What keeps customers coming back in 2025?
Loyalty is no longer just about points and perks. It is about creating authentic connections and experiences that resonate. In this edition of Loyalty Live, we spoke with Katie Berndt, Vice President of Strategy, Research, and Insights at Phaedon, to uncover the biggest trends in customer loyalty and how brands can rise to meet them. Katie shared grounded, data-driven insights that reveal how loyalty programs are evolving—and how businesses can stay relevant by striking the perfect balance between innovation and consistency. Read the excerpt below or listen to the full interview on our podcast at the link below.
Loyalty360: We saw in our 2024 State of Customer Loyalty Report that 79% of brands have an interest in updating, enhancing, or redoing their customer loyalty offerings. Are there any specific industries leading the charge in loyalty program innovation? If so, which ones and what are they doing differently?
Katie Berndt: The travel and hospitality industry is undergoing some exciting loyalty innovation. The industry is really shifting from traditional transaction-based programs where you'd earn miles or points when you travel to more sophisticated engagement-based strategies where you're able to leverage technology to create more personalized seamless experiences while you're gathering valuable customer data to drive future enhancements. As more brands are using AI to optimize the experience, for example, automated upgrades that help ensure the most elite members are getting the best upgrades to enhance, whether it's their hotel stay or having the best available seats on the plane.
We're also seeing more brands move toward choose-your-own benefits when members hit a certain status or milestone. I think this is creating more differentiation and value-added distinction among tiers. The technology to enable the strategies is getting much more sophisticated which helps provide that elevated experience that members are looking for.
L360: What trends are you seeing with your clients? How should brands incorporate new trends into their existing loyalty strategies? And how can brands strike a balance between innovating their programs and maintaining consistency for existing customers?
KB: The ability to infuse more functionality and provide more value through point utility, whether that be through partnerships or otherwise and enabling more flexibility and choice into loyalty programs are really big focus areas right now. But brands should be thoughtful with any changes they make to an existing loyalty program. We've all seen what the commentary on social media will do if you make changes that aren't expected or may be seen as negative. Always be sure that you're leading with data-driven insights that identify both the strengths and pain points of the program, which includes keeping a pulse on customer feedback. Be sure that when you're making changes that involve earn and burn, for example, you're providing enough value without it being too rich of a program. Economic modeling is critical. It's always easier to add promotions that are more targeted or for a limited time than it is to walk back something that you've published.
L360: In a crowded market where many loyalty programs offer similar rewards, how can brands differentiate themselves by fostering emotional loyalty and building stronger, more meaningful relationships with customers?
KB: At Phaedon, we have proprietary research that identifies six key emotional loyalty drivers: trust, reliability, appreciation, investment, empathy, and shared values. An example of how you can stand out in a crowded market is by creating memorable moments that surprise and delight. It could be anything from free samples, exclusive invitations, or early access to a special event. Demonstrate that you remember a customer's preferences and habits and then create experiences that show that you know them. Do what you can with the data you've been provided. It's not only your transactional data, but behavioral or inferred data, and declared data, also called zero-party data. Then invest in the MarTech stack that will enable these personalized experiences that we're talking about. Of course, you need your customer-facing employees to help make every interaction feel as human and authentic as possible.
L360: Brand partnerships continue to be of interest to many brands, but they can be challenging to incorporate for a number of reasons. What are the potential benefits and challenges of such partnerships?
KB: I think partnerships are going to be huge in 2025, as they've already been growing and evolving over time. Some of the potential benefits of partnerships include shared marketing costs, an enhanced value proposition with a broader range of earning and redemption opportunities, expanded access to new market segments, and potential increase in customer engagement and overall retention.
Partnerships can come with challenges. You must be able to find partners that align with your brand values and your customer experience standards. And there can be some complexity from a legal standpoint when it comes to figuring out revenue sharing, the contract itself, and the technical integration side.
L360: How can brands balance investing in new technologies with ensuring these innovations deliver measurable value to the customer experience?
KB: Being strategy-led is key. Consider how to implement new technologies such as AI and voice-enabled solutions, for example, that enhance your customer and employee convenience. Brands should invest in technology that enhances their ability to serve customers while maintaining those emotional interactions that can drive long-term loyalty. To measure the impact and value of new technology, you have to establish clear performance metrics that are outside of your typical KPIs and then track user interactions and satisfaction.
L360: If customer interactions continue to span across digital and physical channels, how should loyalty programs integrate both in-store and online experiences for a seamless and cohesive customer journey? How can brands create loyalty programs that work across different touchpoints while maintaining a unified experience for customers?
KB: You have to have a really unified data infrastructure to get that 360 view of the customer that everyone is looking for. This means you need to connect your customer data across all touchpoints. If you don't have the right MarTech stack to support your strategy, you won't be able to execute it. You want to ensure that real-time synchronization of loyalty points, the rewards, and your customer preferences is something that's prioritized because you want to be able to maintain consistent customer profiles if updates are made, regardless of channel. Your mobile app should be the central hub for loyalty interaction, so it needs to be user friendly with cross channel features that allow customers to start transactions in one channel and complete them in another. Ultimately, testing, measuring, and optimizing are going to be keys to success. Tracking your customer journey and pain points across channels is absolutely a success factor so you can uncover those pain points and fix them.
Listen to the full interview here.
More from Loyalty360:
https://loyalty360.org/content-gallery/daily-news/executive-perspectives-audience-segmentation-for-engaging-high-value-customers
https://loyalty360.org/content-gallery/research-and-reports/email-marketing-playbook-best-practices-for-creating-and-implementing-successful-email-campaigns
https://loyalty360.org/content-gallery/daily-news/engaging-a-multi-generational-customer-base-strategies-for-effective-loyalty-programs