PARIS: Most loyalty programs continue to reward consumers only for purchases and are neglecting the many digital opportunities to engage them, according to new research.

Capgemini Consulting researched the loyalty programs of 160 global companies across seven sectors – retail, banking, consumer products, telecoms, airlines, hotel chains and consumer electronics – as well as scanning 40,000 consumer conversations on social media to gauge customer sentiment towards loyalty programs.

The resulting report, Fixing the cracks: reinventing loyalty programs for the digital age, found that 97% of loyalty programs were based primarily on purchases made by consumers, with just 16% rewarding customers for activities such as taking online surveys, rating and reviewing establishments or referring friends to the program.

And fewer than one in ten loyalty programs (9%) offered point redemption across all channels, although, as the report pointed out, to be commercially successful programs must engage customers across every touch point.

Its scan of social media showed that 89% of opinions on loyalty programs were negative, with lack of reward relevance, rigid reward structures, user experience issues with online channels and poor customer service quality levels emerging as the main reasons.

"Brands need to revisit their approach to loyalty," stated Mark Taylor, Global Lead for Customer Experience Transformation at Capgemini Consulting, who saw the key steps being the integration of the loyalty program into the overarching customer experience and "to reward engagement as well as the simple transaction".

He further noted that "advanced levels of customisation and tailored experiences will enrich loyalty programs and further encourage customer engagement".

The report held up the Beauty Insider loyalty program from French cosmetics store Sephora as an example of what could be achieved. This matches loyalty accounts with Sephora's mobile app, as well as the Apple Passbook mobile wallet and allows Sephora to provide a seamless purchase experience.

Customers can track their purchases, view offers and redeem reward points on the go via their mobile devices. The strategy has worked, with Sephora's Passbook users purchasing twice as much and twice as frequently as the average Sephora customer.

Data sourced from Capgemini Consulting; additional content by Warc staff