When Gated Payments Open Loyalty’s Gates

gate locked

Loyalty is a fickle thing in commerce and coveted by merchants regardless of market.

Because, of course, loyalty is the gift that keeps on giving, that keeps dollars coming into registers, virtual ones (and the real ones), and represents a return on investment that can be rather outsized.

But without understanding what loyalty is and what cements it, how can companies pursue an optimal strategy — one tailored by consumers to get the most bang for the (reward) program’s bucks?

Loyalty as a concept: What does it mean in today’s world when consumers have so many choices and flexibility in how they pay?

Beyond being an expression of commitment between the two parties — consumer and merchant or business to business, for example — ZipLine’s Kristen Bailey, chief marketing officer, said brands and loyalty help shape one another.

But there must be an understanding in place — a relationship where “the merchant understands the needs and wants and desires of the consumer and for the consumer [to] understand what the brand stands for. What I find fascinating,” she said, “is the way consumers define themselves by the brands that they really are loyal to. They’ll say, ‘I’m a Harley person,’ or ‘I’m a Mac person.’ They literally describe themselves as a brand, and it’s a great illustration of a sense of commitment.”

For some merchants, getting to that level of commitment can be fostered by the payment itself. How does a loyalty program become comprehensive, and how do you remove friction?

“What I see [happening] in the marketplace … is this concept of what I call payment-gated loyalty,” she told PYMNTS. “If you look at Target, Starbucks, Cumberland Farms or Dunkin’ Donuts, there are lots of retailers who have constructed programs that aren’t even positioned as quote-unquote loyalty programs.”

Instead, she likened them to “brand programs: The consumer simply cannot participate in them without providing payment — and so, payment serves as the gating function to access for the consumer. That really illustrates commitment from both parties.”

Gated payments, she said, are frictionless and provide both utility and convenience to the consumer simultaneously. There’s both expectation and trust, she said, “that I’m going to provide you with this form of payment and I trust you as a brand to have stewardship of that information.”

One conduit to such cemented relationships: private label debit cards. As proof positive, she said ZipLine studied (through its own payment/loyalty debit offerings at convenience stores) 165,000 consumers over two years.

“What we saw is that consumers visit more often and spend more” — 35 percent more on fuel and other purchases, in fact, whether or not there was another loyalty program in place. The firm found that active users topped more than 80 percent of those who joined.

Segmentation helps in crafting a rewards program, she said — “How often do I visit, and when do I visit? What do I buy when I visit? Putting me into a segment with other people who behave in the same way allows the merchant to get their arms around Big Data. At a high level, it’s very simple.” Of data managed this way, the “information starts to hang into segments. So, I don’t go into segmentation research with any preconceived notions. I have no idea what the segments are going to be or how it’s going to hang together. I just let the data tell me,” Bailey said.

And, in looking at the design of a loyalty/payments program, the data will help retailers find out that it’s not so much about “buy nine cups of coffee, get the 10th free” anymore. The real value lies in looking at the lifetime value of the consumer.

So, alongside a robust payment-gated loyalty program, she said, comes a well-balanced relationship. The consumer is illustrating clear commitment to the brand, and the brand is illustrating clear commitment to the consumer at the same time.

When asked why debit may be an optimal way to conduct such a loyalty program, Bailey said, “consumers understand and love debit … it helps them manage their money. Sixty percent of millennials don’t even carry a credit card,” with Target’s REDcard being a pioneer.

“Linking payment and gaining access to loyalty through payment,” she said, “creates real utility, reduces friction, adds convenience and improves the overall brand experience for the customer.”