Loyalty Explore the evolving customer loyalty landscape from a multi-industry perspective. Gain insights and learn how to boost retention, increase engagement and future-proof your strategies with our thought leadership.

Ecosystems Unlock New Opportunities for Customer Loyalty

12/6/2023
Alex Jarman Profile Picture
Alex Jarman Bio
Share:

Companies are investing significantly in customer loyalty to increase retention and customer lifetime value. While some have turned to traditional loyalty programmes, many are moving to a newer model: the loyalty ecosystem. Loyalty ecosystems develop when companies offer reciprocal benefits across their loyalty programmes or when one company offers reciprocal benefits across its multiple brands.

Ecosystems give consumers greater control over where to redeem their rewards. They also provide companies with significantly more data on their customers’ shopping habits. As more companies move to the ecosystem model, it is becoming increasingly important for them to understand ecosystems’ benefits and how they could impact their business.

Ecosystems support seamless shopping experiences

Customer data is the primary motivation behind many companies’ loyalty programmes, and ecosystems can deliver significantly more data than traditional loyalty programmes. Information gleaned from data is critical as many companies focus on personalising the shopping experience.

48% of respondents reported that more personalised shopping experiences will have a strong impact on retailing in the next five years

Source: Euromonitor International’s Voice of the Industry: Retailing survey

In traditional loyalty programmes, companies only collect data from their interactions with customers. While this can deliver strong data, it leaves gaps in understanding the entirety of a customer’s persona. Marriott’s partnership with Rappi shows how ecosystems address this issue. Marriott’s loyalty programme is well-crafted to understand consumers’ travel preferences, but it may miss information on other, non-travel lifestyle preferences. To better understand its customers, Marriott partnered with Rappi in October 2023. Rappi operates several e-commerce and foodservice delivery services across Latin America. By joining these loyalty programmes in an ecosystem, Marriott can better understand customers’ retail shopping habits, and Rappi can better understand their travel preferences.

Increased data also facilitates seamless shopping experiences. Fully understanding a customer’s shopping preferences allows companies to anticipate their desires and make suggestions that reduce the customer’s time to check out. Seamless shopping experiences will become increasingly important over the coming years, with global m-commerce sales expected to more than double between 2022 and 2027.Global M-Commerce Sales 2022-2027

Ecosystems allow consumers to maximise benefits

Consumers’ appetite for reward flexibility is also driving ecosystems’ growth. One of the largest issues facing loyalty programmes is their perceived lack of value by consumers.

29% of consumers cite rewards not being valuable enough as a barrier to participating in loyalty programmes

Source: Euromonitor International’s Voice of the Consumer: Loyalty Survey

Ecosystems address loyalty’s value issue by offering greater flexibility for reward redemptions. In traditional loyalty programmes, customers only redeem rewards from the merchant where they made their purchase. In an ecosystem, however, customers can redeem rewards from multiple merchants. They may earn points at one member of the ecosystem and spend them at another. This flexibility puts consumers in control and is a major factor behind ecosystems’ popularity.

Loyalty ecosystems are especially popular with consumers who highly engage in loyalty programmes. Euromonitor International’s Voice of the Consumer: Loyalty Survey reveals that Loyalty Enthusiasts want the types of benefits that ecosystems offer. Loyalty Enthusiasts are overwhelmed by the number of programmes in which they participate and want to focus their spending on fewer loyalty programmes. By combining rewards from multiple merchants, ecosystems allow consumers to reduce the number of programmes in which they participate while maximising their potential rewards.Chart showing loyalty and perceptions

Ecosystem development considerations

The creation of an ecosystem will depend on a company’s structure and its goals for the ecosystem. Ecosystem development models broadly break into two groups: cross-brand partnerships and cross-company partnerships. Cross-brand partnerships create ecosystems within one company, such as Amazon Prime. Cross-company partnerships exist when a company partners with another’s loyalty programme, such as the partnership between the Delta and Starbucks loyalty programmes. Many companies focus on cross-brand partnerships before expanding to cross-company ones.

The below chart outlines how South Korean department store Shinsegae is building an ecosystem. Like many ecosystems, Shinsegae started by promoting cooperation between internal brands and is now expanding into external partnerships. The addition of external partners is a critical stage in an ecosystem’s development. Adding partners will increase the ecosystems’ benefits, but it also adds complexity. Companies building ecosystems must communicate clearly with their customers at this stage, so the customers understand the ecosystems’ benefits and are not deterred by any structural changes to the programme.Shinseagae Loyalty programme

Ecosystems will challenge traditional loyalty programmes

The growth of ecosystems comes at a pivotal moment for customer loyalty. Companies must prove the value of loyalty programmes to their customers if they wish to retain their membership. As more companies move to the ecosystem model, it will also become increasingly difficult for standalone loyalty programmes to attract new members. This trend will contribute to an overall consolidation of loyalty programmes, helping reduce the oversaturation of programmes faced by many consumers.

Learn more in our report, Customer Loyalty Ecosystems.

 

Interested in more insights? Subscribe to our content

Explore More

Shop Our Reports

Next-Generation Customer Loyalty

Customer loyalty is transforming due to changing consumer preferences, technological advances and the e-commerce boom. Reinvigorating loyalty programmes in this…

View Report

Elevating Engagement: The Loyalty Landscape in Asia Pacific

Asia Pacific is a region characterised by diverse economies, cultures and demographics. In such an environment, loyalty programmes need to be crafted to meet…

View Report

Building Brand Loyalty in Latin America

Customer loyalty in Latin America is evolving amid the evolving consumer preferences and needs. Players must embrace regional macroeconomic, social and consumer…

View Report
Related Content Customer Loyalty Ecosystems Learn More
;