Leaders in Customer Loyalty, Powered by Loyalty360
Leaders in Customer Loyalty, Powered by Loyalty360
Loyalty Live: Key Customer Loyalty Trends with Phaedon’s Katie Berndt
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 full interview on Loyalty3360 here: https://loyalty360.org/content-gallery/daily-news/loyalty-live-key-customer-loyalty-trends-with-phaedon-s-katie-berndt
Good afternoon and good morning. This is Mark Johnson from Loyalty360. I hope everyone's happy, safe and well. I want to welcome you to another edition of Loyalty Live. In this series, we speak with leading agencies, technology partners and consultants, and customer channel and brand loyalty about the technology trends and best practices that impact a brand's ability to drive unique experiences, enhance engagement and, most importantly, drive customer loyalty. Today, we have the pleasure of speaking with Katie Berndt. She's the Vice President of Strategy, research and Insights at Faden and we're gonna be exploring some of the key trends and strategies shaping customer loyalty in 2025. Welcome, katie. Thank you very much for taking the time to join us. How are you?
Speaker 2:Thank you, happy to be here.
Speaker 1: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 specific industries leading the charge in loyalty program innovation? If so, which ones and what are they doing differently?
Speaker 2:Yeah, I think you know 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 you know miles or points when you book or experience the travel, to more sophisticated, engagement based strategies where you know or experience the 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. So, as more brands are using AI to optimize the experience you know for example, ai based upgrades that help ensure the most elite members are getting the best upgrades to enhance whether it's their hotel stay right with the best rooms or having the best seats on the plane that are available. We're also seeing more brands move toward choose your own benefits when they hit status or milestones. I think this is creating more differentiation and value added distinction among tiers, and the technology to enable the strategies is getting much more sophisticated, which helps provide that elevated experience that members are looking for.
Speaker 1:What trends are you seeing with your clients? How should brands incorporate new trends into their existing loyalty strategies? How can brands strike a balance between innovating their loyalty program and maintaining consistency for existing customers?
Speaker 2:The ability to infuse more functionality and provide more value through point utility, whether that be through partnerships or otherwise. And then you know, enabling more flexibility and choice into loyalty programs is really a big focus right now. Brands should be thoughtful with any changes that they make to an existing loyalty program.
Speaker 2:Really, that you know if you think about it, it's published and it's out there in the world, that you know if you think about it, it's published and it's out there in the world.
Speaker 2:We've all seen where what the commentary on social media will do if, if you do make changes that aren't expected or that are seen as negative, but always be sure that you're you're leading with data driven insights that identify both the strengths and pain points of the program, which you know includes keeping a pulse, a pulse on customer feedback.
Speaker 2:So be sure that when you're making changes that involve the earn-burn, for example, that you're providing enough value without it being too rich of a program, and with that, economic modeling is really critical. It's always easier to add promotions that are more targeted and have more of a limited time right Than it is to kind of walk back on something that you've published right. You don't want to just assume that what you're seeing out there from competitors or what's trending and shiny will be right for your brand. So I think, overall, if you can layer in new features, kind of gradually test with smaller segments or locations first and then kind of keep some of your core benefits stable while adding enhanced options, this will help maintain that consistency for existing members, and then there should always be a huge focus on member communication, existing members and then there should always be a huge focus on member communication.
Speaker 1:In a crowded market where there are many loyalty programs offering similar rewards, how can brands differentiate themselves by fostering emotional loyalty and building stronger, more meaningful relationships with their customers?
Speaker 2:Well at Faden.
Speaker 2:We have proprietary research that identified six key emotional loyalty drivers trust, reliability, appreciation, investment, empathy and shared values.
Speaker 2:And an example of how you can do this is by creating memorable moments that surprise and delight and not trying to sound cliche by saying that, but it could really be anything from free samples, exclusive invitations, whether that's early access to something or to a special event, you know. Being able to demonstrate that you remember a customer's preferences and habits and then create experiences around it that really show that you know them is huge, and I think you know community building is big too, especially these days. I think brands like Sephora and their Beauty Insiders, patagonia they've really mastered this through shared values. So, ultimately, I think, do what you can with the data that you've been provided, whether that's, you know, it's a combination it's not only your transactional data, but kind of behavioral or inferred data, and then your declared data also called zero party data right that you've received directly from members, and then invest in the MarTech stack that will enable these personalized experiences that we're talking about. And, of course, you need your customer facing employees to help make every interaction feel as human and authentic as possible.
Speaker 1:One of the areas we see significant interest in is brand partnerships Very relevant right now. Brands are looking to make sure they are on top of that, but they also have the partnerships that are driving incrementality and interest in the program. When you look at that, there are challenges that exist for the brands as well making sure that there's alignment, of course, making sure that the customers are similar. What are the potential benefits and maybe some of the challenges of such partnerships today?
Speaker 2:I think partnerships are going to be huge in 2025, as they've already been growing and evolving over time, and I think some of the potential benefits of partnerships include shared marketing costs.
Speaker 2:Not having to do it all on your own, so there's some efficiency there. Not having to, you know, do it all on your own, so there's some efficiency there. An enhanced value proposition, you know, with a broader range of earning and redemption opportunities, and then your expanded reach that you get, and potential growth with access to new market segments, and then you know, really this also brings that increase in, or potential increase in, customer engagement and overall retention. But, as you said, partnerships can come with challenges. You have to be able to find partners that align with your brand values and your customer experience standards, and you know there can be some complexity from a legal standpoint when it comes to figuring out revenue sharing and the contract itself, and then the technical integration side right Systems and processes and matching those up, as well as, I think, just the overall risk of your partner actions. If something happens there, it could also affect your brand reputation.
Speaker 1:How can brands balance investing in new technologies with ensuring these innovations deliver measurable value to their customer experience?
Speaker 2:I think being strategy-led is key. So consider you know how to implement new technologies, such as AI and voice-enabled solutions, for example, that enhance your customer and employee convenience. It's going to be huge and is already huge Any of us can really keep up but it is absolutely an enabler of better customer experiences and employee experiences, but not a replacement for human connections. So brands should invest in technology that enhances their ability to serve customers while maintaining those emotional interactions that can drive long-term loyalty. And I think to measure the impact and the value of new technology, you have to establish clear performance metrics that are outside of your typical KPIs and then track user interactions Like is it being used, is it giving us the right answers, or is it making things easier, making it more convenient? And then you know collecting and analyzing customer satisfaction data to see if it's actually making an impact.
Speaker 1:As customer interactions continue to span across digital and physical channels, how should customer loyalty programs integrate both in-store and online experiences for a seamless and cohesive customer journey, and online experiences for a seamless and cohesive customer journey, and what are you seeing that brands are doing well to create loyalty programs that work across these different touch points mobile app, in-store, website, social media while maintaining a unified experience for the customers?
Speaker 2:You have to have really a unified data infrastructure to get the 360 view of the customer that everyone is looking for. So this means you need to connect your customer data across all touch points. So 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 really prioritized, Because you want to be able to, for example, maintain consistent customer profiles if updates are made regardless of channel. And I think 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, and then ultimately, testing, measuring and optimizing are going to be keys to success. So I mean, I always think you know tracking your customer journey, pain points across channels is absolutely a success factor, because you should want to find those pain points so you can fix them.
Speaker 1:One of the challenges brands face is understanding their customers and making sure the value proposition is relevant for all customers in their loyalty program. When you look at key differences in loyalty expectations across generation millennials, gen Z, baby boomers, et cetera how can brands tailor their loyalty strategies to meet the needs of different demographic groups?
Speaker 2:The biggest difference across generations regarding loyalty expectations is, in my opinion, the digital experience. I think brands have to prepare for a future where it's not millennials, it's not Gen Z, but it's Gen Alpha. These are like my kids' ages, where they're entering the market with entirely different expectations, while you have to, you know, continue to serve the needs of this, the more mature life stages like, like boomers. I think you know this can be done by creating adaptive loyalty frameworks. You know where the rewards, the methods of recognition and channels, along with community building building tools, can evolve with changing preferences. And you know, as I've mentioned several times already, but brands can gather, or should be gathering, regular feedback from customers where you know again, if it's that full spectrum of all ages, if that's your target audience, then developing inclusive marketing campaigns is going to be important and investing in AI and machine learning capabilities so you can better predict and respond to these generational shifts in real time, ideally ensuring that loyalty strategies remain effective across all age groups.
Speaker 1:What are the most common reasons loyalty programs fail to meet their goals, and how can brands address these issues, especially with increasing customer expectations?
Speaker 2:How can brands ensure their loyalty programs remain relevant and compelling? You know being overly complex, whether that has to do with the earning or the redemption rules. Having a lack of digital integration where there's a poor user experience is also a big one. Treating everyone the same, where there's not personal personalization, and then, you know not connecting on an emotional level, right, like if it's only a transactional relationship I mean, that's absolutely part of it. But if it's only transactional, then then your members are going to continue to follow the best deal of the week, and sometimes that might be with you and oftentimes it's going to be with competitors.
Speaker 2:It's hard to hard to keep up with if that's all that it's based on. So I think some solutions to address these issues would be to look at simplifying your program mechanics, making sure that they're easy to understand, benefits and that your earn-burn structure is valuable, but not breaking the bank. Enhancing your value prop in a way that you know, if you look at like what your competitors are doing, making sure that you're offering relevant rewards but also something that's unique, and then improving the digital experience. Really making that, you know, knowing that's going to be a central part of how they interact, and having that seamless integration across channels. I think striving for real-time updates is going to be already, is, but is going to be more and more important. So I think, as you think, about maintaining program relevance. It can happen in a variety of ways, but most importantly, let your data and customer research drive personalization and the enhancements that you make 2025 is upon us.
Speaker 1:What do you think, or how do you think, customer expectations are going to evolve in 2025 and how should brands be prepared to meet them?
Speaker 2:There's a couple more 2025 predictions that Faden has made that we haven't talked about yet, so I'll touch on some of those.
Speaker 2:It's around social shopping and sustainability and really you know those have been around, but there's some increasing relevance and evolving expectations. I think consumers expect interactive, community-driven shopping experiences that are merged with entertainment and social media. I think you know we've probably all been victim to, and also beneficiaries of, the social commerce because they know us so well, but being able to kind of shop alongside friends in real time virtually is becoming more commonplace, and you know that personal AI powered shopping assistance is just going to get more and more prevalent in 2025 and beyond. And then there's a growing demand for eco conscious options and rewards rewards and an expectation for brands to lead more sustainability initiatives. So we think that more brands will use AI to connect sustainability back to their loyalty programs and reward customers who have a preference for things like carbon neutral products and sustainability packaging, for example. I think brands can prepare for this by investing in AI and virtual shopping capabilities and implementing advanced analytics for personalization, along with real-time tracking for those eco-friendly choices that people make.
Speaker 1:And last question how can brands keep up with evolving customer preferences while managing the risk of overwhelming their loyalty programs with too many features?
Speaker 2:I think the key here is to focus on quality over quantity, ensuring that each new feature benefit functionality etc. That it adds genuine value to the member experience while maintaining your program's simplicity and effectiveness. So, yes, it's important to keep a pulse on the competitive landscape and what others are offering, but you should, as a brand, be focusing on your core benefits that align with your customer values. You know, as you think about introducing new features, gradually, do it, you know, if possible, rather than all at once, and think about you know which benefits are underutilized that you might be able to remove without people missing them. To help to keep it simple, but make sure that you're conducting customer-centric research to kind of gauge and validate what's working well and where the gaps are, because I think this is where you're able to really cultivate emotional loyalty. People will notice that they've been heard when changes are made and use this opportunity when you're making changes to make the program easy to understand.
Speaker 2:Um, because your communication strategy is so important, you need to educate, have to be talking about everything. Sometimes those bite-sized pieces, kind of that micro learning, can be part of your member communication strategy and whether you're training members on how to best use the program or training your employees on. You know how to enable or execute it. Micro learning is key. So that's what I would say, along with course testing before you roll it out fully.
Speaker 1:And now it's time for a wonderful quickfire question segment. We'd like to keep these to a one word or short phrase. Answer First off what is your favorite word?
Speaker 2:Joy.
Speaker 1:What is your least favorite word?
Speaker 2:Can't.
Speaker 1:What excites?
Speaker 2:you New projects where we can help clients solve challenges, or I always feel good about a great workout or something that you know I've accomplished.
Speaker 1:What do you find tiresome?
Speaker 2:Negativity or negative people.
Speaker 1:Is there a book that you've read that you'd like to recommend to colleagues?
Speaker 2:The book Multipliers, which is about you know basically how the best leaders can help make everyone smarter.
Speaker 1:What profession, other than the one you currently are in, would you like to attend?
Speaker 2:I would love to be a track and field or cross-country coach someday.
Speaker 1:What do you enjoy doing that you often don't get the opportunity to do?
Speaker 2:Puzzles.
Speaker 1:Who inspired you to?
Speaker 2:become the person that you are today, my parents and family, as well as my favorite teachers and coaches, I would say.
Speaker 1:What do you typically think about at the end of the day?
Speaker 2:Usually it's about everything I need to get done the next day, both at home and at work, but I know I should be meditating and appreciative of everything I accomplished that day as well. And last question how do know I should be meditating and appreciative of everything I accomplished that day as well?
Speaker 1:And last question how do you want to be remembered by your friends and family? Someone who is kind, I would say Katie, thank you very much for taking time to speak with us today. It was great hearing your perspective on customer loyalty and customer experience and we look forward to learning more from you and your team at Fate in 2025. Also want to thank everyone else for taking the time to attend. Make sure you join us back every Tuesday for a new edition of Loyalty Live. Until then, have a wonderful day.