Extending the value of rewards

10 April 2013

While every loyalty strategy aims to engage and retain valuable customers, they also generate a certain amount of expense and future liability  , thanks to the currency and rewards that are often an integral element of the proposition.

At the same time, consumers have increasing expectations of the rewards and benefits that brands offer. According to a recent global study   of over 1500 consumers conducted by Forrester Consulting on behalf of ICLP, rewards are most important in driving loyalty to a brand. Consumers across the UK, US, Brazil, China and India want to be rewarded with more instant discounts and savings. They also demand customisation of rewards and the flexibility of being able to use them when they want.

With this in mind, there is a significant opportunity for brands to increase the value of the rewards offered - to the brand, to the customer and to a loyalty programme member. By changing the way rewards generate value, they can become not only a financial game changer but also a competitive differentiator.

Where is the value in loyalty?

The ultimate reason for investing in loyalty initiatives is to drive customer engagement, retention and incremental revenue through simply selling more products and services. Loyalty programmes specifically provide a platform for creating new revenue streams, such as the sale of points or currency to partner companies or being able to offer other relevant products and services which can be purchased with currency to help reduce points liability, or cash. Ultimately, the profitable nature of a loyalty or reward programme can be monetised as a tangible asset in its own right and the opportunity to spin off their frequent flyer programmes has been evaluated by a number of airlines in recent years, such as Qantas and Jet Airways.

How do you make rewards even more valuable?

But how can the rewards and the mechanics of loyalty made to be more valuable for the customer? First, consider the earning opportunities and how you can make it easier for customers to engage with your brand and earn rewards. Traditionally, transactions and purchases have been the main driver of earning rewards but in today's digital and social world, how can you reward consumers for the interactions you value such as reviewing products, sharing news etc? In addition, rather than simply offering a fixed points-per-spend ratio, brands can enable the customer to take greater control of the value that they want to extract from the relationship by offering flexibility in how they are rewarded. For example, the American Express ChoicePlus Card in Canada gives cardholders the option of selecting the 5 merchants at which they will earn double reward points.

Second, consider a more extensive redemption proposition where the customer has the option to drive value from their loyalty programme membership early in the relationship, even if they only have a low points balance. Creating more immediate opportunities to redeem for relevant and more instant benefits will increase the value of rewards and the brand relationship, rather than members perceiving they have to collect and wait until sufficient points are accrued before they can redeem for anything of value to them.

Creating revenue from value and memberships

In exploring the value of rewards for the consumer, brands need to look at how they can increase the business value associated with offering rewards. Combining what customers want and using technology as the enabler can generate opportunities for additional revenue streams and packaged benefits are being increasingly used by brands to achieve just that. This concept is not new, as for many years financial institutions have offered added value accounts providing lifestyle benefits to complement their banking services for a fixed monthly fee

This concept is continuing to evolve, as Barclays in the UK are now allowing customers to self-select individual or multiple themes of bundles, e.g. Travel Pack, Home Pack, Tech Pack and the fee paid is based on those that they choose, increasing the incremental revenue opportunity for brands. This is just as relevant for brands who may not have a specific loyalty or reward programme and, in the example of EasyJet, they offer customers the ability to purchase an annual membership (EasyJet Plus) which offers many of the benefits that would form part of a frequent flyer programme.  

With customers continuing to demand greater personalisation and choice, it is anticipated that this will lead to a dynamic model of ultimate customisation and choice with customers selecting and paying for the individual benefits that are of most value to them.

With the needs and motivations of consumers evolving at such a pace, brands need to ensure they continue to adapt and deliver against what consumers demand. Greater choice, a higher degree of personalisation and relevancy will drive increased value whether the rewards are offered with, or independent of, a loyalty programme. However, what is just as important is that whatever reward strategy is employed and evolved, its success and effectiveness is measured and monitored to ensure that the value being extended to customers is also deriving significant commercial value for the brand.


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  • Loyalty in Dubai according to Sanjit Gill