rewards infrastructure.

Ownership & identity

Perhaps the most exciting facet of web3 loyalty is true ownership. Members can hold a digital piece of your brand, fostering a deep sense of belonging and commitment. This "token" of loyalty isn't just symbolic—it can be traded, sold, or kept as a collectible.

Unique rewards & NFTs

With the rise of NFTs, loyalty programs can offer unique, irreplaceable rewards—like limited edition digital artwork or exclusive, token-gated experiences. This opportunity aligns your brand with the cutting-edge trend of digital collectibles, adding a new dimension to your loyalty program.

Co-creation & community

Web3-powered loyalty programs foster a shift from transactional to relational. Members become more than consumers—they become co-creators and stakeholders in your brand's story who can shape future products, experiences, and strategies. This strengthens customer loyalty and nurtures an engaged brand community.

The evolution of loyalty

Showcasing Success

Diverse Approaches to Loyalty Programs

Here, we delve into eight standout examples of loyalty programs, dynamic rewards, and community-driven benefits, each harnessing unique components to incentivize and reward customer loyalty.

Starbucks Rewards & Odyssey

Points

Tiers

Exclusive offers

Experiences

View details

Starbucks’ flagship rewards program employs a points-based system with stars earned per dollar spent, which can be exchanged for food and drinks. The program also includes tiered rewards offering exclusive benefits like birthday rewards and free in-store refills.

In 2022, Starbucks launched Odyssey, a web3-enabled loyalty program and NFT platform that allows participants who complete interactive tasks and challenges to earn tradeable digital collectibles (i.e., “journey stamps”) that can unlock exclusive benefits, experiences, and unique merchandise.

Amazon Prime

Paid membership

Free shipping

Exclusive access

View details

Amazon Prime is a paid membership program providing an array of benefits to subscribers including free two-day shipping, exclusive access to movies, TV shows, music, and early access to certain products.

Sephora

Points

Tiers

Exclusive events

View details

Sephora's Beauty Insider program is a points-based system where customers earn points per dollar spent, which can be redeemed for products. It also includes tiered rewards that provide better rewards based on the amount spent.

NikePlus & . SWOOSH

Personalized rewards

Exclusive access

Royalties

Prizes

View details

NikePlus offers a unique approach by providing members access to exclusive products, music and workout playlists, and personalized training plans, extending beyond mere product purchases.

In 2022, Nike stepped into web3 with .SWOOSH, a new community-powered platform and marketplace to co-create and trade digital collectibles and wearables (i.e., virtual sneakers or jerseys), which the footwear company incentivizes through royalties and prizes.

American Express Membership Rewards

Points

Flexible redemptions

View details

The American Express Membership Rewards program operates on a points-based system, where cardholders earn points for their spending. These points can be redeemed for a wide range of rewards, offering flexibility and a wide array of choices to customers.

Glossier

UGC

Social media engagement

Exclusive access

Experiences

View details

Glossier's loyalty strategy leans heavily on user-generated content and social media engagement. They encourage their customer community to share their experiences and photos on social media, fostering a sense of belonging. Glossier also provides exclusive access to new products for loyal customers, enhancing the brand experience.

Supreme

Exclusivity

Limited releases

View details

Supreme has leveraged the power of exclusivity in its loyalty approach. Their strategy involves releasing limited quantities of products, creating a sense of urgency and exclusivity. This has cultivated a loyal following of customers eager to be among the first to own the latest Supreme merchandise.

Red Bull

Community events

Exclusive experiences

View details

Red Bull's loyalty approach focuses on community engagement and exclusive experiences. They host a variety of events, from music festivals to extreme sports competitions, fostering a sense of community among customers. These unique experiences serve as a reward for customer loyalty and align closely with Red Bull's brand identity.

Boys Club

Rewards

Drops

Exclusive raffles

View details

Boys Club, the always-buzzing web3-native — and Co:Create partner — launched a native reward token ($DIMES) to help activate their members through a new community-powered reward program that will unlock exclusive raffles, drops, events, and more. Boys Club NFT holders can easily claim DIMES proportional to their NFT tier after connecting their wallet, kickstarting their DIMES journey. Co:Create’s API was used to help bring the program to life and make it easier than ever for Boys Club members to claim tokens and engage with the growing rewards program. Read more about DIMES here.

Bleacher Report

Rewards

Drops

Exclusive experiences

View details

Leading sports media brand Bleacher Report (B/R) recently launched a new tokenized community activation program called B/R W2E (Watch to Earn). This exciting loyalty program levels up the sports viewing experience through real-time gamification and rewards, where participants can earn tokens through engaging with trivia. Earned tokens can then be used to unlock premium content, access exclusive events, or be used in the Bleacher Report marketplace. Beneath the hood, these rewards models are powered by web3 technology — and Co:Create’s API — made possible by using smart contracts to create and distribute native tokens that can be earned, traded, and redeemed for various rewards. Read more about Watch-to-Earn (W2E) here.

Join the Brand Loyalty Revolution

Well, there you have it. We've learned about the long history of loyalty, how it's evolved (and why), and the various loyalty and rewards frameworks, categories, and business models.

We've introduced how web3 can solve some of the inefficiencies and misleading messaging surrounding loyalty through enabling ownership, trust and transparency, interoperability, composability, NFT-powered rewards — and some of the brands leading by example.

With Co:Create, brands can now build so much more for their communities

— by enabling them to move away from traditional, transactional, one-directional relationships with their consumers.

We've all heard the saying, "If you build it, they will come." For the brands of the future who want not only to drive customer engagement but empower community members to wear their brand on their sleeve (both physically and metaphorically), it's up to you to build loyalty experiences that give them a real reason to keep coming back.

At Co:Create, we make this opportunity easier than ever for brands, developers, agencies, and anyone else new to community-powered loyalty programs and web3. If that sounds like you, or you need a helping hand to get you on your feet and going in the right direction, let's chat! The brand loyalty revolution is waiting.

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