Recently, Kim Walsh, General Manager – Australia & New Zealand for Kognitiv, had the privilege of moderating a panel for the Australian Loyalty Association Sydney event. This panel of loyalty experts examined the best practices and tactics to monetize loyalty programs. In mature markets, loyalty programs may be viewed as a commodity and a cost center, delivering little differentiation and offering little true value to consumers. Brands may view the cost of running those programs as a drag on organizational resources and infrastructure while adding a burdensome liability on their balance sheets for the unredeemed program dividends.
However, loyalty programs cannot only be a company asset, but monetized effectively they can become a revenue center rather than a cost center. Designed well and executed with precision, loyalty programs are the key to building advocacy and retention with their most valuable clients.
This panel of industry experts explored the best tactics and practices to monetize loyalty programs. Walsh brings to us the key takeaways of this discussion and her own insight into how, leveraging the right tools and opportunities, marketers have the chance to experience Redefined Loyalty.
Takeaway #1: Develop Cross-brand Partnerships
Finding that perfect connection with a complementary brand partner is ideal to not only providing your most valuable customers with opportunities to redeem for rewards they want, but for acquiring new customers that look like your member base. Historically, partner investment in your program may have been in the form of direct fees for marketing exposure or bonus points issuance, or soft investment into the program to be targeted at key milestones, such as heavily discounted goods and services to be used for reward redemption, prizes for sweepstakes, or exclusive offers to be claimed as program benefits by your members. However, from our view, brands competing against each other for share of mind and wallet often results in a zero-sum game with winners and losers. There is an alternative; through strong partnerships, collaboration produces joint new opportunities for less, while giving direct and preferential access to new audiences, resulting in network effects where everyone (brands and consumers) win all the time.
Takeaway #2: Leverage Zero-Party Data for Trading and exchange
Zero-party data is the ideal standard for marketers in an age where consumers demand personalization, yet distrust how brands use or share that information, particularly after numerous high-profile data breaches in recent years. By allowing customers to opt-in to share their data, and with brands providing full transparency of how that data is used, marketers can gain valuable insights about preferences, motivations and intentions, enabling more precise future prediction of customer behavior. Access to zero-party data not only informs the campaigns and tactics used within marketing, but it can be used for decision making across the organization, from inventory management, merchandising, to real estate and more. Combined with the above takeaway of forming strong partnerships, zero-party data can be exchanged in a secure, peer-to-peer network where each brand gains access to new audiences for acquisition, and can use the data to offer experiences that are completely personalised and highly valuable to their member base.
Takeaway #3: Paid Loyalty Programs
Paid loyalty is a small but ever-increasing trend. While payment for loyalty membership (when previously free to join) may seem as a hurdle for some, research has shown members of paid loyalty programs are 60% more likely to spend on the brand after subscribing. This model where the investment is made upfront by the customer provides a revenue stream for the brand and a funding mechanism to offer high value rewards for their best customers. Add this revenue stream plus the potential basket stretch halo from the membership, and this is a win/win scenario for brands.
Paid loyalty can mean paying an overt membership fee specifically for the brand loyalty program where a points currency is earned but is also often a subscription with a brand linked to desirable experiential benefits such as free delivery or media subscriptions.
In recent years Amazon Prime have become the poster child for this form of paid loyalty. What Prime got right was the value exchange—the benefits like free delivery are valuable enough for a customer to pay to be part of their eco-system; loyalty is simply the outcome of that exchange.
Reaching an optimal outcome for both the brand and the customer is the holy grail for brands to drive long term meaningful customer engagement.