Generate Revenue and Lower Cost of your Loyalty Program

Author:Lars Hubinette

Many of us have had to fight to ensure that enough marketing budget is allocated to our loyalty program. It may sometimes be hard to get enough budget allocated even with good ROIs that is evidenced through closed loop engagement. How can you either generate revenues or be smart about how you lower the point cost and liability of your program.

How can you generate revenues?

There are different approaches that you can explore. One is to charge for memberships, not only does that generate revenues, but it also creates more exclusivity. However, you must ensure that enough benefits are given to the member to make it worthwhile for them. This can be done by bundle a set of benefits together that is given as part of the purchased membership. There are various strategies for how you do this in the most efficient way. One interesting fact is that adding a paid loyalty program option can drive higher spend and satisfaction. A growing number of consumers (37%, up from 30% in 2017), are willing to pay a fee for access to enhanced loyalty program benefits and willingness to pay for enhanced benefits is significantly higher among Gen Z (47%) and Millennials (46%), as well as households with children (44%) and early technology adopters (69%) (see Bond).

Another way is to start sell gift cards and/or vouchers, that the member can purchase to a discount. This can be profitable, especially since the use of these gift cards and/or vouchers will not be 100%. If you sell these vouchers with a discount of 5% but only 90% is utilised you have made a profit of 5%. Apart from driving additional sales via these vouchers and gift cards. With the right strategy and execution this can go a long way to pay for your loyalty program.

This also includes offering anonymous gift card allowing any customer to purchase the voucher and give away. Many companies think that this requires a physical voucher and an additional expense, but that is not necessarily true. With the right platform, that provides appropriate reconciliation, fraud detection and one-time codes with closed loops you can even issue electronic gift cards that are anonymous. Like member vouchers this can generate some additional funds.

How to minimize the point cost?

When your members are transacting and engaging with you they will earn points. This is great, because that means that they are active and generating more business for you. The points they are awarded has a certain value (currency of the loyalty program). You then want them to use these points by redeeming vouchers, getting additional discounts or redeem items. Or the points will expiry naturally.

To lower the cost for your business in terms of burning these points, but still give great value to your members, you can build up a partner network. The partners want access to your customer base and market to them. Your members want to receive great and attractive offers. And you want to burn points and satisfy your members. By sourcing partner vouchers, reward items or partner discounts and allow your members to redeem points to receive these items you can drastically lower your points liability, but still ensuring your members are receiving the benefits they deserve.

Another way to burn points is via gamification. You allow your members to buy chances with their points that enables them to get a higher chance of winning the grand prize. The prize value should be less than the points that you are able to burn as part of this strategy. When this is done appropriately with the right game design it can greatly improve the point burning cost ratio. It gives members excitement and incentive to engage and spend more with your brand. Important that you have a smart chance engine (which should work alongside your points engine) to make this a successful part your loyalty design.

Then, by being a bit stricter around expiry of points, you can also lower your liability. However, it is important to understand that points are an asset that you want your members to use. Usage of points means more transactions, sales and revenue for your business.

These are just a few examples of ways to ensure that your loyalty program achieves a higher ROI with a lower cost base. If you are interested to know more do reach out to our customer success managers.