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Changing the Loyalty Paradigm

 Filling the Void Between Loyalty and Payments

The basic principles on which loyalty programs are based have remained the same for decades – customers are rewarded for their business with points, miles or vouchers which they can then exchange for a specific – usually limited – range of goods, typically with the issuing brand. Guy Rosenhoiz of Nayax Coinbridge reviews how this traditional model constrains loyalty programs and limits their power to incentivize shoppers to keep spending with a specific brand.

He will further introduce what has become clear as the next logical step in the evolution of the loyalty industry – the merging of loyalty and payments – and set out the benefits for both retailers and consumers.  

Guy Rosenhoiz, CEO, Nayax Coinbridge

Unfulfilled potential 

The popularity of loyalty programs is fueled by the idea that a customer will get something they value in return for their engagement with the brand. Redemption must therefore be relevant, straightforward, and accessible. Yet, consider the following: an estimated 85 percent of loyalty points are left unredeemed.  

As well as representing missed engagement opportunities, unredeemed loyalty points are considered a liability for a brand, in the form of a future cost that the company may have to incur. When enough loyalty points are left unredeemed, the brand may need to set aside funds to cover the future cost of providing the rewards, which can impact their financial statements and cash flow.  

There are a variety of reasons why points aren’t redeemed, including point expiration; rewards being tied to specific products or activities that simply don’t appeal to customers; and customers leaving physical cards and vouchers behind, or forgetting to redeem digital coupons at checkout. In one survey, it was found that 26 percent of Gen Z – people born 1997-2012 - never redeem loyalty program rewards at all!  

It is clear, therefore, that today’s loyalty programs are falling far short of the mark when it comes to rewarding customers in a meaningful way for engaging with their brand, and retailers will typically experience lower customer engagement levels as a result. In order to reap the benefits of increased engagement that improves their own bottom line, and avoid the liability of unredeemed points, retailers therefore have a vested interest in making it easy for their customers to spend their points – which includes expanding the range of available redemption opportunities. 

Reward constraints 

Whilst, as mentioned above, the basics of loyalty programs have stayed the same over the years, the loyalty ecosystem hasn’t remained completely static. In an effort to stand out in the vast ocean of loyalty programs, in recent years brands have created partnerships and alliances to facilitate point redemption at other retailers. For the consumer, being able to ‘burn’ points at a wider range of outlets enhances the appeal of remaining loyal.  

For the brand, however, such a move requires substantial behind-the-scenes investment of capital, time and resources, making it increasingly prohibitive as they extend coverage of their program to an increasing number of merchants. 

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