Authored by Andy Hermo, Chief Commercial Officer at iSeatz, a loyalty technology company.
Bonus earning on specific everyday spending categories – think gas and groceries – have long been a pillar of credit card loyalty strategies. But the redemption side of that equation has traditionally been focused on either cash-back or more inspirational rewards, like travel. The result is a long interval between earning and redeeming that limits members’ engagement with their loyalty programs.
Offering a more comprehensive selection of lifestyle rewards can help loyalty programs boost engagement and enjoy several other key benefits. One of the chief advantages of maintaining a robust portfolio of lifestyle rewards is differentiating a loyalty program from the many competitors that offer just the point-redemption basics. Lifestyle rewards, typically smaller dollar-amount products compared to airfares or hotel stays, can be redeemed more frequently, reducing the time between earning and redemption and driving more loyalty program interactions.
More interactions mean more opportunities for a loyalty program to learn about its members, generating valuable first-party consumer data and fueling personalization strategies. And lifestyle rewards can also be deployed to complement higher value rewards, creating a more cohesive experience for program members and forging a stronger bond between brand and customer that increases overall lifetime value.
Breaking away from the traditional loyalty program pack
Lifestyle rewards are an opportunity for differentiation because so many loyalty programs have not yet embraced them to their fullest extent. According to the iSeatz State of Loyalty: 2022 Credit card rewards Report released earlier this year, only a tiny fraction of the major credit card issuers with loyalty programs offer what could be considered a robust lifestyle rewards portfolio. Only a third provide cardholders with redemption opportunities for live events, less than 15% offer direct options for redeeming points for dining or food delivery, and only one makes carbon offsets a redeemable reward.
Compare this to the fact that all the analyzed programs offer flight redemption opportunities, 96% include hotel and car rental, and 77% provide cruise rewards.
Why don’t more loyalty programs incorporate lifestyle rewards into their redemption mix?
Some might view these smaller-ticket products and services as lacking the revenue “bang” for the bucks they would outlay to offer them. However, that overlooks lifestyle rewards’ ability to drive incremental spending. Others might see certain lifestyle rewards as diluting their brand, though they can be curated to suit any brand’s image, values and audience.
Whatever the reasoning, as many loyalty programs hesitate to deploy lifestyle rewards in a comprehensive way, there’s an opportunity for other programs to set themselves apart by embracing them wholeheartedly.
More touchpoints, more customer data, more engaged members
At a time when many consumer-facing brands are desperate for first-party customer data, lifestyle rewards create a pathway for acquiring this valuable insight into member preferences and patterns. Additional redemption options create other touchpoints, generating first-party data that can be used to create personalized options and member communications to spur even more program interactions. It’s a virtuous cycle that can reduce the cost of member and customer acquisition, increase redemption rates and boost spending on a brand’s core products.
With access to data that can support personalization strategies, loyalty programs can create a more connected, relevant experience for members. Lifestyle rewards can play a significant role in this process as well. Pairing a redemption offer for food delivery service with an offer for a vacation rental property to a member that has already shown interest in that kind of travel demonstrates an understanding of their needs–and helps endear the brand to that customer. But the power of personalization can only be unleashed when a loyalty program has the data to fuel it.
Lifestyle rewards lead to improved lifetime value
Complementary options don’t just impact brand affinity; they also generate incremental revenue and boost customer and member lifetime value. Lifestyle rewards create cross-sell opportunities and keep members engaging with the loyalty programs when they might otherwise venture outside of the ecosystem to find additional products or services.
When a loyalty program can offer a member everything they need for a trip via points redemption or purchase – not just core travel products but the supplementary products and services that truly round out a vacation – they increase their ownership of that customer’s travel journey. When this extends to non-travel, at-home engagement, that’s when a brand has created the stickiness that leads to leaps in customer lifetime value.
This is perhaps the biggest long-term benefit of lifestyle rewards and why many of the major new loyalty program platforms launching soon will feature more of them. Lifestyle rewards can significantly expand what a loyalty program can be to a member. They evolve the brand relationship beyond the transactional or situational into the everyday and in a more tangible way than cash back or points-per-gallon discounts might.
While travel loyalty programs devote significant resources to becoming a member’s first thought when considering travel, lifestyle rewards help them stay top of mind. With the differentiation advantage, their ability to generate valuable member data through additional touchpoints, and their capacity to create more cohesive, complementary redemption experiences, lifestyle rewards can be vital to a successful, future-proof loyalty strategy.
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November 30, 2022 at 03:00PM
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Loving the Lifestyle: How Lifestyle Rewards Helps Loyalty Programs - TheWiseMarketer.com
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