Loyalty points: Earn them at one retailer, redeem them at another
Giving consumers the power to swap out loyalty points or miles earned in one program for currency in another is driving business at Points.com. The online program, the consumer-facing side of Toronto-based Points International Ltd., is one of the only – if not the only – independent loyalty program currency exchanges. With retailer customers including Starbucks, J.C. Penney Co. Inc., Penney, Eddie Bauer, eBay, GiftCertificates.com and others, in addition to customers in travel and other industry sectors, Points.com recently passed the five billion mark in the total number of points transacted. The company collects a 10% transaction fee every time points move within its system.
Chief marketing officer Grad Conn says one benefit of the exchange program is that it makes points, miles, and other loyalty program currency more valuable to consumers because they can redeem them at any partner in the Points.com network instead of only at the marketer where the currency was earned. That, in turn, makes consumers more loyal to marketers where they can earn the points and more likely to purchase there, Conn says.
While marketers participating in Points.com benefit directly form those increased purchases, they also benefit by increasing the profitability of their loyalty programs, and by being able to expand their network of partners online at a lower integration cost, he says.
“Anyone who runs a loyalty program looks at two numbers. One is program liability, their cost when someone actually redeems a mile or point, which is the number they have to carry on their books,” says Conn. The other number is the value at which their loyalty program currency is sold – such as the cost at which an airline sells miles to a bank for the bank to use in a promotion, for example.
The gap between the two numbers represents how profitable the loyalty program is for the marketer: the wider the gap, the greater the profitability. Points.com gives marketers the ability to widen that gap by removing liability from its books at a certain number as points or miles are redeemed, selling its points or miles to the companies that want to use them in their own programs at another number, with the flexibility to experiment with how they set those two numbers so as to realize the biggest gains, Conn says.
Conn adds that Points.com’s system provides a central hub that allows a marketer to do one integration with Points.com, which then connects the marketer with all other partners in the network, rather than having to do a separate integration with each partner it brings into its loyalty program. “That becomes valuable to marketers as they look for a way to expand the network of partnerships they have in a cost effective and simple way,” he says.
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