Mastercard: It’s The End Of Rewards Points As We Know It

Consumers are awash in points. Starbucks gives them Stars, airlines give them frequent flier miles, Bee Built has Swarm Swag and Pixi Beauty hands out Pixi dust. Whatever they are called, they all more or less work the same way the customer builds them up through brand interactions and gets to spend them on rewards.

The appeal of loyalty programs built on and around points, Francis Hondal, president of loyalty services, managed services and labs as a service at Mastercard, told Karen Webster is simple. Points-based loyalty programs are relatively easy to set up and many brands have leveraged them to great effect. Customers are drawn to the gamification of racking up points to get things for free and as long as consumers keep doing that, brands will continue having that as part of their loyalty mix.

 There’s just one problem, Hondal told Karen Webster in a recent interview. Points-based programs aren’t very effective at building loyalty because they don’t provide what customers say they need to become loyal.

“Points are easy, so they have become ‘Chapter One’ of the loyalty playbooks for everyone,” Hondal told Webster. “To get beyond that and to start writing the next chapters, people have to operationalize all the other things that drive loyalty. To get beyond engaging the consumer with that easy but not too effective earn and burn formula it is about rethinking the whole way they interact with the customer.”

Why Rewarding A Customer Means Meeting Them Where They Are 

This rethink, Hondal says, starts with recognizing two key trends.

The first is that brands are now beginning to invest in building loyalty programs that genuinely connect with consumers. According to a recent Mastercard/Harvard Business Review study,  72 percent of survey respondents say optimizing customer loyalty is a top-five priority of senior management at their organization this year, and more than half have updated or refreshed their loyalty strategy within the past two years, including 30 percent  who did so in the last year.

And, the data also demonstrates, they are increasingly aware that the primacy of points is fading.  Fifty-three percent believe digital access will be the single most important driver of customer loyalty five years from now; five years ago, traditional points and rewards were seen as the main driver of customer loyalty.

The second trend is the recognition that for all the interest, investment and acknowledgment of the shape of things to come  there isn’t much confidence in the effectiveness of the offerings to their customers. Only 42 percent of respondents believe their organization's customer loyalty strategy is effective and 46 percent of respondents say their loyalty strategy lacks innovation.

“There is openness from brands, most of them at this point, that they need to transform themselves and their ideas around loyalty around the consumer experience and meeting the customer where they are in context.  But there is also the acknowledgment that it will take a lot of investment in technology and a new communications paradigm with their customers, to get there,” Hondal observed.

That won’t be easy.

 Brands with legacy infrastructure are unable to pivot quickly and without well-defined data management strategies, she noted, are increasingly thinking about how to partner with FinTech service providers to get there.  And some brands and verticals, she said, have more of an advantage when it comes to forging those emotional connections with their customers in context simply by the nature of what they sell or how often then encounter the consumer in their daily journeys.

But she noted, while all specific approaches are going to vary there are two golden rules that every successful loyalty play will follow from the word go.

“Know your consumer is the first rule and then develop a data management strategy that allows to you really see them for who they are and then use those insights to come up with all these wonderful plans you want to engage them with. The second is always think about context be where they are and ready in the style they want to engage with. Those things sound simple, to get it done right requires a multi-tiered strategy that incorporates communication, channel management, organizational skills around campaigns and strong follow-through.”

It’s a lot, she noted, and certainly a lot harder than just winging some points at a customer and hoping for the best. But, in a changing landscape, it's what brands have to do, which is why Mastercard has spent the last several years upping its commitment to make that transition.

The Reforming Field 

Because this is a tall order for brands, Hondal said, Mastercard over the last several years has become increasingly dedicated to expanding the stable of value-added services it can offer its partners at banks and brands across verticals to help them grow and expand their businesses. Loyalty is central to those value adds, she noted, which is why Mastercard announced its acquisition of SessionM last week.

“SessionM is a consumer engagement platform that will be that critical technology to help brands manage a lot of data. Getting that necessary 360 view of [the] consumer is hard and what their technology can do is help brands really see their customers from all angles and then help them devise the right strategy around reaching out to and retaining them.”

And while SessionM is itself not a household name much of its current client list is: Chipotle, Coca-Cola, Huggies, Air Canada and L’Oréal are a handful of examples.

Hondal said that brands need powerful tools to take on these challenges. The world at the end of the 2010s is an undeniably different landscape when it comes to building customer loyalty than it was at the beginning. The customer is constantly in flux, as is what they value. Building a loyalty program that speaks to those values, the first step is “being continuously in the know.” And to do that, she noted, brands will need to start with a really strong data strategy — because there is no last word on loyalty or how to build it, just an ongoing conversation about the consumer, and giving them what they need.

“At the end of the day, one piece of advice won’t change. Continue to listen to your consumer, and start the planning process there knowing that the plans will likely change as the customers continue to.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.