Why retailers need a payment and loyalty program

It’s no secret that many traditional retailers have had a difficult time recently. Bricks-and-mortar stores, including those belonging to the best-known and most successful global brands, have suffered from enforced closures, a challenging macroeconomic environment, and customer behavior that has changed dramatically.

As we start to emerge from the pandemic, introducing or improving a payment and loyalty program can make a real difference to retailers. Successful loyalty schemes can help to win new customers and increase engagement with existing ones. Marrying a closed-loop payment system with a well-crafted loyalty program can improve both the customer experience and a brand’s financial performance.

Starbucks saw global store sales decline 5% between October and December 2020, mainly due to COVID-19. However, the number of active members in its Rewards loyalty program in the US grew by 15% to 21.8 million in the same period. This followed a recent update that enabled members to make payments without having to use a physical card. ¹

Deepening member engagement

The ubiquitous coffee company, which has around 33,000 stores – including a significant number of franchises – predicts sales growth of 18–23% in 2021.² It anticipates that Rewards will play a key role as its finances bounce back. “We expect the expansion of payment options will appeal to an even wider customer audience and deepen engagement with our members,” said Brady Brewer, Chief Marketing Officer, Starbucks.

Loyalty programs remain a popular choice for many brands. A staggering 96% of American consumers said they use at least one loyalty or rewards program, according to one survey.³ Understandably, the pandemic has affected how often they have been able to use them – 28% of consumers actively earned rewards from fuel-related programs last year, down from 36% in 2019, for example. But a majority of businesses surveyed said implementing a loyalty program app and cashierless checkout would be their top priority once the pandemic subsides, suggesting they still see value in their payment and loyalty strategies.

At the same time the shopping habits of consumers are changing, driven by digital technology. During the pandemic, about 15% of consumers in France, Germany, Italy, Spain, and the UK shopped for groceries on a website that they had never used before, according to McKinsey.⁴

Closed-loop vs. open-loop payment systems

Closed-loop payment systems – which enable people to pre-load money onto a card to spend with a specific brand – give companies increased control and reduce service fees, which can improve their profitability. The float associated with customers pre-loading money onto cards also provides companies with additional working capital. A branded card, meanwhile, boosts brand awareness and provides important information about spending habits. In contrast, many open-loop systems have significant fees and it is the service provider, not the retailer, that controls access to customer data.

The quick-service restaurant (QSR) industry is one sector that has turned to global technology provider G+D to introduce a new payment and loyalty program. One of the largest QSR chains in Asia wanted a closed-loop, online-only loyalty program that worked alongside their existing processes. G+D’s Convego^® Pearl solution – an all-in-one platform that enables brands to own and control the payment transaction and the customer relationship – helped the company to achieve a 13% uplift in sales.

The rewards of customer loyalty continue to be exponential. The latest data shows that 78% of consumers think loyalty programs make them more likely to continue to do business with a brand, and 72% say they are more likely to recommend brands with good loyalty programs.⁶

Not everyone will be as globally successful as Lidl, McDonald’s, or Starbucks, but an integrated payment and loyalty program can make a material difference to the customer experience you provide and the financial performance you deliver.

Published: 28/04/2021