We’re all familiar with loyalty points and rewards, and most readers use them regularly. However, many loyalty programs offer rewards that participants don’t fully utilize. Consumers are on the lookout for new ways through which they can unlock their purchases’ full value.
I recently spoke with Aron Alexander, CEO and Founder of Runa, the global digital value infrastructure provider, to learn more about the current landscape of loyalty and reward programs, exploring their limitations, and looking towards the future and how these programs present more opportunities to consumers.
Gary Drenik: What are the limitations with Loyalty and Reward programs today that make them insufficient?
Aron Alexander: Loyalty and reward programs have undeniably transformed the way businesses engage with their customers. According to a recent Prosper Insights & Analytics survey, over 62% of consumers actively participate in customer loyalty programs with retail brands and restaurants.
But several limitations persist, making them insufficient in meeting the evolving needs and expectations of consumers.
Many consumer programs limit members’ redemption choices to specific categories of rewards based on predetermined merchant choices, thus often failing to align with individual preferences. A study from Runa found that 61% of loyalty participants prefer to receive rewards in the form of gift cards, as opposed to the special promotions and discounts often offered by retailers, which only 15% prefer.
Coalition programs, which are typically funded by multiple merchants, involve a wider range of businesses, but can still frustrate consumers when they lack interoperability. Many loyalty programs only provide one-size-fits-all rewards, instead of tailoring their offerings to individual customer behaviors and preferences.
These issues result in consumers being unable to spend their rewards how they see fit – a problem further amplified by expiration dates and usage constraints. Such inflexibility is ‘”ose-lose” for both businesses and consumers: businesses risk customers hopping from one loyalty program to another, while consumers see the value they accumulate left behind, unused – which will inevitably frustrate them.
Drenik: What needs to be done to improve the overall experience of loyalty and reward programs for consumers?
Alexander: To enhance the overall consumer experience for these programs, the loyalty and rewards industry needs to enhance speed and ease of use for customers. A majority of program participants say that the most important factor when choosing their favorite rewards scheme is simply the ease of earning rewards. Merchants that reduce complications and make the rewards process as straightforward as possible reap the rewards from improved customer satisfaction.
Choice and flexibility are significant factors too. According to a recent Prosper Insights & Analytics survey, 26% of consumers are members of at least two loyalty programs, with 15% being members of more than 5. This translates to consumers amassing an ever-increasing cache of rewards, yet these rewards remain trapped within siloed systems, incapable of interoperability.
If people were able to use and spend rewards where, when, and how they want, they would benefit from a more streamlined customer experience and a more transparent overview of the digital value they possess.
Drenik; What should businesses do to upgrade their loyalty programs?
Alexander: Flexibility is a critical aspect in need of upgrading. 55% of consumers gravitate towards loyalty programs that guarantee seamless, practical redemption processes. We live in an era of instant gratification, and loyalty programs should be no different. Complex earning structures and rewards burdened by expiration dates are seen as inconvenient, so offering consumers the freedom to redeem rewards as they desire should be a crucial element of loyalty programs.
The perceived value of redemption choices also plays a pivotal role in fostering customer loyalty. Businesses should ensure that their loyalty programs not only offer appealing redemption options to retain their members, but also attract additional consumer segments by offering a wider range of rewards. This can include a multitude of options, such as cryptocurrency, NFTs, fractional shares, subscriptions, and more. Currently, the reward industry underserves these digital asset categories, and consumers actively seek programs that provide this extensive array of choices. In today’s landscape, consumers are no longer tethered to a single loyalty program, and would happily jump ship if they find a better alternative. Failure to provide an enticing rewards catalog simply encourages consumers to find competitors that do.
Drenik: Which emerging technologies/trends will have a significant impact on the future of loyalty programs and rewards?
Alexander: Technology is continuously updating and evolving in ways that influence the loyalty and rewards industry.
Personalized rewards have emerged as a critical driver for both consumer satisfaction within loyalty programs and businesses’ capacity to retain their valuable customers. The emergence of AI holds the potential to revolutionize this landscape through advanced data analytics – with this technology, retailers can delve deeper into consumer preferences and spending habits, allowing them to personalize rewards effectively for each individual consumer..
Digital wallets, which help consumers store and monitor their digital value in one place, also make it much easier for consumers to rack up rewards and redeem them seamlessly. Moreover, they have a better understanding of the digital value in their possession – similar to how they see and access cash in their bank accounts.
Cashback is now hugely popular as a rewards category and can now be effortlessly converted into various forms of digital value, for example, cryptocurrency. 77% of consumers do not use cryptocurrency, according to a recent Prosper Insights & Analytics survey, but that may be as they lack an easy way to store or spend it. Facilitating the receipt of cryptocurrency as cashback, followed by seamless storage within a digital wallet, may hold the key to propelling it towards the mainstream.
Drenik: How do you envision the future of loyalty and reward programs?
Alexander: As consumers continue to earn more and more digital value, it becomes even more crucial to give them additional avenues to spend this wealth within the mainstream economy. Facilitating the real-time conversion of funds from one value store to another creates a new revolutionary way to achieve interoperability across multiple rewards infrastructures. Businesses that commit to bridging this gap by rebooting their loyalty programs stand to rake in consumers who are eager to spend their newfound digital value.
The loyalty and rewards industry has a unique opportunity to establish a cohesive infrastructure that seamlessly facilitates the transfer of rewards. As of now, rewards are siloed within their individual infrastructures – Air miles only buy flights, Starbucks Rewards only buy coffee, and so on. What’s needed is an infrastructure that combines these systems, allowing them to be used interchangeably.
Drenik: Thanks Aron for sharing your insights into the potential transformation of loyalty. It’s clear that businesses have multiple avenues they can use to empower consumers to unlock their digital value. This highlights the untapped impact loyalty and rewards can have on the everyday lives of consumers. So, the next time consumers are feeling frustrated in how they receive or redeem rewards, consider these innovative approaches to unlock digital value.
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