NYPAY hosted a panel of senior rewards and loyalty experts to discuss “The Future of Loyalty and Rewards” at a gathering of senior payment industry executives on June 13 at the offices of AllianceBernstein. The insights provided by the gathering of senior industry leaders proved to be as interesting as those of the rewards and loyalty leaders sitting on the panel.
The capacity crowd of payments industry professionals that filled the meeting space represented firms coming from all aspects of the industry, including loyalty companies, startups, advisory firms, issuers, program managers, networks, and merchants. Among the senior executives attending and providing perspectives on the changing business of the loyalty industry were Charlie Kim, CEO of NextJump, Joe Salesky, Founder and Chief Strategy Officer for FreeMonee and Schwark Satyavolu, CEO of BillShrink. The high turnout and broad array of attendees reflected the rapid and dramatic changes sweeping the payments industry.
Panelists included a banker, a merchant, a reward and loyalty vendor and a leading industry analyst:
- Jason Brooks, SVP, Cardlytics
- Arnold Lewis, VP Customer Loyalty and Rewards, Macy’s
- Patricia Hewitt, Director / Analyst, Mercator Advisory Group
- Amy Harris, SVP, Loyalty Marketing and ThankYou, Citi
The panel provided their own perspectives of the trends and future of the rewards and loyalty business, and a healthy back and forth exchange ensued between the panel and attendees, resulting in a lively discussion. With long-held assumptions being challenged, expert opinions vary widely; given the quality of both panel and attendees, a wide variety of insightful views were aired.
The major observations highlighted during the session included:
- The speed at which the loyalty space is evolving is breathtaking. Merchants have seen their choice of merchant-funded rewards options grow from the classic loyalty programs (buy 10 coffees, get one free) to incentive programs (such as 50% discounts from Groupon). For merchants, the cost of loyalty programs used to be 1%; as a result of new reward models from companies like Groupon/LivingSocial, consumers are now expecting 30-50% off purchases.
- How shoppers see and value rewards programs are beginning to negatively impact their view of the brand. Loyalty programs grew in importance during the economic downturn as brands used loyalty to gain much needed increases in sales. But “flash deals” have begun to erode brand value as consumers have start valuing brands at 50% less. Is a better strategy to offer point-based rewards that doesn’t reduce the value of the product or brand?
- It has become increasingly difficult to differentiate one reward program from another. The average consumer now subscribes to 11 reward programs compared to 3 just a handful of years ago. One senior executive referred to recent studies showing that points have become currency and many consumers build rewards into their own personal financial management.
- Panelists agreed that consumers have increasingly shown less tolerance in lag time and demand more choices and interactivity with merchant discounts. Consumers are interested in merchant incentives that have moved from being cumulative, redemption-oriented to real time interactive.
- Loyalty programs have evolved from being transaction and payment focused, to being behavior and activity (merchant) focused. Sending a non-targeted offer to all prospects leads to costly behaviors or negative goodwill (sending a vegetarian a free ticket to the local meat market). However, providing targeted, local rewards that deliver a high level of value to consumers benefits all parties to the program.
The consensus was that the industry will continue to see more loyalty and rewards models develop in the near-term before the “consumer speaks.” We are still in the “wild west” days of rewards and loyalty where new, innovative models are being tested, and a few clear winners will emerge. It is clear that targeted, immediate rewards that incent the desired purchase behavior will be highly valued by merchants and issuers. The remaining question is which loyalty model will win the consumers’ hearts and minds long-term.
NYPAY is a New York area industry group whose primary goal is to provide face-to-face networking and idea exchange for payments professionals. NYPAY consists of hundreds of senior-level payment industry professionals. NYPAY continues to bring together some of payment’s leading forward thinking minds to advance the conversation and stimulate innovation within the payments industry. For information on future events and to join NYPAY, visit NYPAY on LinkedIn.Like This Post