Loyalty: On the Cusp of Major (R)Evolution

Loyalty program announcements so far this year indicate a major sea change. From the customer perspective, it amounts to a Revolution – where brands are finally giving into what has been a ‘peaceful demonstration’ gaining momentum for several years – namely that it is too difficult to accumulate much value among so many incompatible loyalty point currencies/programs – so consumers quit.  To get customers re-engaged, brands are making it easier to participate in their loyalty programs and are offering enhanced ways to redeem – so customers can make use of even small amounts of points/miles.

Revolutions are typically bad for incumbents, but in the context of loyalty marketing, I would argue that the Revolution for customers is only a natural Evolution for brands.  After all, they don´t have to throw out years of investment in programs, systems, and processes in order to make their loyalty currencies much more valuable to the target audience.

That is good news for everyone because for merchants ´opening-up´ their loyalty ecosystem, they stand to double or triple the customers participating – with only a linear increase in cost.  Stated a different way, ROI from loyalty marketing investments could grow exponentially with a few tweaks that put the customer´s interests first.

A few examples – just so readers don´t think I am inventing this – include Amazon Prime (household penetration), Nordstrom (multi-tender), Hilton Honors (redeeming with Amazon), La Quinta Hotels (Redeem Away), Tesco (increased redemption partners), and the list goes on.

The ´point´ is that customers can no longer be expected to participate in dozens of loyalty programs where they end up with a tiny amount of value in each – and no expectation of ever accumulating enough value in any one program to redeem for something of interest.   Brands are now ´getting it´ and what we will see over the coming year is increased momentum in the direction where brands are offering a more universal loyalty currency, multiple currencies to enable customer choice, or enable their currency to be exchangeable so customers can shift value and realize material benefits – especially from places they shop less frequently.

More useful loyalty currencies are appreciated by more people and will bring the hundreds of millions of people who are rarely active in programs back into the fold – because they can accumulate more useful value across a much wider spectrum of places they shop.  This means merchants and travel suppliers will be able to capture useful data insights from a much larger set of customers, who again start identifying themselves at the point of sale.

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