Millennials are reaching their prime working and spending years. As the largest population in U.S. history, they have the ability to significantly alter the buying power of the U.S. economy.
Mobile devices enable users to be more connected than ever. As of 2015, two-thirds of Americans owned a smartphone, a number that will undoubtedly grow in 2016. Consumers can connect with anyone, anywhere, at any time. And they expect the same from brands and loyalty programs: they want to check their rewards points in line at the grocery store and chat with reps who can answer questions almost instantly.
Immediacy is no longer the goal; it’s the expectation. And loyalty programs that can offer real-time one-to-one communication will win.
By Mike McDonnell, Connexions Loyalty Group Vice President, Product
Major changes happened in the travel industry last year: brands got smarter about social media and online communication tools, loyalty programs focused on customer data and insights, and United Airlines, Delta and American Airlines rolled out revenue-based frequent flyer programs.
loy·al·ty \ˈlȯi(-ə)l-tē\ a loyal feeling : a feeling of strong support for someone or something
Incentives are certainly ubiquitous. According to the Incentive Federation’s “Incentive Market Study,” nearly three-quarters of U.S. businesses use non-cash rewards to recognize and reward key audiences in the form of incentive travel, merchandise or gift cards, spending $76.9 billion per year on those rewards.
With all that point-of-sale seems to offer and with all the technological advances over the last 30 years, why do we still not have point-of-sale rewards on a large scale? It’s a complicated situation.
Loyalty program managers and retailers have concerns about program profitability. POS rewards may be less expensive to offer than cash back because the program can “charge” for the convenience. However, will those charges erode the value proposition to the consumer? As a savvy consumer, if I can redeem 10,000 points for a $100 digital gift card or redeem 12,000 points at a $100 point-of-sale purchase, which am I going to choose? Another hit to profitability: program managers will need to compensate retailers for offering the service at the point of sale and due to ever-eroding margins, retailers are less likely to discount these items to the program manager.
Clearly consumers are motivated by the almighty dollar. Studies show that consumers in traditional rewards programs tend to redeem for cash back or retail gift cards. With 30 years of experience managing loyalty programs for some of the biggest brands, Connexions Loyalty has data that validates this trend. Across our client programs, 78 percent of redemptions are in the form of cash or gift cards.