In the modern world, customers increasingly expect experiences that cater to their unique preferences and motivations. Sophisticated retail loyalty programs are rising to this demand with increasingly personalised content and rewards.
Digital loyalty programs – accessed via a smartphone app – offer compelling interfaces for deal offering, activation, and redemption. Typically, customers are presented with special deals relevant to them; they activate these deals and redeem the benefits at checkout.
The Rise of Challenge Offers in Loyalty Programs
Gamification in the form of challenge offers is an emerging addition to the digital customer loyalty experience. Challenge offers increase engagement and extend consumer interactions by providing customers with compelling goals, stakes, and rewards.
An example of a challenge offer might include rewarding customers for hitting a regular streak of in-store visits over a period of time, purchasing five brands they have not previously tried, or spending a bit more on a given brand for an even bigger points reward. The progress of a challenge would be tracked in the app.
This kind of gamification is already making waves in some supermarkets and has proved to be highly engaging. By looking at some examples and examining the psychology of gamifying marketing and loyalty offers, this article sets out three key reasons why challenge offers are so successful at driving consumer engagement.
1. The power of mass marketing to deliver personalisation at scale
Challenge offers stand out by combining highly personalised experiences with a mass marketing message.
Earlier this year, UK-based supermarket brand Tesco launched ‘Clubcard Challenges,’ a campaign that provided each customer with a personalised challenge, which, when completed, would reward them with Clubcard points.
Customers could complete up to 10 challenges and redeem a total of £50 ($98 AUD) during a six-week campaign.
Although each offer is tailored to individual preferences, the overarching message, such as Tesco’s “Collect up to £50 worth of Clubcard points,” can be communicated at scale via digital channels, in-store promotions, and traditional advertising.
This wide visibility leads to impressive participation rates – often five to 10 times higher than traditional coupons. Despite the broad reach, each challenge feels personal and relevant to consumers, balancing reach with individual relevance.
2. The power of the chase: The “Goal Gradient Effect” in action
Challenge offers leverage the Goal Gradient Effect; a psychological principle where motivation increases as people get closer to achieving a goal.
By encouraging consumers to reach specific targets – such as spending a certain amount over a set period – challenge offers turn shopping into a game, making it more interactive and engaging.
As consumers progress toward completing their challenges, the chase itself becomes more enjoyable, further motivating them to continue engaging with the offer.
3. The power of delayed gratification to deliver value
Challenge offers tap into the concept of delayed gratification by asking consumers to complete actions over time before receiving a larger, cumulative reward. This delay builds anticipation, making the eventual reward feel more valuable.
By asking consumers to put effort into earning their rewards, retailers become associated with meaningful value. In many cases, the final reward makes a significant difference to the cost of the consumer’s shopping basket, further increasing the perceived value.
Attractive to brand partners due to incrementality
From a partner brand’s perspective, challenge offers drive incremental sales by encouraging consumers to change their behaviour – whether that’s purchasing more frequently, trying new products, or increasing basket size. Instead of offering discounts on items consumers would have bought anyway, challenge offers generate new sales, providing a clear and measurable return on investment (ROI).
Brands benefit from the ability to influence consumer behaviour in a measurable way, making challenge-based offers a smart strategy for both short-term campaigns and long-term growth.
Asia-Pacific retail brands, are you up for the challenge?
The rise of challenge offers and gamification represents a major advancement in loyalty programs. This is a significant shift from traditional discount-based engagement to sophisticated, psychologically-driven customer engagement.
While challenge offers are already making a measurable impact at leading global retailers such as Carrefour, Leclerc, and Tesco, they have yet to see top-tier adoption in Australia and New Zealand. With the groundwork laid across many major retailers and grocery chains in the region, particularly with app-enabled personalised offers, there is now an opportunity to implement this emerging engagement strategy.
Forward-thinking retailers in Australia, New Zealand, and the wider Asia-Pacific region that seize the opportunity as early adopters stand to capture the proven benefits of higher participation rates, engagement, loyalty, and revenue.
