September 25, 2019 CPG, Customer Data & Analytics, Customer Engagement, Customer Experience, Loyalty Trends

5 Ways to Maximize Loyalty Program Revenue

Woman shopping in loyalty program

Brands are looking for more ways to be smarter with their marketing investments. Within loyalty, marketers are expected to generate content, deliver a personalized experience and pay for rewards and program benefits. And this sits on top of the technology required to support these efforts. Loyalty creates a powerful ROI; however, brands are experiencing an increase of internal pressures to lower costs associated with the program. Here are 5 ways to turn your loyalty program into a revenue generator from the start.

1: Monetizing Media Space

Loyalty customers are more highly engaged than your broader range of customers. Customers are selective on which programs they choose to engage with and raise their hand to surrender data in exchange for the benefits of the program. Because of this, the open rate and CTR of loyalty communications are much higher than broader brand communications. Here’s the approach to monetizing your member communications: Using your loyalty data and program engagement, create highly targeted segments based on demographics, behavior and emotion. Use your communication channels to message your key segments, then sell media space within the communication channel based on the segments. This helps offset costs and can be a great value add to the customer as they have access to more relevant offers and content that they wouldn’t otherwise be aware of. We will caution, however, to always keep your customer at the focus of who you choose to partner with on these communications. There’s no faster way to alienate your best customers than by sending them offers that don’t make sense to them.

 

2: Rewards & Partnerships Investment

Your program can offer an attractive route to investment for third-party brands. Be sure to fully understand and leverage the unique power of your program, whether it’s scale-based or qualitative (e.g. a distinct member base or segments). Brands are often willing to provide value to your program in exchange for access to the right audience. This may come 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. Understanding your point of difference and creating simple and well-defined packages for partners to be promoted in program marketing is key to unlocking the potential of your program. The better you can show third party brands the value of your program, the more they are able to divert marketing budget for you.

Furthermore, well-curated and targeted content from partners can have a wider program benefit of driving emotional engagement for members, providing new and meaningful ways for them to realize program value. This richer program experience enables you to create a win-win-win for you, partners and your members with long-lasting, profitable relationships.

 

3: Develop Key Cross-Brand Partnerships

Cross-brand partnerships, or in some cases coalitions, are a great way to drive revenue to your program. Not only can you and your partners share costs or get creative in how members burn their points, you’re giving members more options on how they can use points or earn benefits from more than one brand, a clear value add.

Should you have a sizeable standalone loyalty program, creating a coalition is a great way to drive revenue. First, signing up partners who are happy to earn and/or burn points allows for the coalition owner to earn revenue from issuing points. For example, a partner may get charged $0.005 for every point issued but when points get burnt with the partner, the coalition owner would pay them $0.004 thus pocketing the $0.001. Multiply that up by a few million transactions and this become a significant profit generator. The other way the coalition owner earns revenue is when points are burned in companies owned by the coalition owner, especially when they are funded by a partner. This is because the points where funded by one of the partners and then are redeemed in the coalition owner’s store. Here the coalition partner would essentially pay themselves for the points being burned.

 

4: Sell Your Insights

Data is arguably the most valuable aspect of your loyalty program. Not only does it allow you to personalize their loyalty journey and campaigns, but it provides insight into who your customers are and what they want. Other parties want and need this data. Selling these insights is a common practice in grocery retail where aggregated loyalty transactional data is sold to suppliers. This allows the suppliers to have a better understanding of who buys their products as well as use the retailers’ own data to create business cases for product development, delisting competitors and evaluating promotions.

In most cases there are people interested in analyzing loyalty data from industry watchers, consultants, suppliers and more. Another point of caution here, be sure your customer knows where their data is going and give them the opportunity to opt out of third-party data sharing.

But also growing as a trend is “selling” that data to other business units of the same brand, such as merchandising, product innovation, pricing strategies, operations, customer relations and more. Loyalty data, which is omni-channel and attributable, gives deeper insights into the business itself and allows brands to uncover further revenue opportunities.

 

5: Pay to Play Loyalty Programs

A growing trend in loyalty is offering paid tiers or paid programs. Restoration Hardware is a leading example of this construct. Members are asked to pay $125 USD in exchange for an always-on 25% discount and additional benefits. Getting members to pay provides the revenue up front to invest in high value rewards and member experiences. Membership numbers might be smaller than a free loyalty program, however, with a paid membership hurdle, you’re ensuring highly qualified leads that can then be leveraged in all the ways listed above: monetizing communications for other brands, attracting free-to-you rewards from burn partners, partnering with brands who are looking for access to a high quality audience and selling customer insights to interested parties.

 

The value and ROI of a loyalty program is inherent, however marketers keen to gain internal alignment and support from stakeholders can show the immediate business case for implementing or enhancing a program through these 5 steps.

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