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Good Points Blog

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Point-of-sale rewards: Many moving parts

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.

And what about profitability for retailers? Will purchases made with points at the point-of-sale cost more than other redemption types? Or will people spend more money or buy more frequently because of the portability of this new currency? Is this uptick in spend worth the system and training investments?

Fast forwarding to a future filled with loyalty programs that offer POS rewards, what happens to brand loyalty? If consumers can use all of their various points to pay for anything, will it erode their loyalty to a specific rewards program provider? Will their loyalty to the retailer increase? If these issues can be addressed, the future could be ripe with opportunity for a strong coalition loyalty program— something that has never taken root in the U.S.—to take on the challenges of POS rewards.

A recent Wise Marketer article summed it up well: “No matter how much research we do, and no matter how much insight we gather from customer feedback, of one thing you can be certain: the building of loyalty will not get any easier as time goes by.” At the end of the day, our best bet as loyalty marketers is to focus on the consumer experience—delivering relevant rewards through a simple process based on immediate gratification—even if this means that our costs increase.

Remember that every interaction with your brand is important in the customer loyalty lifecycle. Ask yourself, “Did you fulfill your brand promise?” At Connexions Loyalty, we know that redemption typically leads to even higher earnings per account, as customer loyalty and usage increases after redemption. This is a major indicator of engagement and loyalty to a brand. So doesn’t it make sense to make that redemption as easy as possible for your customers?

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Tags: reward redemption, blog

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