Your loyal customers are a gift to your brand.

A customer loyalty program is a great way to say thank your best customers and incentivize them to remain loyal for years to come. By offering a specific perk after each user action, you can also encourage new customers to make repeat purchases in the future. But what kind of actions should you choose to directly lead to a reward from your brand? Or, said a different way: what rewards program will motivate customer retention?

There are two types of actions you can choose to reward: transaction-based or engagement-based. It’s easy to acknowledge customer transactions and honor them with rewards like discounts on future purchases, free shipping, or loyalty cards. But if you’re only capturing transactional data – number of purchases, types of purchases, or amount spent per transaction – you’re not getting the most complete picture of your customer. And if you’re only attempting to generate customer loyalty programs based on past purchases, you’re missing out on other ways to meet customer retention.

If one of your goals for the upcoming year is to decrease customer acquisition, increase customer retention(and it should be!), consider rewarding engagement-based loyalty over purely transaction-based loyalty. When you reward customers for interacting with your brand in one of several possible capacities – not merely transactionally – you create a richer and more multi-dimensional brand experience, and you demonstrate to your customers that you care about more than the sum of their purchases. Having this mentality can be a determining factor from any small businesses to large business, like Amazon or Apple.

Engagement-based customer loyalty is capable of doing so much for your brand.

Encourage Repeat Engagements

If you don’t reward your customers until they’ve made a purchase, you lose out on the almost 70% that browse merchandise but ultimately fail to buy anything. By rewarding non-transactional actions – such as using the mobile app, bookmarking a product, “liking” a post from the brand on social media, or sharing the link to an item with other potential customers – you can spur other actions that are important in their own right and greatly increase each customer’s lifetime value. And in all likelihood, those other actions may well lead the shopper to become a repeat customer.

Surface Greater Customer Data

When you place too much importance on transactional actions, you’re not acknowledging the full importance of all the different ways your customers engage with your brand. But when you offer rewards for non-transactional actions, you can learn more about what your customers are interested in overall. This not only allows you to have a fuller picture of your customers, but it makes it possible to better personalize your targeted campaigns to align with their needs. For example, if you learn that your customer often browses a more expensive product line, but never purchases anything, you could offer them a coupon that could push them over the edge to purchase.

Strengthen The Brand-User Relationship

The concept of “emotional loyalty” underlines the idea that many customers stick with a brand for reasons beyond the purely monetary. Sometimes it’s a personal preference; sometimes it’s a psychological attachment. But the overall customer experience is much more powerful than many marketers realize. In fact, a study by Lim College revealed that 66% of millennials will abandon a brand if the brand no longer fits with their personal identity. By rewarding all kinds of engagement, not just transactions, you demonstrate to your customers that you care about more than just the things they buy from you, and you can honor the kind of emotional loyalty that stems from things other than the price tag.

Takeaway: More Than Just A Price Tag

While most brands are making at least some attempt to measure customer loyalty, the concept of “loyalty” isn’t defined the same way across the board. At the end of the day, if you’re making customer loyalty a priority, and are able to understand that “loyalty” can mean a range of things beyond mere transactional data, you become closer to being a company that focuses on loyalty – not just a company with a loyalty program. It’s also worth mentioning that an engagement-based loyalty program certainly does not ignore transactions – but as per a rather unsurprising cycle, if you reward transactions, you merely encourage future transactions. Conversely, if you reward engagement, you encourage customers to really get to know your brand, and create opportunities for your brand to truly understand your loyal customers.

Sruthi Narayanan

When Sruthi's not writing and editing marketing content, she spends her time volunteering for a Cambridge-based arts organization, singing in a post-collegiate a cappella group, and reading novels to her cat, Monty.