Points for Purpose: Micro-Donations in Loyalty

Traditionally, loyalty programmes have relied heavily on transactional rewards to incentivise repeat purchases. With increased saturation in the loyalty space and lack of added services and perceived value, consumers tend to ignore (or not check regularly) their points status. This represents a major stumbling block for Generation Z for whom transactional points are no longer a significant draw; instead, they are highly conscious about important causes that support purpose-driven initiatives, and seek to explore how loyalty programmes embrace such initiatives.

Why transactional loyalty points are losing appeal

The decline in the effectiveness of transactional points can be attributed to several factors such as loyalty programme complexity, lack of meaningful incentives, and immediate reward gratification which causes customers to forget altogether about the loyalty perks they can redeem. With increasing connectivity and digitalisation in consumers’ daily lives, keeping track of loyalty points can easily slip through the cracks. As a result, consumers, especially Gen Z, often neglect to regularly check their points status. Such disregard of loyalty rewards can lead to points expiring and brands ultimately losing customer loyalty. According to Euromonitor Voice of the Consumer: Loyalty Survey, fielded March to April 2024, indeed 35% of Gen Z forget to regularly redeem loyalty rewards.Consumers want to give back despite the challenging economy

Due to high inflation and the rising cost of living, consumer sentiment towards the monetary aspect of charitable donations has unfortunately declined globally, with individuals and families facing tighter budgets. However, this financial constraint has not diminished the spirit of generosity among consumers. Instead, there has been a noticeable increase in the frequency of donations of used items. This shift reflects a continued and growing commitment to charitable activities and a desire to contribute to good causes, even when direct monetary contributions are more challenging. People are finding creative ways to support their communities, turning to non-monetary forms of gifting to provide significant value.

17% of global consumers donate used items to a charity or non-profit once a month or more

^{Source: Euromonitor Voice of the Consumer: Lifestyles Survey, fielded January to February 2024}

Micro-donations: A new way to engage

A growing trend in the loyalty space is the incorporation of purpose-driven usage of loyalty points, in the form of micro-donations. Micro-donation refers to making small, often nominal donations to charitable causes or social initiatives. Unlike traditional contributions that may involve significant amounts of money, micro-donations allow individuals to contribute smaller sums, which can collectively have a substantial impact without putting pressure on members’ own budgets. By offering this reward option, brands can enhance their appeal to socially-conscious consumers and foster deeper emotional connections.

Various loyalty programmes are already incorporating such features. PetSmart Inc (North America’s leading pet shop and superstore) offers micro-donations to select charities through its Treats Rewards loyalty programme. The scheme allows double points collection for all purchases when supporting animal welfare organisations.

Another player, Mango (an apparel and footwear specialist), runs a loyalty programme, called "Mango likes you Club", across 15 countries in Europe. Members can collect “Likes” when shopping, visiting the store or recycling their garments.​ Following consumers’ increasing awareness of purpose-driven initiatives, “Likes” can also be used for charitable actions by contributing to various NGOs such as Save the Children, Plant for the Planet, and WHO Solidarity Response Fund through micro-donations. Consumer loyalty is a key growth driver for the retailer, which ​consistently outperforms the total market growth in Western Europe. Diversifying the type of rewards and leveraging its loyalty programme for social good have helped the company to record 9% y-o-y growth (USD million, Fixed 2023 ex rates) in 2023 compared to the 7% industry growth, according to Euromonitor International.

Purpose-driven loyalty programme features on the rise

The future of loyalty programmes hinges on their ability to adapt to the evolving preferences of consumers. Brands must transcend traditional transactional point redemption methods and integrate purpose-driven features as innovative avenues for points redemption. By adopting this approach, they can capture the growing segment of consumers who prioritise services that allow them to contribute to societal good. In an era when consumer preferences are constantly evolving, adapting loyalty programmes to include purpose-driven elements is essential for maintaining engagement and cultivating long-term brand loyalty.

Learn more about loyalty in our report across various industries, The Transformation of Customer Loyalty: A Pan-Industry View, or read Loyalty: Top Trends Set to Dominate in 2024 to understand key loyalty trends we see for 2024.