What do consumers want most when it comes to loyalty and rewards programs?
It’s a question that’s important to not just the designers of loyalty platforms, but to those in the retail and travel industries and any other vertical in which rewards and points play a major role.
A recent survey by Loylogic took a look at what consumers really want, called the "Frequent Traveler Survey 2013," and some of their findings may surprise you. For example, 60 percent of consumers indicated that they’d actually prefer flexibility and convenience to value when it comes to rewards and miles, while 40 percent stuck with the miles with the higher value.
So how does a successful loyalty program balance consumer desire for convenience and value? PYMNTS.com spoke with Dominic Hofer, founder and CEO at Loylogic, to find out.
PYMNTS.com: First, tell us what you were really trying to learn from this survey. Loyalty rewards aren’t necessary something consumers think about every day, so how did you try to really dive into what the people want?
Dominic Hofer: At Loylogic we serve some of the largest and most innovative loyalty programs in the World with our leading eCommerce and ePayment solutions for their program members. Some of them are truly global programs such as United Mileage Plus or Hilton Honors, others more leading regional players like Allianz Suisse insurance or Etisalat telecom in the Middle East. In total, more than 20 million active consumers worldwide have access to our points (or miles) shopping solutions. Naturally we aim to stay on top of the latest technology developments. However, it is mainly the voice of the customer that gives us the direction of what our solutions should provide. For many years, The Freddie Awards have been a great platform for collecting the voice of thousands of frequent travelers from all over the world. Members of over 400 different programs responded to the survey and provided us and the loyalty industry with clear answers on members’ needs and wants.
Consumers overwhelmingly opted for “redemption options” when asked about the aspect of a loyalty program that was most important to them. What was Loylogic’s reaction to this finding?
Consumers participate in loyalty programs because they want to be rewarded. And they clearly understand that the points that are being collected are not the “reward” but the product or service that they receive in exchange for their collected points. The survey simply confirms the obvious: rewards are the key factor for program participation and member engagement. If the reward solution - 'solution’ understood as a program’s integral reward offering that certainly must go beyond a merchandise-based web catalog - is weak, then consumers won’t value those points and the program will never perform. Our research identified two similar-sized customer groups when it comes to points redemption: one group seeks “value” for their hard-earned points, the other group appreciates “liquidity” for their many points; so the opportunity to use points anytime and anywhere while not being too concerned about the underlying redemption value. In other words, we can say half of the consumers are “value redeemers” and half of the consumers are “convenience redeemers.”
Loylogic is the only company that can provide reward solutions that respond to both redeemer needs. With our client-branded, online reward shops we provide “value” through reward deals, whilst our mobile payment solution PointsPay delivers the convenience, enabling members to use their points at more than 30 million online and in-store merchants worldwide.
One of the study’s most interesting findings was that a whopping 96 percent of respondents said they’d check their loyalty program before making online purchases if given the right products. Behavioral change is the name of the game, so why is this important?
The clear response was surprising but what it says is that, programs have an opportunity to play an everyday role in the lives of their consumers and to move top of their minds as a loyalty program, but probably even more so as a company brand. If the rewards of a program are easily attainable, then customers are willing to engage and confirm that they will want to earn more of those points. Not really rocket science, however, in the airline industry, the reward selection goes down in line with the rising oil price. While we understand the challenges that come with funding billions of miles, we also think that it’s a dangerous path. Airlines depend on the billions of dollars of miles sales revenue to the credit card industry. They are or will be suffering as soon as member engagement drops. We think that PointsPay is an excellent product to (a) counter such trend in a very controlled manner and to (b) substantially differentiate any loyalty program.
Another interesting result was that 60 percent of consumers said they’d actually take lower value from their miles if they could redeem those points anywhere. Talk about how that ties into PointsPay.
It relates to the statements made above. With PointsPay we enable program members to carry their points in their pocket - actually more in 'the cloud’ above them - and use the points wherever and whenever they want. I personally think it also has a lot to do about “being independent” and about “being in control” when redeeming points. And for this feeling and privilege, many consumers are happy to accept a lower points value. This said, the points values are fully determined by the participating programs; PointsPay has zero influence on this. For those reasons, PointsPay is a pretty perfect solution: it directly responds to the strong “convenience” consumer need while offering program managers the opportunity to unlock equally strong value potential for the program funding company.
Finally, what either surprised you most about these findings, or what do you think the most important takeaway is?
I would like to answer that question from two perspectives.
Looking at the consumer feedback I’d say:
• Surprising that 60 percent of members opt for “convenience” over “value.” I thought it would be more around 25 percent - especially with the expert frequent traveler panel that participated in the survey - but now I even think it could develop towards a clear majority.
• Surprising that 66 percent of frequent travelers seem to “expect” from their programs that points miles will be available for redemption on their mobile phones. But I like it.
Looking at the opportunities that become available for program managers, I’d say:
• Great to know that PointsPay provides not only the ultimate, global reward selection but moreover the potential for designing truly segmented reward solutions.
• Great to know that PointsPay provides an option to steer the program business case and to boost program value while completely satisfying a, so far, unmet consumer need.
To view more of hte survey's findings, look at the infographic below.