2021 loyalty predictions

Curated by Adam Posner: CEO - The Point of Loyalty

The global loyalty leaders who contributed are:

Adam Posner – AustraliaDave Canty – USAMark Ross-Smith - Malaysia
Alan Lias – UKDavid Feldman - USAPhil Gunter - Australia
Anthony Graham - UKIain Pringle – UKStuart Dinnis – Australia
Craig Grimshaw – New ZealandJoanne Ward – Canada 

Adam Posner – Australia

  1. Retention will be more important than acquisition: Customer retention and loyalty will receive greater investment than customer acquisition in 2021.
  2. Loyalty program member segmentation re-evaluated: Programs will re-calibrate their member segmentation and tiering based on the huge shift in behaviours in 2020.
  3. Data and privacy stays top of mind: Data use, security, sharing and transparency will continue to rank as a priority with more data compliance officer roles being recruited for.
  4. Program propositions to solve problems: Programs will by necessity lift themselves out of the sea of sameness. They will move from the bland and boring - points, perks, bonuses and birthdays to solving customer problems, anxieties, friction issues and world issues - mostly linked to the environment, sustainability and then to relevant causes or charities.
  5. Gaming mechanisms to become more essential to program design: Gaming mechanics and associated principles will be integrated into more program structures (but not as one-off promotions).
  6. More moments of Joyalty*: Brands will create more magic in the lives of their customers. Joyalty - “Your customer’s feeling of maximum joy and delight from one or a series of moments of magic delivered by your <brand>” will be agenda item #1 on how to move customers from a transactional connection to an emotional interaction. *Joyalty originates from Brand Currency by Steve Susi and the above definition has been created by Adam Posner.
  7. Coalition partners reconsider: Partners of coalition programs will re-evaluate the viability of being a partner ie borrowed loyalty (one spoke in a bigger wheel of fortune) vs owned loyalty (the whole wheel of fortune).

Alan Lias – UK

  1. Paid Loyalty to add choice: fee-based programme options enabling members to enhance value will start to roll out …. arguably the ability to customise the loyalty experience is only just beginning in line with advanced customisation approaches.
  2. Neo and Digital banks need to figure out how to make money: This will lead to a big push for premium customers in turn forcing them to bite the bullet on loyalty programmes, probably points based and fee based.
  3. More airlines see the loyalty light: Airlines who don’t already will see the value from loyalty programmes will see the light and aim to grow the partner earning base as a future cash generating hedge before the next disaster.
  4. Working with working from home: The urban exodus will see a huge rise in demand for home and DIY retailers which is likely to mean that momentum to grow loyalty programmes in those sectors will reduce as they all start making super profits. Same for businesses that serve home working like Apple and IT brands who will be filling their boots with or without loyalty.
  5. Amazon is the enemy: Online shopping will continue to grow as a total share of consumer spend (up to 35% by the end of 2021 in developed economies), as a result Amazon will continue to dominate giving loyalty an opportunity to help differentiate the remaining pack.
  6. Loyalty to save lives: The growth of well-being industries and health is an opportunity for loyalty, we see innovation already in health care, this will continue with ‘back to nature’ and mental health support being suited to earn and reward mechanics.
  7. Alexa the miles Geek: Loyalty practitioners will start to crack how to optimise smart home assistants …. for example ‘Alexa I want to buy a pair of New Balance 991’s, give me the option with the most miles’.

Anthony Graham - UK

  1. Card linked loyalty - Card linked loyalty programs will accelerate as retailers try to drive the next customer visit without the expense of an everyday loyalty programme.
  2. More discounts, less points - Cash will be king with the need for instant gratification as customers  deal with the COVID credit crunch.
  3. Growth in causal rewards - Those who have been working throughout the crisis on full incomes with little to spend it on have been building up savings. The socially aware one's will appreciate spending their rewards to help struggling families with benefits such as meals for children, clothes banks etc.
  4. Changes to the small print - Terms & Conditions will be modified as organisations try to release points liability on their balance sheets.
  5. Redefined airline programmes - As customers are travelling less, earn structures and tier levels will need to be re-considered to keep the airline programmes both profitable and engaging for customers.
  6. Grocery Wars - Aggressive promotions in the incumbent grocery programmes as the Lidl programme gains traction.
  7. Excess Capacity Fillers - Growth in travel-based rewards at discounted prices as suppliers try to occupy empty rooms / seats.

Craig Grimshaw – New Zealand

  1. A second currency will prove valuable - Airlines (and others) will leverage/introduce status to retain valued members as a means of keeping their customers given the reduced flying/spending activity.
  2. Loyalty Programmes will be even more important - More focus will go on loyalty programmes as businesses get more cost-conscious and see return on their marketing dollar.
  3. Give it to me now! - Instant redemption/rewards will be more attractive to members.
  4. Businesses will need more assistance - Agencies will be in more demand as businesses will/have laid off the marketing staff who managed growth/activation/retention campaigns.
  5. Suppliers go direct - FMCG players will look at more direct to consumer routes.
  6. It’s time to negotiate - Banks will negotiate heavily with airlines to reduce the fees that they pay for FFP points/miles as the lack of travel reduces the reward relevance for their products.
  7. The rise of Social Good continues – so long as the economy is strong - There will be opportunities for new coalition programmes based around social good – so long as there is economic recovery. If there are recessions this will not be the case.

Dave Canty – USA

  1. More Investment - Loyalty programs will finally be recognized as the most important marketing discipline within every organization. I hope this will mean there will be a more deserving focus on investment in the value proposition and the tech stacks that enable them.
  2. A shift in focus - Programs will emerge in more meaningful areas of everyday life (Housing, Rent, Mortgage, Health) focusing on the consumers largest monthly outlay. 
  3. Pay up front - Subscription programs in travel will emerge to cover annual (change fees, cancellation, premium economy upgrades, bags).
  4. Loyalty is an art, entrust it with your/the best - Programs who don’t engage with relevant content and lack personal recognition and engagement will see massive attrition and become a cost to the organization. It will be important to ensure loyalty teams are staffed or supported with the proper expertise.
  5. Redemption breeds Loyalty and delivers profits - Redemption will become much more important to the revenue managers and more and more programs will attract new and engage existing members with engaging redemption campaigns.
  6. Get in touch with tomorrow - There will be a realization amongst the legacy/established programs that they have an over dependency on an older generation business traveler. There will need to be a significant evolution of their programs to become relevant to GenZ.
  7. The program should prop up the cobrand not vice versa - Cobrand(s) will battle for share, airlines and hotels survival will depend on who wins here. However, they need be a little more concerned about cards coming to the market that are more generational in focus. The value proposition that resonates to daily life, sustainability and purpose could be a challenger.

David Feldman – USA

  1. Massive Member Reset - Members of airline and hotel programs have been presented with a massive reset. All of the efforts over the years to lock-in members; create stickiness; increase switching costs - have been removed. Whilst status match campaigns by hungry competitors are predictable - the real impact will be member-self-reassessment - which will likely drive increased attrition. 
  2. Devalued Programs will be Punished - Further to the first point - members will no longer maintain patience for programs that fail to provide genuine value. Switching costs and apathy previously led to significant member inertia. Those dynamics no longer exist.
  3. Members Staying Home - Even where members maintain an affinity for their preferred airline/hotel brand - many former top-tier travelers will re-prioritize and decide that they value being at home with family. Combined with less pressure to travel for work, programs will struggle with depressed travel demand from their best customers.
  4. Refocus away from Business Travelers - Recent trends have been to focus only on top-spending managed corporate travelers (who may in fact not actually change behavior due to the program), as well as base entry-level members who are prime candidates for co-brand acquisition. As airlines have discovered that the managed corporate traveler has evaporated - the effort is being made to refocus on self-funded (or at least self-selecting) travelers who typically dominate the mid-tiers in programs. Expect these initiatives to continue through 2021.
  5. Importance of the P&L - it took a while (and a Global Pandemic) for the true value of Loyalty Programs to finally be recognized. Expect more attention to be paid to the contribution that Loyalty drives to the Parent Brand P&L in the future. This will manifest in pressure on redemption economics (and volume), together with the expansion of partner networks.
  6. Delayed Recovery - Despite the massive propaganda push by the travel industry to convince members that traveling is safe - expect the recovery to take longer than anticipated. Only a small percentage of former top-traveling members will return quickly. Some won't return in significant volumes at all. 2021 will likely be a sluggish year, with recovery led by non-traditional member segments, for which historical data is useless.
  7. Boring "meh" Retail Programs will Perish - Ain't nobody got time for boring, costly, data-intruding, time-wasting programs that provide questionable value to members, and are often seen more as an annoyance than a benefit. The flipside is of course a huge opportunity for the successful retail value propositions to double-down on driving incremental revenue from their Loyalty Programs.

Iain Pringle – UK

  1. Covid winners - Brands that have grown rapidly during Covid (home delivered fresh foods, take away delivery etc) will invest in loyalty programmes as a means of holding customers as the World returns to normality.
  2. Launch of a new global OTT coalition platform – Sooner or later Google, Facebook or another will break cover with a global loyalty play.
  3. 2021 will be the year of Open Banking – Now that we have had 2 years since PSD2 new platforms that have secured funding will start to emerge.  At first there will be a Darwinian cull of bad ideas but the survivors will emerge and grow…
  4. Great value airline redemption – If and when the economy and travel start to open up there will be amazing deals on airline redemption.  Hold onto your miles and wait for amazing offers.
  5. Move from “passive” collection - Too many traditional programmes rely too heavily on base rate collection that may have worked in the days of email but do not now give a positive ROI.  Programmes today must be about more than just passive collection and need to have wider utility (like payment) or truly reward activity and engagement if they are to provide positive ROI.
  6. Move from apps to social – Only the biggest programmes will have apps.  Smaller programmes will need to find alternative ways of payment and collection that do not require apps but operate where customers interact.  WeChat in China has shown the way and Western platforms like Facebook, WhatsApp or Messenger will follow.
  7. 2021 will NOT be about crypto – Blockchain is still a solution waiting for a problem.  2021 may see the emergence of new relevant use cases but it will remain a niche tech solution.

Joanne Ward – Canada

  1. Credit card partners will have more influence over airline FFP programs as they bail out/provide critical financial support to the airlines.  This could include cardholder benefit and reward value proposition improvements.
  2. Travel loyalty status qualification will give more weight to credit card spend than previously, as travel frequency/spend is slow to recover and the importance of partner revenues becomes more critical.
  3. Retail loyalty programs will have a strong online focus, with redesigned benefits that are most important to the online shopping experience and less about in-store (although having exclusive invitations/time periods to shop in-store without the masses will become more popular).
  4. New loyalty programs will be launched in high growth sectors during the pandemic, to retain the large base of new customers acquired. Examples:  video conferencing, online gym/workout subscriptions, online/streaming entertainment, online groceries and meal kits.
  5. Cashback and real time reward options will gain in popularity vs. traditional points programs as consumers worry about economic uncertainty.
  6. New loyalty coalition concepts that reward  “buy local”  and “travel local/domestic”, will emerge, with funding from governments, tourist boards, FI players and local business… most likely involving card linked offers to facilitate multiple partners and keep costs down.
  7. Touchless retail, voice commerce and loyalty will intersect… following 7 Eleven’s lead into this area.

Mark Ross-Smith - Malaysia

  1. A Loyalty Program will buy/start an airline - Loyalty programs are in the public spotlight, many with valuations exceeding that of the entire airline group. What if the traditional airline business model was flipped, and a loyalty program started an airline to increase enterprise value?
  2. Big Tech wants in on the airline loyalty valuations - Technology companies will learn lessons from the airline loyalty industry and take steps to build out their ecosystems with more financial services offerings.
  3. Airline Loyalty programs will acquire new, non-airline businesses – Instead of forging new partnerships, airline loyalty programs will look to established companies that can bring immediate, new value to the loyalty company. Growth by acquisition.
  4. Airline alliances step up loyalty efforts - the major alliances, oneworld, Skyteam & Star Alliance will step up to recognise that loyalty spend is critical to the success of their member airlines, and part of this renewed effort help their member airlines will be to establish more alliance-wide loyalty benefits.
  5. New elite status tiers – Now that almost every travel loyalty program has extended elite status of their member base, the focus will shift on how to retain those members, and one of the core ways will be through adding a new tier elite tier.
  6. A technology leader will head up an airline – In a changing of the old guard, and in an effort to boost valuations, airlines will begin exploring new options whereby technology leaders run airlines, as technology companies.
  7. Airline loyalty status will become more relevant for the non-flying members – With much of the world not flying, yet still spending on the ground, a renewed focus on bringing elite status benefits to the non-flying activity will pave the way for a new breed of elite airline loyalty members.

Stuart Dinnis – Australia

  1. Honey I shrunk the Program! - Loyalty programs downsize and go back to basics, ie. spam email marketing (no segmentation or intuitive structuring)
  2. If you wanna make $1m start with $1bn - More Airlines go bankrupt and ultimately close programs
  3. Gimme Free Status - Customer Acquisition/Retention becomes a game
  4. Status stops the Rona!  - Status becomes more important and is about safety and security (keep me away from everyone else that's infected)
  5. The arse falls out of the Points Market - points volumes Decline - or remain depressed affecting "notional valuations" of programs
  6. Cash is King - Every airline CFO "forgets" about the loyalty program as ticket sales/cash is the focus. 
  7. They continue to get it wrong  - No-one understands how to revise their loyalty accounting assumptions.

Phil Gunter – Australia

  1. Status Match Frenzy - With most travel focused loyalty programs extending the current Status period, tiered members can use other airlines & hotels without the fear of dropping down a tier - many businesses will see this as an opportunity to attract new members resulting in a frenzy of status match campaigns in 2021.
  2. Travel Shaming Return - As things return to normal, travel shaming will again return. Good programs will find ways to reduce the guilt of travel whilst increasing engagement with frequent travellers.
  3. Rise of the New Providers - A number of new providers that provide better systems for less $$$ will hit the market and quickly gain share. Old established loyalty system providers watch out!
  4. Outsourcing Explosion - with many businesses reducing employee numbers this year, many programs will be forced to outsource functions previously done in house - often finding it cheaper and easier than doing the activity themselves.
  5. Dynamic Reward Pain will surface - Programs that moved fully to dynamic rewards. will start to feel the impact as members and partners realise that one of the key advantages that the programs previously had is no longer there.
  6. Member Patience falls further - Members will disengage faster than before and switch to programs that offer a better experience.
  7. Program power will overreach - Many programs that have proven their worth during 2020’s challenges will start to think that the business should revolve around them - some will have a rude awakening finding out that although the loyalty program is no doubt a key asset and vital to the Groups success, the program can only really succeed with the groups support!

 

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