Merchant Loyalty Space Trends

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Merchant Loyalty Space Trends

Two trends related to merchant loyalty programs are data privacy laws compliance and expanding loyalty programs during the COVID-10 pandemic. Collecting customer data, offering cashback, mobile friendliness, and keeping the rules simple are some of the characteristics of successful merchant loyalty programs.



Data Privacy Laws

  • According to Fielo, a company that specializes in incentive automation, the General Data Protection Regulation (GDPR) compliance is one of the key trends in merchant loyalty programs for 2020. It is a regulatory trend.
  • The company predicts that more loyalty programs will adapt their communication strategies to convince customers to give consent to use their personal information. Otherwise, those programs will have limited possibilities to expand the customer base and gain customer insights.
  • Fielo also believes that it is crucial for companies to stay up to date with data privacy laws because many other regions are looking more into protecting customer data with similar regulations.
  • Additionally, research by Capgemini shows that retailers that became GDPR-compliant saw an increase in their loyalty programs' membership.
  • Experts from ICF also believe that complying with data privacy regulations is one of the key trends in loyalty programs. They believe that many companies will be forced to revamp their data architecture and face issues related to compliance.
  • At the same time, there will be more regulations across different regions. Some of them may prevent customer data to leave certain countries.
  • However, loyalty programs that are able to adjust to data privacy laws are likely to become more successful because they will increase customer trust and use new data architecture to personalize the experience.
  • Experts consider it a trend because data privacy regulations are expected to become more widespread and affect numerous loyalty programs as data collection is crucial to their success.

Expanding Loyalty Programs During the COVID-19 Pandemic

  • Experts consider expanding or modifying loyalty programs during the COVID-19 pandemic a trend because it was implemented by several major companies, such as American Express and Chase. It is an economic and social trend.
  • Furthermore, 84% of loyalty executives believe that "the skew of points versus cash will be a concern once recovery begins, and allowing customers more opportunities to redeem points is crucial to driving engagement and helping the bottom line of struggling programs."
  • According to Travel Daily News, travel rewards have been at the center of many loyalty programs, including those in the travel and hospitality space.
  • However, during the pandemic, many of those programs had to adjust their rules to balance the rewards that can be enjoyed at home and not only while traveling. For instance, multiple programs have started focusing heavily on food delivery.
  • Loyalty-integrated food delivery jumped by 25% since March.
  • The change was driven by the fact that the share of loyalty members who place their food orders while at home has grown by over 27%.
  • Depending on the line of business, companies apply changes to loyalty programs to serve other areas of everyday life, including grocery shopping, streaming services, and gift cards.
  • Some other possible special services include offering virtual payment cards or discounts on selected products that fill customer needs during this period.
  • According to experts from Loyalty360 and Travel Daily News, companies that can adjust their loyalty programs during the pandemic and stay connected in this time are more likely to maintain their customers' loyalty long into the future.

How to Create a Successful Loyalty Program

Five Key Elements

  • According to a 2019 report by the Mercator Advisory Group, a successful merchant loyalty program is a mix of five elements, which are frequency of visits, cashback and discounts, points and tiers, membership and subscription, and contests and challenges.
  • While the full report is paywalled (it can be purchased here), a brief overview of each element is available in this article.
  • With the digitalization of merchant loyalty programs, it is crucial to record the frequency of customer visits.
  • In terms of cashback and discounts, the report notes that regular credit cards tend to offer around 2% off the purchase value, which increases to 3-5% with in-store cards.
  • As for points and tiers, they are a needed element, because they introduce gamification. However, if they are too complex, they can become confusing.
  • Also, successful loyalty programs are often bundled with subscription programs, which allows combining special pricing, delivery, and targeted offers.
  • Finally, according to the report, contests and challenges increase customer engagement.

Collecting Customer Data

  • While the report by the Mercator Advisory Group noted the importance of recording the frequency of customer visits, according to Winsight Grocery Business (WGB), collecting customer data should go beyond that.
  • The magazine claims that loyalty programs are a highly effective way to gather customer data, which is why they should collect both personally identifiable information (PII) and point-of-sale data.
  • This can help to "drive personalization, product mix optimization, real-time offers," and differentiation.
  • Winsight Grocery Business believes that it's easier to achieve through loyalty partnerships and coalitions, such as fuel rewards programs. The magazine thinks that there will be more similar deals in 2020 because they can positively impact merchandising and marketing strategy.
  • The prediction is based on grocery merchants. However, according to WGB, grocery stores are often loyalty program pioneers. Also, there are multiple examples of non-grocery merchants who use a data-driven approach, which is why the information was considered relevant.

Most Valuable Rewards

  • According to the report by Dosh, customers feel most rewarded by cashback programs. 83% of surveyed Americans replied so, with 31% feeling very rewarded and 52% slightly rewarded.
  • Additionally, one in three customers admitted they would switch to a different merchant just because they offer cashback.
  • Earlier research by Maritz also discovered that customers prefer to be rewarded with cashback. They also want rewards that can be easily obtained.
  • However, it is worth noting that only around 31% of customers surveyed by Dosh think their cashback card gives enough cash back.
  • The same survey showed that 49% of customers feel rewarded by tiered programs, 38% by birthday gifts, 32% by free samples, and 30% by instant coupons.
  • At the same time, 89% of those surveyed by Dosh don't feel rewarded by invitations to special brand events and 48% think that their loyalty to major brands is not appreciated.

Creating a Mobile Program

  • The same survey by Dosh showed that while more than 66% of respondents used a coupon in the last twelve months, only 30% collected their cash back from everyday purchases using their mobile phones.
  • However, 50% of surveyed customers shop on mobile. It is particularly true for Generation Z customers (out of whom 68% shop on mobile), millennials (69%), and mothers (70%).
  • Additionally, 55% of those polled have at least one shopping app connected to their credit or debit cards, or their bank account.
  • According to Dosh, mobile merchant loyalty programs are a huge opportunity for merchants to attract more loyal customers.
  • Also, Chick-A-fill saw a 20% increase in their conversions since they introduced a new, app-based loyalty program.


  • As noted above, according to the research by Maritz, customers like loyalty programs that make it easy to obtain rewards. Also, both Dosh and the Mercator Advisory Group warn about overly complicated tiered systems.
  • Fast Company believes that simplicity is the key element of the loyalty program's success. It recommends as few restrictions and rules as possible.
  • At the same time, it's important to focus on offers that can be consistently delivered, instead of promising high-value rewards that are often unavailable and damage the program's credibility.
  • Based on several examples of most successful loyalty programs, such as those by Starbucks, Lancome, and American Airlines, Emarsys also thinks that one of the key elements in a program's success is seamless customer experience.
  • Additionally, Fielo observed that more companies are going for their customer's short-term satisfaction and simplifying their programs because it is in accordance with customer preferences, for whom the rewards in complicated tiered programs are too hard to achieve.