The loyalty industry has been buzzing with references to point ubiquity and liquidity, with the volume increasing dramatically over the past year. Technology has finally met up with aspirations, and we predict that 2018 will be the year that ‘Loyalty as a New Currency’ is embraced.
Here are some of the trends which are influencing this sea change:
- Loyalty reward programs are no longer a nice-to-have, but are now expected by consumers who carefully compare reward program value when selecting new products such as credit cards, travel and hotels.
- Reward Program Sponsors are seeking ways to interact with their customers at the point of purchase – to create visibility into how and when their members are using their rewards points – because they currently do not have brand exposure during those rewarding moments when their valued customers are spending their points.
- Despite the slower adoption of digital wallets in the U.S. compared to international countries, U.S. consumers repeatedly express a desire to have their loyalty currency in digital wallets. Once loyalty currency is available in the mobile wallet, U.S. adoption of mobile wallets will accelerate.
- There is more focus on the redemption experience than ever before as demands and complexities have raised the bar considerably for reward programs. Consumers expect payment experiences to be consistent, regardless of channel or currency used (meaning dollars, points or miles), which shines a harsh light on those antiquated experiences which do not leverage new delivery models. The current statement credit models are cumbersome and represent extremely poor customer experiences. These poor substitutes to true loyalty offerings do not feel rewarding, and they completely neglect consumer demand for fast, easy and intuitive ‘everything’.
- Unlocking the estimated $160B in closed loop rewards currency will add tremendous value to consumers, merchants and program sponsors. The success of online Pay with Points models has proved that both the consumer and rewards program Sponsors want point liquidity. However, the significant technology requirements to implement Pay with Points capabilities on online retailer websites restricts participation to only the biggest online retailers.
- Embracing a customer-centric redemption model has changed the focus of reward programs and the profitability of their underlying products. This change in paradigm is a result of loyalty practitioners’ recognition that redemptions should not be viewed primarily as an expense to be managed, but rather a tool to drive spend, brand engagement, and long-term loyalty.
The convergence of all these trends along with leaps in technology have created a tremendous opportunity for change. This change will fully disrupt the status quo by making warehouse and closed loop models feel old-fashioned, clumsy and limiting. In contrast, point liquidity will vastly simplify the customer experience and provide benefits for all constituents. Corporations with reward programs will be able to create tremendous value within their end-to-end value chain – from reward program sponsors to merchants, digital wallets and ultimately the consumer. The consumer is the ultimate winner as they will have “new” discretionary income in the form of rewards currencies.
Bridge2 Solutions will not only be in the middle of this transformation, but we are already driving it.
Part II of Loyalty as the New Currency (posting week of 2/19/18) will share ways which companies can take advantage of this emerging disruption to drive engagement, customer satisfaction and profitability.