A messed up loyalty market
qiibee’s back with another story. Last week we introduced ourselves, but today we want to take you to the very beginning of our journey: Why we even started.
We would guess that you and possibly every adult you know is involved in a loyalty program. In fact, a recent study conducted by Consumer Reports showed that more than 80% of adults in Western economies participate in at least one loyalty program and oftentimes, even in multiple, competing loyalty programs. As such they represent strategic investments for customer relationship management, which can either make or break a company’s image.
Within the last twenty years, technology has transformed our lives rapidly, especially when it comes to consumer satisfaction and loyalty. Consumers seek for a faster, connected, interlinked way to communicate with their brands.
Most companies create their own loyalty programs such as Etihad Airlines, Wallmart’s hybrid loyalty program or Mariott’s Reward program, or form separated coalitions between each other, think of United’s MileagePlus. The Plenti program, launched in 2014 by American Express, brings together Macy’s, Hulu, Rite Aid, AT&T and ExxonMobil, among others, or Miles & More that provides a loyalty platform for 9 airline companies. While each existing service provider tries to sell their own loyalty solution, for example Shopkick, loyaal or even REI, a community-driven loyalty reward program, we are facing a real avalanche of loyalty programs across various industries that lead to companies and loyalty program owners having to spend more than 160bn. USD annually to compete with each other. At the same time customers are having trouble to keep track of their different loyalty points or catch up with every new redemption rule and discount period each individual loyalty program offers.
The loyalty market is fragmented and one of its consequences is its account activity issue. Bryan Pearson, president LoyaltyOne, pointed out in a recent study that the average American household is registered to 29 loyalty programs, but only uses around 12 of them. Since these programs are not compatible with each other, customers cannot easily interchange the points earned in one program to another. Thus, they are limited by the choices the loyalty program offers, resulting in lower engagement and redemption rates. Combine this phenomenon with the high customer acquisition costs resulting from the dissatisfaction of the loyalty program from current customers.
We see the last and most sensitive issue in the central storage of customers’ data. All this sensitive data reflecting the lifestyle of the customer is owned by the loyalty program owner, who is responsible for its security. Storing this data on a central server, automatically increases the risk of failure due to a single point of attack. This may result in customers that risk their privacy and loyalty program owners risking their brand image — not to mention the legal consequences.
Only recently Equifax, one of the largest credit reporting companys in the U.S., got into the headlines when up to 143 million customer records were breached in a hack that began in mid-May and continued through July of this year. Taking into consideration the 2017 survey of talend where 53% of consumers listed a company falling victim to a data breach as a reason for breaking up with a brand, special efforts need to be taken in this department.
To sum up, the loyalty program status quo faces three inherent problems:
- a high rate of fragmentation,
- operational inefficiencies and
- data centralization.
The ideal loyalty market solves the problems mentioned before by consolidating it, increasing the efficiency for users and program owners as well as decentralizing the ownership of transaction-related data.
Let’s disrupt the loyalty market together! Join us now on our journey!
Disclaimer: All the information in this article are for informational purposes only and do not constitute legal, accounting, or investment advice of any kind. This article does not represent a solicitation for investment, nor does it represent an offering or sale, public or private, of any kind of financial instrument, security or otherwise, in any jurisdiction.