The business of loyalty: an ever-growing opportunity
Over 7.6 billion members across more than 10,000 reward programs have an estimated 360 billion US dollars’ worth of points and miles sitting in their member accounts, a number greater than the GDP of Singapore, the Philippines, or Finland. The growth in reward programs has caused the overall loyalty and reward management industry to grow at an estimated rate of 22% to reach and estimated USD 4.59 billion by 2021.
But with all the investment and promise of revenue growth, a 1/3 of all reward points go unredeemed. Customers continue to express their dissatisfaction with redemption options and complexity of the process. In addition, even the most sophisticated and consumer-friendly reward programs continue to fall short of addressing their full user base and are constraint with operational costs and overheads.
Pains of modern-day reward programs
The first issue customers face today when redeeming their reward points and miles is accrual speed the time or effort needed for them to accumulate enough points for a redemption. For Frequent Flyer Programs (FFP), the long tail of non-business travelers and less-frequent travelers, accumulating enough points for a worthy reward is close to impossible. Even with an FFP linked credit card, once the user gathers enough points, they are surprised with fees and taxes associated with an upgrade or a flight purchase that they would need to pay for in cash.
The second problem facing reward program members is the value of the reward itself. A growing number of reward stores offer customers less-desirable options as they rely on third-party vendors and suppliers who either inflate item prices or focus on high-margin items with long shelf-life. This is causing customers to find items that are either outdated or significantly more expensive compared to other online and offline channels.
However, consumers are becoming more educated and more demanding. It’s no longer enough to offer an online reward store with limited options serving a subset of the reward program base, nor are gift cards enough in being the most flexible option. For those reasons, loyalty programs must find ways to increase engagement and perceived value of their points and miles by being present where members already spend their time shopping, and by inserting themselves in that process in a frictionless manner.
Changes in the reward point redemption landscape
Luckily to consumers, reward brands are already looking for ways to address these issues. A number of examples exist, such as Amazon’s “Shop With Points” in partnership with a number of US credit card companies - like Chase, Citi, and American Express. Qantas Airlines allow their members to use their points to pay for hotels, restaurants, and cinema. Emirates Airlines partnered with Careem, Uber’s competitor ride-hailing app in the Middle East. Nevertheless, what works for Amazon and American Express doesn’t always work for everybody else. There are plenty of other online retailers where customers love to shop, and most are not going to have the time, resources, and negotiating leverage to strike deals with the world’s leading loyalty programs, nor would smaller regional loyalty programs have the leverage to strike deals with the world’s largest retailers.
PointCheckout is a payment method that is added to the checkout pages at online retailers, enabling members of participating reward and loyalty programs to pay using their reward points or combine points and card payment, if they don’t have enough balance. By placing our company directly in the checkout process, it created a frictionless experience for online merchants, reward programs, and customers. PointCheckout handles the full reconciliation process with reward programs, and merchants are paid in cash, just like any other payment method.
PointCheckout and other new solutions provide a great fit for rewards programs. They help reward programs increase member satisfaction and redemption rates, reduce program management costs and overheads, streamline new partner on-boarding at a very low cost, and, customers using those new technologies start seeing more relevance and value to their reward program points and miles.