Point utility increases as brands revamp loyalty programs

On average, Americans claim membership to 16.6 loyalty programs, of which they are active in 7.6 of them. While overall membership has steadily increased since 2015, active membership hovers around seven programs. As brands realize the value of loyalty programs and launch new programs or improve existing programs, customers become more savvy in navigating and maximizing their experiences. In fact, whole publications, like The Points Guy, are dedicated to helping members maximize their loyalty memberships and co-branded credit cards by comparing the value and benefits of each. Dedicated members boast about their status and ability to save money by paying for a product or service entirely with points and rewards.

You can keep members engaged by matching the right benefits to the right tier of customer and giving your program’s currency “buying” power (such as into external partnerships). Brands that provide greater choice through increased earning and redeeming options can make members’ program experiences more meaningful and personalized to them and accumulate rich data along the way.

Additionally, brands that lean into economic modeling as a part of loyalty program redesign can drive increasingly active participation in their loyalty programs. This process leverages advanced analytics to optimize the mix of program elements for your brand’s unique audiences, as well as rightsizing for multi-tiered programs, to maximize both engagement and ROI. (Learn more about Phaedon’s patent pending Economic Modeling).

During the pandemic, brands added or heavily promoted everyday partners, including co-branded credit cards, to stay connected to their customers making essential purchases. Now, brands are using partnerships to position themselves as lifestyle brands, striving for the coveted flywheel effect, whereas member participation, retention, and brand advocacy collectively strengthen each other. This results in reduced acquisition and retention costs through word-of-mouth referrals and repeat business.

Earlier this year, Bilt Rewards, the program that allows members to earn points for paying rent by partnering with management companies, announced plans to offer points to members making mortgage payments as well. Bilt members in a Bilt Alliance building can request to have their rent payments “shared with all three credit bureaus” and build their credit at the same time. Members can use their Bilt Rewards points on things such as travel, transportation, fitness, dining, shopping with Amazon, and rental credits. Bilt’s earning and redeeming mechanisms make it relevant to target consumers’ everyday lives.

Hilton promoted concerts as a redemption option of its rewards program during the 2024 Grammy Awards. The ad featured footage of members attending an exclusive concert performed by Icelandic musician Laufey in a Hilton Hotel and highlighted members who redeemed points for the experience. While concerts may be more of a luxury versus an everyday experience, Hilton still benefited from the brag-worthy experience it was able to offer through this exclusive partnership.

The right partnerships matter just as much as the redemption experience. Brands must continue removing friction in the conversion or redemption of points through partners. Keeping programs sticky ensures redemption offers and the “purchased’ experiences have the right value exchange in members’ eyes.

Brands have made great strides since the pandemic—some set up ecommerce for the first time, some created or vastly improved app experiences, and many moved quickly to adopt contactless methods of payment and Buy Now Pay Later flexible financing options. Today, we increasingly see brands across industries allowing members to pay with points at check-out or redeem them for personalized coupons.

Whether a customer is part of a loyalty program or not, most brands aim to provide personalized experiences that are as close to a 1:1 level as possible. Having a connected, omnichannel approach, where a loyalty program can be a part of the ecosystem, is vital to achieving this goal. Loyalty programs can further Customer Experience Transformation because brands can activate customer data through this owned “channel.” According to Mintel’s 2024 US Loyalty in Retail report, consumers who were asked to consider different factors in their loyalty toward a brand ranked “quality customer service” and “convenience” among the top five. They also ranked “flexible return policy,” and “seamless shopping experience.”

Wayfair considers themselves a data company, and their connected journeys showcase their ability to leverage customer data to deliver brand-consistent, behavior-based member experiences across its email, app, and website channels. It’s not just their promotional campaigns that are omnichannel—including social and MMS, their cart abandonment journeys bring in-cart items to the home page when signed-in and highlight coupons relevant to wish list items. Additionally, Wayfair deep links within its app any links shared.

Loyalty programs help consumers save. In fact, 56% of survey respondents agreed with the statement “I am relying more on loyalty programs right now due to higher prices,” according to Mintel’s 2024 US Loyalty in Retail report.

It is a little-known fact that brands must list points as revenue on their balance sheets. While, historically, brands have kept listed values and perceived values of points confidential from public eyes, members overwhelmingly view points as currency. Loyalty program terms and conditions even specify that points cannot be transferred in the event of divorce or death. And, as brands allow members to convert unused points to cash in the form of vouchers, gift cards, crypto, or another form of currency, they place monetary value on those points. Of course, the “true” value of those points varies contract to contract, promotion to promotion, and member to member.

Point utility can help differentiate loyalty programs within their respective industries. It’s a win-win situation for brands. Members have freedom in how they earn and redeem points, and brands gain valuable zero- and first-party data as members engage through the loyalty program. This creates a compelling value exchange and sets brands up to have the data they need to reach consumers and deliver personalized experiences tailored to member preferences.

It’s been shown time and time again that during times of economic uncertainty brands that cut back on marketing spend, program benefits, and member experiences miss the opportunity to drive deeper emotional loyalty with members. By recognizing customer loyalty through distributed points that members use to cut costs or redeem for valuable goods and memorable experiences, brands show up for their customers. Loyalty programs drive retention, build brand advocacy and identity, and help brands stay resilient through tough times and thrive in better times.