Loyalty Program Rewards – A Thriving Currency?

Payments Leader

Posted on October 4, 2013


As we all know, winning consumer loyalty is a never-ending battle for loyalty program managers and marketers. There are countless strategies and tactics currently at play and all continue to strive for performance improvement and innovation.

As we all know, customer rewards programs are everywhere. In fact, the proliferation of these programs makes it seem as if they might literally be a ‘dime a dozen.’ But what if a program allowed for more instant gratification and took that “dime” and turned it into a “dollar,” and thus further raising the bar on the value proposition?

Don’t be fooled – the rewards offered through loyalty programs are, in essence, currency, but of a non-traditional kind. Not only that, it’s a currency that carries a market value so significant, it could be referred to as ‘buried treasure.’ How much market value does this new currency carry? Would you believe it’s conservatively estimated at $48 billion a year?

How Much Rewards Currency is Left on the Table?

While the average U.S. household earns $622 in rewards every year, they fail to cash in on a full one-third of that [1]. Multiply that $200 a year by the 117,538,000 households numbered in the 2010 U.S. census and you get- well, you get a huge amount of ‘booty!’ Offering more opportunity to redeem the outstanding (currency) value not only increases the buying power of consumers, it improves the financial fitness of every business selling goods and services through incremental spend behavior. So why aren’t rewards currency being accepted at the point-of-sale of retailers? Well, there is a multitude of reasons from POS infrastructure constraints, numerous merchant processors, and much more. However, the landscape has been evolving and rewards currency is accepted at several retailers, both online and brick-and-mortar.

Contextual Example: Fuel Rewards Programs

So let’s examine a fuel rewards program as an example. A couple of quick facts: Did you know that a 10 cents rise in gasoline and diesel requires consumers to spend an additional $93.25 more per year? Or better yet, that same price increase removes $11 billion from consumers’ wallets in a given year [2]. Now what if a rewards program allowed consumers to use that rewards currency for a discount in gas, real-time at the point-of-sale, or in this case, the pump? Well, that possibility exists, it’s increasing in popularity and doesn’t require a person to drive a hybrid to get more miles per gallon! That’s right, SUV lovers, sports car enthusiasts, and all other motorist types can enjoy this high-perceived value rewards offering. Leveraging rewards currency for a commodity makes sense in a lot of cases…even if you’re not a fuel store operator. The economics benefit all parties involved due the very high perceived value of gas. Ever know anybody that would drive a few miles for a couple of cents per gallon savings? A fuel rewards program is just one example that transforms rewards into currency of real value, of which is transcending multiple merchant establishments.

And though expanding the reach of a rewards program from a currency perspective is appealing on many fronts, it is limited in acceptance at the present. While we wait to see who gathers their courage to make the initial leap, let’s remember that one existing strategy still works: make it easy for program members to redeem their rewards for things they consider meaningful and they will participate in your program.


[1] Colloquy
[2] U.S. Energy Information Administration

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Payments Leader

Payments Leader from FIS provides insights on credit, loyalty, fraud and emerging payments strategies through blog posts from our industry experienced authors.