The evidence is mounting to suggest retailers and brands must think differently about their loyalty programs if they are to get true value from them. Everything points to considering the potential and power of the partnership.
According to research from analyst group Forrester, financial rewards are the most important elements of loyalty programs in the eyes of U.S. consumers. Some 76% of U.S. online adults said instant discounts are important in a loyalty program, while 74% said loyalty currencies, such as points, miles, and stars, are required.
John Pedini, principal analyst at Forrester, summarizes what consumers want in three bullet points:
- Financial rewards
- VIP treatment
- Simple loyalty experiences
“Year after year, consumers rank monetary benefits like instant discounts, loyalty currencies, and exclusive deals from partners at the top of their list of loyalty program perks,” he writes.
We think his comments about exclusive deals from partners is crucial. Forrester’s study shows half of U.S. online adults think enhanced customer service, offers tailored to their preferences, and the ability to earn and use points across different brands are crucial to a good loyalty program – these findings also back up what other research shows.
The rise of the loyalty ecosystem
A Bain & Co. and ROI Rocket 2024 study, covered off in a compelling Harvard Business Review (HBR) article written by some of its consultants, suggests mediocre, underperforming customer-loyalty programs tend to get the economics wrong. Hence, they end up being a drain on resources rather than an opportunity for boosting income.
Failure to distinguish programs from the myriad of others out there and those that add to the overbearing market noise of trying to grab consumers’ attention is also a common mistake, according to Bain. Often, a poor understanding of consumer behavior, for instance, money-off deals are often for goods the customer would purchase at full price anyway, contributes to a poor proposition too.
What’s the point of that? It’s simply margin eroding.
Bain calls for companies to redesign their loyalty programs, first by attaining a deep understanding of customer preferences and behavior, and what it is that they value. Then, there is an opportunity to personalize messaging more effectively and offer gamified experiences that tend to resonate with younger generations.
Most importantly of all, in our view, Bain suggests retailers looking to get the most value from their loyalty programs should consider an “ecosystem with partners”. Realising that their customers have comprehensive needs and interests is something brands often overlook as they become obsessed with their proposition.
As Bain’s consultants in the HBR article make clear, “the ecosystem should be broad enough to bring relevance and optionality to consumers.” Still, it should also include a selection of partners that fit with the originating brand.
“These can include a mix of aspirational experiences with more basic rewards,” the consultants argue. As two good examples, they reference the Hyatt hotel chain’s loyalty program’s tie-up with fitness company Peloton, as well as Qantas Loyalty, which boasts an integrated offering of products and services from around 700 partners across dozens of travel, retail, utilities, financial services, health, and much more.
These programs recognize consumers don’t make their purchasing decisions in silos, and they offer members deals that can make a difference to several aspects of their lives. These programs, as well as Delta Airlines’ co-branded line of American Express credit cards, which feature a tightly curated selection of deep partnerships, are helping drive huge value to those operating them, the article states.
In short, these allow retailers to achieve what Bain describes as some of the fundamentals of a successful loyalty program: they trigger desirable customer behaviors; keep people engaged; and generate a high return on investment (ROI).
What to remember
Call it an ecosystem or a loyalty marketplace, it all comes down to the same thing: finding ways to ensure a loyalty program thrives. And that only happens when creating the virtuous circle of keeping consumers happy with relevant deals and perks and running a loyalty program that pays and provides an ROI.
Once retailers and brands have realised this, Exhance’s SmartCircle comes into play.
The proposition aggregates offers from a range of different companies that can be seamlessly integrated into retailers’ existing loyalty programs. Cashback deals from more than 5,000 third-party merchants are already in place and waiting to be embedded into a retailer’s existing platform today.
In terms of the financials, there are no additional loyalty program development fees and long timelines required, while retailers using SmartCircle benefit from ongoing revenue each time one of the customers they directed towards a cashback deal converts.
And what’s in it for the customer? Well, SmartCircle provides them with access to a plethora of money-saving offers to help them navigate what remains a shaky economic environment.
Immediate financial rewards and a broad range of partner deals – all done in the interests of the consumer and the business alike. Now there’s a loyalty program business case worth considering.
