Retail Loyalty Programs Evolve In Pandemic

Retail loyalty programs are alive, well and even innovating during the pandemic. As the consumer shifts to Digital 3.0, loyalty has become more about data, technology and customer strategy than it is about points and rewards.

“Effective loyalty programs utilize data to profitably change consumer behavior,” says Brandon Logsdon, president and general manager for loyalty program solution PDI. “Due to the pandemic and other market forces, consumer habits have shifted, and data from loyalty programs are more critical than ever to stay ahead and adapt to evolving consumer trends.”

New research from PDI shows that retailers — convenience stores in particular — are using loyalty programs more as a customer retention strategy than as a way to increase purchase recency and frequency. The research shows U.S. convenience retailers said customer retention was their top priority in the current environment, and 66 percent of convenience store retailers say they plan to improve the customer experience after the pandemic subsides.

On the technology side, the loyalty sector now has its first blockchain solution. Because of its digital ledger capability, retailers and loyalty program administrators have looked to blockchain as a way to secure loyalty information and make it more personalized. It also has the flexibility to store cryptocurrency transactions, which is what HashCash is now bringing to the market.

The company says its blockchain solution will enable retailers to modify existing loyalty programs, integrating it with blockchain technology. Powered by DLT, the blockchain-based loyalty and rewards program aims to further customer engagement and gather data on consumer spending patterns.

“Blockchain integration transforms the traditional loyalty and rewards program into a complete customer management system that helps businesses to improve their brand offerings,” said Raj Chowdhury, CEO of HashCash Consultants. “Owing to a unified platform, the program becomes equally beneficial and easily accessible to the consumers.”

According to HashCash, retailers participate in loyalty programs without getting consumer data from them. It claims that a blockchain-based solution will enable businesses to move away from loyalty program cards and personalize rewards as well as rewards redemption and in the process increase ease of access of  points and rewards.

While blockchain technology can add to the customer experience, the loyalty industry is also considering looser contracts and conditions to amp participation. Just as the subscription retail business is adopting the ability to “pause” a subscription, loyalty program platform providers are looking at increasing the availability of “pausing” loyalty contracts.

“It has always been in the best interest of ‘Suppliers’ to retain customers; to [maximize] profit [and] prevent competitors from gaining a foothold in their market,” says loyalty news source The Wise Marketer. “They can do this by ‘punishing’ churn or rewarding loyalty: metaphorically two approaches, the stick and the carrot. Both strategies increase switching costs — when switching costs are sufficiently high that customers stay with a supplier they do not like rather than switch, the customer is the victim of ‘lock-in’.”

The argument for lock-in programs is that they provide an obstacle to program churn. The downside is they often have early termination fees, although The Wise Marketer says these have declined in usage. The new term that is being considered is “free exit.” Free exit allows customers the freedom to step in and out of loyalty schemes as they choose. It also keeps the onus on retailers and loyalty platforms to maintain their focus on overall customer satisfaction rather than specific program satisfaction.