by Agalia Tan, Planner, XYZ

Loyalty marketing has traditionally been focused on acquisition and retention, but we think it should evolve beyond these tried and tested “points for purchases” tactics and cultivate ritualism instead.

• Such tactics merely reinforce the deal-seeking behaviour of price-conscious consumers and are unsustainable.

• Transactional tactics only secure a consumer’s passive and habitual patronage, which can be as easily lost as it is gained.

• To recode loyalty, focus on innate consumer needs and “ritualism” – creating brand symbolisms and building ritualistic communities.

**Why it matters?**In the modern aspiration economy, consumers no longer signal status through affluence and luxuries but instead emphasise new forms of social, cultural and environmental capital such as knowledge and influence.

Takeaways

• Brands that earn fervent devotion are those that create meaningful and symbolic expressions of identity by reinforcing desired affiliations/aspirations.

• Unlike traditional loyalty programmes, ritualistic communities are sticky, and customer advocacy comes naturally as a byproduct of experience.

• Enlightened brands create ritualistic communities to amplify their raison d'etre through customer touchpoints for greater meaning.

Whenever I shop at Sephora, I feel like a kid in a candy store. Glitzy signs advertise the latest seasonal drops that “you can’t miss” and Sephora assistants beckon with a beguiling smile to try the latest product “that all the TikTokers are raving about”. Pulled in all different directions, my mind goes into overdrive and I forget what was originally on my shopping list. One moment, I am finding a refill for my Fenty Beauty foundation and the next, I am checking out at the cashier with another brand that is selling its flagship product for just half the original price. Sure, novelty is compelling but so are discounts.

Take this as a microcosm of the entire retail landscape. In this era of abundance, customers are consistently served up a plethora of options to choose from. In efforts to hold onto customers’ purse strings, brands jostle hard for their attention by churning out sweet new deals to offer: think seasonal drops, member sales and free gifts that come with purchase. At the extreme, some have already gone to the extent of paying customers to use their service. In just 2022 alone, brands have burnt through US$5.57 billion to do so, with the amount projected to soar to US$24.44 billion by 2029.

Despite all that, customer loyalty remains elusive. According to Salesforce’s 2022 State of the Connected Consumer report, 71% of global consumers have switched brands at least once in the past year as priorities, lifestyles or financial situations changed. Within APAC, consumers are highly fickle, with less than 25% of them being very loyal to their favourite brand or store. After all, in the global confectionery, how can one resist the temptation of experimenting and discovering new flavours?

For brands, this is the conundrum they are facing today: how can they sweeten the deal for customers and keep them coming back for more?

Money undermines loyalty.

For the last three decades, the field of loyalty marketing has been governed by two key goals of acquisition and retention, the former which refers to soliciting for new customers and the latter which aims to increase each customer’s propensity to make a repeat purchase. During those 30 years, loyalty marketing tactics have not evolved past the tried-and-tested “points for purchases” play, which works in a three-step feedback loop:

• Customer makes a purchase

• Brand clocks membership points and offers pecuniary rewards when the customer hits specific milestones.

• Think “50% off your next purchase”, “redeem a $10 voucher for your next visit” or “get a free beverage on us”

• Customer makes repeat purchase

Call it what you will but such greasing of consumers’ palms can only last for so long. These points-for-purchase tactics ultimately reinforce deal-seeking behaviour amongst already price-conscious consumers and trap brands in an unsustainable cycle of one-upping each other via pecuniary incentives. Being highly transactional in nature, it merely secures a consumer’s passive, habitual patronage that is as easily lost as it is gained.

At the end of the day, brands have to recognise that something as emotionally charged as loyalty can’t be bought, especially when we are transitioning to a modern aspiration economy where money takes a backseat.

Recoding loyalty: Our approach

In the modern aspiration economy, consumers are no longer making purchases based on the functional product but instead the narrative around what the product stands for and what it signals about people who own it. Think about how purchasing a pair of Nikes demonstrates a resolve to fulfil one’s athletic potential. Or how using a stojo cup signals one’s interest and commitment to sustainability.

As compared to the traditional economy where consumers signalled status through affluence and tangible luxuries (ie a Rolex, a mansion and a swanky new car), consumers are now placing greater emphasis on collecting “knowledge, taste, micro-communities and influence”. In the words of Ana Andjelic, author of “The Business of Aspiration”, the modern aspiration economy is all about “new forms of capital – social, cultural and environmental which brands create in addition to economic capital”.

“It’s important on a consumer end – it’s how they signal their status, their distinction, who they want to identify with. It’s something that’s wired into us: to identify with a certain group and to distinguish ourselves from a different group.”

To truly sweeten the deal for consumers today, brands should focus on fulfilling the two innate consumer needs to signal distinctive identities and reinforce their distinction from outgroups via what we term “ritualism” – a portmanteau of creating brand symbolisms and building ritualistic communities. Through ritualism, brands can go beyond garnering passive patronage to win the active and fervent devotion of consumers’ money, time, effort and soul.

To signal distinctive identities, create symbolism.

Brands that earn fervent devotion create meaningful and symbolic expressions of identity that consistently reinforce desired affiliations or aspirations.

To build symbolism, brands can anchor on a singular theme and continually reinforce that theme through subsequent drops or activations that consumers can participate in.

A standout example would be South Korean boy band BTS. Beyond their catchy tracks and charismatic personalities, BTS’s brand and music are synonymous with the topic of self-love, given the launch of their “Love Yourself” album trilogy and the “Love Myself” campaign that aims to uplift youths worldwide and teach them how to love themselves. Their lyrics and album motifs have become emblems that fans proudly wear on their clothes or even on their skin.

Another example would be the “da bai tu nai tang” (“White Rabbit Candy” in Chinese) brand, which has long been associated with nostalgia and childhood happiness. Over the years, the brand has continued to reinforce that association in modern ways to pander to the new generation, whether it is through their whimsical flagship store that is designed like a playground to evoke feelings of childlike wonder or collaborations with brands like Hao Food SG to create merchandise that takes them back to their childhood.

Brands can also enter into brand partnerships that further reinforce their desired affiliations and aspirational value. With similar brand values in embracing the avant garde, Hennessy partnered Friends with Benefits – a social DAO that’s been dubbed the VIP lounge for crypto’s creative class – to launch a luxury Web3 social club, Café 11. The venture aims to bring together the FwB culture of fostering creative agency in Web3 and Hennessey’s 250-year history of cultural innovation to build the future of cafe society. Its inaugural event at Art Basel Miami was an all-day affair that consisted of casual hangs over morning coffee and dinner, as well as speaking engagements around ownership, community and meaning that were helmed by core members of FwB and artists.

Build ritualistic communities to reinforce distinction.

Beyond being a symbol of identity, brands also represent an ideology and way of life. To impart that ideology to consumers, brands need to go beyond the cursory labelling of “members” and mechanical customer engagement before and after purchases. To do so, enlightened brands create ritualistic communities that amplify the brand’s raison d'etre through an expanded suite of customer touchpoints, thereby imbuing greater meaning in what it means to be a member of the brand.

Adapted from Anu Atluru’s theory of ritual-based social, these communities are characterised by five key qualities:

1. Meaningful: The brand provides value beyond functional product utility, often emotional in nature.

2. Exclusive: Only a select group of individuals are allowed access, reinforcing exclusive group identity.

3. Consistent: Members can expect regular programming that is always delivered upon reliably.

4. Participatory: The community thrives on members’ active commitment of time, money, effort and soul.

5. Intentional: The community thrives on conscious engagement that is all geared towards a bigger purpose.

Homegrown brand Tiger Beer has reinforced its brand spirit of “Uncage Your Tiger” and its brand story of empowering young men to cast aside their inhibitions through various activations across APAC, whether it was giving Vietnamese football players the opportunity to play against international football legends, making their product a platform for Malaysians to share personal stories of courage or its Tiger Roar Collective which serves to spotlight emerging creative talent withing APAC. Not only does the brand reinforce a clear message for its community to rally around, Tiger Beer’s activations also provide avenues for its community to mingle with each other and enjoy a sense of belonging and camaraderie.

Beyond traditional tactics like the above, the advent of Web3 technologies has seen brands taking to new interesting ways to build real relationships that support consumers’ desire to accumulate knowledge, social capital, micro-communities and influence, as well as create micro-moments of delight within their communities.

Tokens (whether fungible or non-fungible) have become a cornerstone of many brands’ Web3 strategy. Often, they function like non-transferable membership passes that award the token-holder with benefits spanning exclusive access to events and gated communication channels, IP and co-creation rights, as well as opportunities to network with like-minded peers.

Back in 2021, fragrance house Rooks Perfumes launched a “Scent the Metaverse” NFT collection that invited perfume enthusiasts from all over the world to join them in their journey of olfactory exploration. An exclusive group of 26 perfume enthusiasts spent four months working with a perfumer to explore the possible fragrance notes of a “metaverse accord” via drop-in chats on Telegram, masterclasses and IRL events. Each NFT holder was also entitled to claim a share in the profits made from the sale of the perfume.

Tokens can also be used to incentivise consistent and recurring participation. Australia Open’s (AO) ArtBall NFT is a stellar case study on how a brand delivers ongoing value to its members. Launched in 2022, each NFT ball represents a 19 cm by 19 cm plot of tennis court surface that is randomly assigned when each NFT is minted. Every time a winning shot lands in that plot during any match, the relevant NFT is updated with real-time match and ball tracking data. This is compelling for fans because their NFT gets more valuable every time a match point lands on the plot it’s pegged to.

After acquiring a strong membership base in AO22, AO23 is enhancing the membership with a slew of new benefits. Not only are AO22 members re-engaged by receiving a new court position (and thus a fresh opportunity to score an AO23 match point), existing and new members can now get even closer to the live action through a token-gated suite of digital experiences – members can toggle between the 360° Front-Row Robocam and Player-cam, view unseen social content and player AMAs. And AO has already charted out a roadmap for future utility in AO24, with any eligible AO ArtBall that scores a match point on the AO23 court having a chance to claim tickets to the equivalent match at AO24.

Contrary to traditional loyalty programmes, these ritualistic communities are extremely sticky. Not only do members join and participate in the community out of their own volition, advocacy also comes naturally as a byproduct of their experience in the community. Ritualistic communities seal the deal for members by offering them a platform to form authentic human connection, to be part of something bigger than themselves and to feel fulfilled emotionally, be it a sense of accomplishment, a renewed sense of self or even just unadulterated fun.

How brands can sweeten the deal.

At the end of the day, brands will still be competing with a myriad of brands that are all jostling for consumers’ attention. But this time, they can choose to play a different game.

By cultivating ritualism, brands can shift consumers’ attention away from brightly coloured signs and the deals galore, and instead appeal to them via creating symbolic expressions of identity and building a ritualistic community to cater to their desires for identity signalling and distinction from outgroups in the modern aspiration economy.