Loyalty programs, according to Philip Shelper, can be traced back to ancient Egypt. At that time, workers were paid in tokens and could earn a higher status through their work. They could also redeem beer and bread tokens for other goods.
He then looked at the example of Benjamin T. Babbitt, who is considered the “father” of modern loyalty programs in the U.S. in the 1950s. Babbitt encouraged people to cut the trademarks off his soap packets and mail them in to receive a reward, originally a lithograph, but then a “list of premium” products.
Shelper detailed these examples last week in an online webinar on the Future of Loyalty and Rewards held by Australian incubator Stone and Chalk.
Rebalancing the loyalty equation
In introducing the topic, Shelper detailed three “megatrends” which drive innovation in loyalty programs today:
The event included presentations from companies representative of these trends. A fundamental principle was that the rewards “equation” needed to be balanced to be a win-win for retailers and consumers.
If the balance was skewed too much in favor of the retailer, then a program would struggle for engagement. Consumers are always looking for more value in their relationships.
Fran Ereira, the country head of Klarna Australia and New Zealand, said her company was “working really hard to be more than a payment option on a checkout.”
Klarna is adding loyalty to its original buy-now-pay-later business model. It recently signed 6,000 customers up to its rewards program over two weeks in Australia. In the U.S., there were around one million users.
“Loyalty is now part of Klarna’s DNA,” said Ereira.
“Our global research told us that customers wanted to generate points when checking out, so we launched a rewards program. Our retailers love it because we are adding incremental value to their rewards, while consumers are getting more value.”
Architecting frictionless loyalty
Travis Tyler, the chief product and marketing officer at new digital bank 86 400, said loyalty played into the bank’s philosophy of “surprising and delighting” consumers to build advocacy.
86 400 can link its platform to more than 100 institutions, which gives its customers a “better vision of their money.”
The bank’s technology predicts when bills are about to arrive. In line with the “surprise and delight” approach, it recently paid upcoming bills for its customers between AUD 5 and AUD 100.
Tyler conceded that 86 400 was only at the beginning of a journey with loyalty. But he said it was an obvious extension of its business model, and it would be driven by data.
“If you haven’t built your business to be powered by data, then I doubt you will have a business in five years,” he said.
“Unless you can use that data to deliver the value, you will become a wholesaler, and that is the challenge for banks. Most of the value which typical industries have delivered is being whittled away through better business models and better services, so in every single way, we are seeing services bettered.”
The third presenter was Garry Cobain, chief executive of PokitPal, a new breed of card linking providers.
“We have integrated with the card scheme, and that enables us to pick up their transactions in real-time,” said Cobain.
“Our tech removes all that friction because people don’t need a dedicated card.”
PokitPal is working with around 1,000 merchants who fund rewards to cardholders. It helps them transform their payment touchpoints into points at which their loyalty is rewarded.
Image credit: iStockphoto/AaronAmat