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Top 6 Loyalty Trends For 2021


If 2020 has taught us anything it is that diversification (or luck from being in the right sector) can be a lifeline. It allows us to keep customers engaged when business plans fly out the window, due to marketplace calamities, such as the Covid-19 pandemic.


In November 2019 when we published the Top Trends for 2020, we could not have known about the Covid-19 pandemic. But those brands pursuing each of the trends predicted for 2020 probably suffered less as the course of this year evolved.


I also anticipate that 2020 will not only be remembered as the year Covid-19 hit, but as the pivotal year, in which companies that are not leaders in their category recognized just how far they were falling behind in terms of customer engagement.


After many companies dealt with panic and shock during March and April of 2020, most professionals got back to work accelerating their digital transformation.


2021 will be another year in the long-term journey to become customer-centric, balance the economics of loyalty programs to deliver more value to customers, and ensure the right systems are in place to reduce dependencies on the IT department or vendors.


In this context, five of the trends for 2021 are not particularly new, but will gain momentum in 2021. The sixth trend is also not new, but most companies have been ignoring the implications and will now try to catch up.


Each trend supports aspects of the broader business imperative: to be present when and where customers choose to engage. The sixth trend – to be present and compete in marketplaces – will become a new, but pressing objective for brands that have been operating in silos – since it is now patently clear that customers are interacting with brands beyond the brands’ own channels.


Today, the best experience we receive from any brand becomes our expectation of every brand. This changes who your competitors are: from your closest business rivals, to every brand that provides a better customer experience.


We crave convenience and more intuitive, personalized experiences. We seek those out in broader marketplaces or social ecosystems where we now spend the majority of our time. We also tend to trust companies less and are overwhelmed with information coming at us via multiple channels – 24/7 – so deploying solutions that help customers save time is key across every touchpoint.


Such a backdrop of change creates a framework where many past methods of segmenting customers no longer apply – because ‘the customer’ has many more personas and is switching from one to another in the blink of an eye.


Accelerating customer-centricity


The goal of digital transformation – and the reward for getting it right – is being present to meet customer needs when and where the customer demands.

The implications of digital transformation include

  • putting the customer at the center of your business model

  • evolving from the delivery of products to delivering value-added services that enhance the experience

  • and operating in an agile way where the processes and systems can adapt easily to new business opportunities.

Layering customer-centricity on top implies a single view of the customer – augmented with data from outside your business, and having the tools to make customer insight actionable.


Loyalty marketing has always existed as a primary method for building direct relationships with your customers.


Brands that are not already well along the journey, implied by the trends for 2021, are increasingly frustrating their customers.


By working at the cutting edge of these trends, you will learn how to get a customer’s attention and target investment at the moments that matter, thereby maximizing return on investment.


1. Continued evolution to being truly customer-centric


The underlying needs of most customers have not changed. What has changed is that customers are much more sophisticated and discerning.


They sense and observe how companies treat them, as well as how tools (information & technology) are used to deliver value. This became obvious during the past eight months, as some brands were able to continue meeting customer expectations even if the channel of interaction changed due to self-distancing.


It was highlighted by the messages of empathy – or lack thereof – as customers struggled to find new ways to meet their needs.


A large portion of the population had more time, during the pandemic, but they came to value their time more rigorously. As those customers shopped around to find companies that could meet them on their own terms, and, with the delivery capabilities necessary in a world where mobility was greatly constrained, the brands that fumbled stood out like a sore thumb.


Customers want you to show you know them based on the data you already have. They don’t want to re-enter information they’ve already provided. They are willing to share more information if it leads to greater value or more personalized service.


Customers now expect that if you have considerable information about them that you can give them better insights about solving their problems, know their challenges, and deliver value on their terms.


Unfortunately, most companies remain far from having a single view of the customer – let alone, of how their behavior changed during the pandemic.


Can you understand why your customers behave in specific ways?


If the answer is no, then your journey to being truly customer-centric is incomplete.

This has accelerated the race to deploy best-in-class technology based on microservices. With microservices, systems that do one thing extremely well can work with complementary functions to deliver a scalable, adaptable, and effective customer experience.


The functionality in loyalty systems is being broken up. Under the microservices model, customer data is in one enterprise CRM that coordinates with one enterprise Campaign Management System to coordinate touchpoints. The Points Bank and Loyalty Rules Engine, that enable a points-based loyalty program, are being de-coupled from tightly integrated CRM and campaign management modules, so companies can adapt more quickly to new opportunities.


It is no longer tenable to have a portion of your customer data in the loyalty system, and other customer data in the enterprise CRM if you want to respond quickly to customer needs, allow AI to anticipate customer problems that you can solve, and talk to customers with a single voice.


Importantly, signals of customer needs and their lifestyle preferences no longer come just from your own data. You need to collaborate with complementary brands to share data (with on the customer’s permission) to build richer profiles.


The easiest way to obtain these complementary signals is to allow your customers to earn loyalty points/miles other than your own, in exchange for the data that collaborating brands can reveal. Or, you can enable your points/miles to be exchanged so customers can shift value to where it has the highest perceived utility – all in exchange for richer customer insight.


Becoming customer-centric is a long-term journey and most brands are still at the beginning, so this trend will go on for many more years. What has changed in 2020 is that the cost of not making good progress now results in the rapid loss of customers as they search for providers that can meet their needs today.


The gap between winners and losers will widen significantly in 2021.


Some brands can spot the moments that matter most to customers and build value around them. Those brands that cannot achieve this over the next 12-18 months will fade away.


Customers continue to make time for those things that matter to them. Understanding how customers prioritize and marshal their time and attention is critical to break through the increasing noise and chaos in each customer’s life.


Recognizing that your customers are time-constrained is an important first step.

With the right customer-centric approach you can build deeper and more meaningful relationships with your customers at a time when their attention is the limiting factor in their lives – and when convenience, immediacy, experience, and value matter most.


The magic in this equation is that when you deliver value, the customer is less likely to pinch pennies – meaning that you can retain reasonable margins as you help customers solve their own problems.


2. Rebalancing loyalty program economics


The loss of value in loyalty programs has become far more visible in the past two years.

In 2019, the loss of value was mostly in the form of devaluations in many popular programs. In 2020, it was largely due to the inability to redeem for things that customers really wanted at a time that their ‘normal’ transformed. Loyalty program operators will spend much of 2021 enhancing value for customers in the following ways:

  • diversifying revenue streams (allowing customers to earn elsewhere)

  • acquiring rewards at better cost (creating a step-up in perceived value)

  • reducing margins on points sold to partners (less greed to create program velocity)

  • migrating to new suppliers with lower operating cost

  • deploying AI to automate touchpoints

  • dynamically adjusting points earned based on margin

  • enabling more customer self-service

  • burning off liability for lower-value customers

  • allocating more resources to mid- and longer-tail customers

It is not the purpose of this ‘trends’ article to dive into each of these in detail – but combining such levers enables brands to deliver more value to customers. This makes it far more obvious to the customer what they stand to gain from participating in the loyalty program – creating motivation to engage.


The reality is that if a customer cannot earn about $25 per year in value from any loyalty program, the majority of customers will simply not join, or will quit soon after they realize how difficult it will be to achieve meaningful rewards.


This harsh reality is setting in and brands recognize that the vast majority of their customers simply don’t need that much product or service from them directly. Frequency and basket size are the key variables and most brands simply don’t sell enough of their stuff to get customers to the $25 hurdle if the customer is only earning 1% of the purchase amount in the form of points.


To earn $25 in points/miles at 1%, the customer must spend $2,500 per year. This can happen in grocery and maybe financial services, but beyond frequent business travelers, very few spending categories get $2,500 allocated to them – or at least a single company within that category.


Therefore, we are seeing a lot more collaboration between brands so that customers can earn the loyalty currency they really want across complementary spending categories. This has existed in countries with coalition loyalty programs for a few decades, but the intermediary running the loyalty coalition was typically taking 30-60% of the value out of the ecosystem to cover their operating cost and profit.


In many other countries, coalitions never took hold because brands did not want to participate in a scheme where most of the money they invested in points was not passed to the customer. The unsustainability of the legacy coalition model came to roost in the last few years with Nectar, Plenti, Aeroplan and others effectively failing – and/or needing to be resurrected by the anchor brand.


As brands rebalance the economics of their loyalty programs and recognize that the low share-of-wallet they have with most customers does not allow them to reach 30% customer participation, let alone 70-80%, they will choose to collaborate with complementary brands. However, these brands with lower frequency will participate in a new form of open loyalty network: where each brand collaborates as a peer, and where the shared technology and connectivity cost will drop to a tiny fraction of the value received directly by customers. This will make the points much more valuable to collect.


This is becoming a top priority for many brands, now, as customers are not spending much in some categories at all (i.e., travel or luxury goods). So more brands will need to diversify their collaboration with complementary brands in order to stay top of mind.


Furthermore, multi-brand collaboration is becoming a priority because the value of data obtained from partners, about the customer’s behavior and lifestyle preferences, far exceeds the cost of issuing any loyalty points which customers are motivated to collect.


The value of customer insight and degree of engagement was made very visible in 2020 as brands like United Airlines, Delta, American Airlines, Hilton, etc. found they were able to pre-sell points worth billions of dollars, or mortgage their loyalty program for loans that enabled their survival.


This has not gone unnoticed by non-travel brands. The enterprise value of a loyalty program in any company is probably in the range of 10 to 20 times the EBITDA of the program as a standalone business unit. At time of writing (November 2020), Macy’s Department Stores has a market capitalization of $2.04 billion (USD). If Macy’s could demonstrate that their loyalty program generated $100M of EBITDA, then perhaps the entire enterprise value of Macy’s is based on the value of their loyalty program.


Could we also say that the majority of enterprise value for Taco Bell, Avis-Budget, Decathlon, Hilton, or Boots is because of their loyalty programs? Would activist investors try to spin-out the loyalty program into a separate entity to maximize enterprise value?

Perhaps. History has shown that short-term profit can be made from such efforts. But if the loyalty program is not integrated throughout a brand’s customer-centric efforts, operating as a separate entity destroys the ability to create long-term value, because incentives between the loyalty program and core business become divergent over time.


What it might suggest is that for some brands, the loyalty program is the core value proposition. Such a loyalty program might take over an airline, or sell goods online or coordinate travel – as well as services attached to the customer-facing loyalty marketing efforts.


Maybe Amazon, WeChat, Alibaba, Rakuten, Trip.com, Booking.com and others are already huge loyalty programs, that also happen to be doing many other things to build tight and meaningful relationships with their customers. Some use points as the unit of measure in their ecosystems, and some do not.


In any case, the traditional cost of operating a loyalty program has been about 2.5% of total sales – where only about 1% would be the value given customers in the form of points and the other 1.5% went to cover other direct and indirect operating costs. In a world where points programs have lost their cache, that equation is upside-down.


Striving for operational efficiency should get cost down to less than 25% of the total invested in loyalty marketing, so much more value can go to customers – increasing the perceived utility and getting them to the $25 hurdle rate faster.


On the flip side of the coin, with more engaged partners and opportunities to acquire redemption inventory at better cost, brands can make the points appear much more valuable than their cost; $25 in perceived value of points may only cost $10-15 to the program operator.


Tesco has been a master at this for many years. Being a supermarket, with thin margins and unexciting inventory, they are dependent on this mechanic to create meaningful rewards – so partners have been fundamental to the success of the Clubcard program.


In 2021, we will see an expansion of multi-brand collaboration, as brands in more sectors realise they need to significantly increase participation, getting customers to opt in to data sharing, and to accepting direct marketing messages.

3. Systems upgrades to gain agility and reduce cost


“Upgrading” has historically meant spending more money – but with modern technology, especially SaaS-based solutions, an upgrade might actually reduce vendor or operating costs by as much as 50- 80%.


Loyalty programs are starting to figure that out. In fact, 2020 has seen a plethora of RFPs for new loyalty software. However, many brands may be aware of savings potential, but since they already have millions budgeted based on historic cost, they don’t have the motivation to investigate what is now possible with microservice-based solutions.


Just look at the increase in Google search volume for “loyalty software.”



Those that are progressing with their digital transformation are finding, that instead of running many systems with a portion of customer data in each one, they can standardize on a single enterprise-wide CRM solution. They can then place microservices around the single view of the customer to enable points management, loyalty rules, redemption alternatives, campaign systems, social media monitoring tools, etc.


That single, richer view of the customer can enable AI solutions to run on better data, to feed algorithms and better anticipate customer needs. And, consolidated campaign management can better track how customers interact with offers, newsletters, targeted promotions, and other information.


2020 revealed many brands as being woefully weak in their ability to communicate with customers, to share how they were dealing with Covid-19. Most found that they had decent data on 15-20% of total customers, poor data on another 20% and no ability to communicate with 60% of their customers at all.


In some cases, this was because the customer did not join the loyalty program in the first place, and therefore, had not opted in to data collection or receiving messages.

This weakness is also getting companies to consider how they double or triple the number of members.


Overcoming that hurdle involves ceasing to operate in a loyalty silo – and collaborating with complementary brands – where together – the customer might spend 50-70% of their monthly discretionary income.


Coalitions in some countries delivered on this promise – albeit at a large cost for the intermediary running the scheme. As 2021 unfolds, companies will recognize that multi-brand collaboration, in a more open loyalty network, can be achieved with very low-cost connectivity platforms. Furthermore, these platforms have nice value-added services for partnership workflows, reporting, reconciliation, and settlement.


These same cloud-based systems also greatly reduce the dependency on the internal IT department or vendors to make changes. In many cases, after a single integration, loyalty team members can change loyalty incentives, partnerships, redemption content, and other features without any IT involvement at all.


That type of cost-reduction and enhanced productivity from agile systems will allow insights from team members to be tested and deployed as fast as their customers are changing.


By the end of 2021, industry conferences and the presentations from attendees will be full of stories describing how they have taken back control of their loyalty programs.


Read our article on loyalty microservices to learn how to start working towards this goal.



4. Accelerated deployment of time-saving customer experiences


Contactless commerce has become all the rage in 2020. But for those brands that found ways to serve customers even if they were staying home, such enablement started years earlier.


2021 may see more customers visiting stores again, but customers want the tools in their own hands to decide how to do business with a company.


Many companies accelerated their ecommerce initiatives to this end in the past 6-8 months – including standalone retailers that allow online ordering and home delivery or curb-side pickup. These features add great customer convenience and they will become permanent fixtures.


Of course, some of these rapidly-deployed solutions are not yet very robust, but companies are quickly receiving feedback and iterating to deliver industrial-strength solutions so customers find them dependable.


Even if Covid-19 disappears, a customer’s lack of time and need to be efficient will continue to compound over the years to come. It is precisely for this reason that winning brands will continue to allow customers to choose how they engage across all channels.


Today, we generally call that ‘omni-channel’ but this phrase will disappear from our vocabulary much like references to ‘send me a fax’ has disappeared. Going forward, brands will be focused on being ‘always on’ and delivering services across channel touchpoints in whatever way the customer prefers.


This will partly mean adding more features in websites and apps. But brands will increasingly be considering how their products or services are obtained in marketplaces and digital ecosystems in which they don’t own or control the way in which customers engage.


It is still possible to deliver consistent brand experiences, even when not in your own environment. Since customers are now spending much more of their time in such marketplaces, brands will adapt to remain present.


In the context of loyalty, this will involve letting the customer identify themselves in whatever way is convenient and then the company accessing all relevant information about that customer to treat them as they want to be treated. This may be via more universal credentials that can be used across ecosystems, or simply by registering a payment method and having the payment network operator customize the experience based on customer preferences.


QR codes have been around nearly 30 years now, but their use in 2020 has accelerated in a world where contactless engagement is appreciated. Given the flexibility in use of QR codes, many more apps will have the ability to scan them as a native feature. But displaying a QR code on the mobile phone can also be a highly efficient way for a customer to inform the company they are present – enabling the instantaneous assembly of all the relevant insight to customize the customer’s experience.


Amazon, Netflix, Uber and a few others have set the bar very high, in creating ecosystems in which the CX allows customers to quickly get what they want. While each of these brands has thousands or millions of things they could sell, they present a curated list of things they think the customer wants to buy at that moment of time, often quite accurately.


Customers now expect that degree of personalization from nearly everyone trying to sell them something. That may not seem fair to many businesses, but that is the state of play.


A customer’s loyalty profile is the best tool, at brands’ disposal, to deliver on this promise. 2021 will see many companies enhancing their customer profiles in order for the customer experience to be optimal across every touchpoint. Those that fail to deliver this suffer great losses, while impatient customers flock towards the brands that can.


5. Proper and secure use of data


Customers are increasingly aware of the implications of their data being shared with or stored by businesses.


This may be due to bad experiences of a stolen ID after a data breach, or loss of value when gift cards or loyalty points are obtained by hackers. On the up-side, the potential to get better value from existing providers, or the opportunity to receive enticing offers from brands that want to steal their patronage.


Since trust is at the heart of loyalty, brands will continue their efforts to protect confidential information and improve experiences. They will also double down during 2021 on enhancing their customer identification and authentication methods, while improving the technical architecture of systems to reduce exposure to risk.


The concepts behind GDPR are being embraced to varying degrees by countries worldwide. Most companies now recognize that putting control in the hands of customers, regarding how their data is used, actually enhances the customer relationship.


Some spooky examples of improper use of data have surfaced in recently years and customers are now more sensitive. When they receive an offer, many now subconsciously wonder, ‘what triggered this?’ If the offer is for a weekend get-away, they may simply think the brand is blindly sending the offer to thousands of customers. However, if the offer is for a baby crib (which is a relevant offer), they may question whether the insight was obtained ethically and with permission.


The sensitivity over data management will only grow because even if 95% of companies are doing a good job with protecting the private information of customers, a few highly visible data breaches among other brands will affect the customer’s confidence with everyone.


6. Presence in the marketplaces and ecosystems increasingly frequented by customers


For three years, Currency Alliance has been talking about how brands must learn to engage their customers in marketplaces in which they sell, but which they do not control.

In the past, we have not predicted this as a major trend, but as a simple inevitability.


In 2021, however, this will be a hot topic, because existence in such broader marketplaces and ecosystems in 2020 was critical to those companies that saw the greatest growth.


At the end of 2019, Skift reported that, ‘Booking Holdings sees brand collaborations as key to restoring growth on steroids’. Their article explains how the company’s foothold with multiple experiential partners has allowed the OTA to build a stash of marketing data with unprecedented detail.


Booking’s ecosystem allowed it to suffer the least, among travel brands, during 2020, as business and consumer travel nearly came to a halt. Similarly, Rakuten, WeChat, Alibaba, and Amazon prospered quite well during the pandemic because of the ecosystems they built – but also because of the complementary ecosystems and marketplaces where they exist, even when not controlled by them.


For airlines and hospitality companies, operating in largely a standalone manner meant they were invisible when customers showed no interest in traveling. However, for those airlines and hospitality companies that had convenience stores or home improvement retailers in their network of partners, customers continued earning points/miles even if not traveling.


BP and Shell have dramatically extended their collaborations with complementary brands in 2020 – some of this dated back to 2019. That meant that, when customer priorities shifted in April and May, from pursuing experiences with their points to obtaining maximum utility (i.e., gas), they benefited by being partners in much larger, relatively open loyalty networks of collaborating brands.


Airlines in particular have typically had relatively strong presence in their hub markets (i.e., where they fly out of), but poor networks of partners in their destination markets. 2021 will see this change as they try to become the most aspirational loyalty program in every market where they operate.


Similarly, airlines and hospitality groups will want their customers to get more utility from their points even if not spending on travel services. These brands will, therefore, enable the redeeming of points with many more ecommerce and bricks-and-mortar partners where the customer lives.


And, we will see many more collaboration initiatives for brands in a local geographic area. As people spend more time in one location, this will enable them to accelerate earning of points across a set of complementary partners.


This means that many more companies, that have historically been locked out of loyalty marketing because of high entry costs, will start loyalty programs, or join existing ones.


But most won’t bother creating their own loyalty currency. They will simply leverage existing coalitions or issue the points that the customer really wants to collect.


Points, of course, have a cost that must be paid for, but that cost won’t be much higher than issuing a proprietary loyalty currency – and in any case, that cost will be a fair exchange for the richer insight they can obtain from shared customer data.


Many of the customer’s underlying needs have not really changed, but some have. What the platform players have done is change the way the old and new needs are met and served. In the process, they are eking out greater improvements and efficiencies, in order to create a more customer-centric platform.


DishBonus was launched recently in Germany by Metro/Makro Group, a retail group with a significant global wholesale presence. This mobile-first app allows people to find restaurants that will issue Miles & More (Lufthansa Group) or Payback points – two well established and popular loyalty currencies in Germany.


Metro/Makro has little to do with travel, but they want their primary customers – which are actually other businesses such as hotels, restaurants, and catering organizations – to obtain more business, so that they buy more product from Metro/Makro. This is a very insightful scheme where the primary sponsor recognizes that none of their business customers have sufficient frequency with guests to make a new loyalty currency relevant, so they are offering the points/miles that customers want.


In Latin America, Visa and Novae announced last month a new ecosystem called My Rewards, in which customers can spend nearly any loyalty currency within their payment-enabled rewards network. The idea is not new, but the vision articulated in this article is quite compelling and it appears they have allocated the resources to give it real potential.


Qitaf from Saudi Telecom, and Jo Bonus Club from REWE International in Austria, are other very good examples of brands going well beyond their own ecosystem, to create a compelling loyalty scheme that gets nearly every household in their core markets actively involved.


We predicted in 2018 and 2019 that banks and mobility operators were in the best position to create the next generation of compelling loyalty scheme, because of their frequency in enabling customers to achieve their personal goals. So far, no company in either sector has launched a program that will disrupt the industry, but maybe 2021 will be the year where we see some first-movers strive for that goal.


The reason why banks are in a good position is because of their consumer and merchant networks. Few have tried to enable both groups to benefit from doing more business with the other, but the opportunity is huge – and the customer data that could be collected about lifestyle preferences would enable all stakeholders to greatly improve personalization.


Mobility operators have great potential because of the frequency of using various modes of transportation to get from A to B – perhaps 2-10 times per day. The mobility operator knows what exists at A and B, so they would be able to guess the commuter’s intent. And because of the high frequency, they could assemble thousands of collaborating brands that want to market to their customer base.



Of course, the grocery sector also has high frequency. With the right mix of partners, they can go from strength to strength. The blog we published last year shows how many grocers are doing well at one dimension of running a world-beating loyalty scheme, but none are creating customer value with each dimension.


Conclusions for 2021


Most businesses have a great many dependencies between departments. For loyalty leaders, 2021 – like previous years – will continue to present the challenge of how to gain buy-in to the future vision.


The good news is that that consensus is becoming easier to build, as customers will continue rationalizing the programs in which they participate.


This will drive more brands to join more open loyalty collaboration networks, so they can remain top-of-mind, and so that they have permission to engage when they anticipate the customer’s needs.


Even with consensus around priorities, getting the resources necessary to pursue these trends will require some faith and some up-front investment. But the ROI will be meaningful for the entire organization, as fewer people on the loyalty team will be able to achieve much more.


About Currency Alliance


Currency Alliance makes it quick and easy to extend your loyalty capabilities to drive deeper engagement from your frequent, as well as less frequent customers.


Our low-cost, API-based software integrates seamlessly with your existing loyalty platform and/or MarTech systems in a matter of days.


You can then easily connect with your customer’s favorite brands, exchange valuable insights, and build greater customer value into your loyalty program.


While Currency Alliance does not provide professional services to guide organizations through these challenges, we are happy to hear from clients and prospects, to share insights based on how we see the loyalty sector evolving, and to help you adapt solutions to your unique situation.


This article was first published by Currency Alliance. Permission to use has been granted by the publisher.

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