Global Loyalty Program Industry Outlook

  • The global Loyalty Program market was valued at $169 billion in 2018
  • The market is forecasted to grow at a CAGR of 4–5 percent to $199–201 billion between 2017 and 2022
  • Regions, such as Western Europe, North America, and some parts of APAC, such as Australia, Japan, Hong Kong, Singapore, have high market maturity 
  • The APAC and parts of Latin America are expected to be the future growth driving markets for loyalty program services

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Global Loyalty Program Market Maturity 

Loyalty program penetration is high outside Europe and North America, due to increasing e-commerce and online buying behavior of the customers High adoption for Loyalty Program in APAC, due to the presence of regional/global suppliers with established technology platform and regional/local merchant network offering iconic reward catalog. Global buyers are looking at consolidating the supply base.

The Middle East and Africa have low adoption, as infrastructure and connectivity pose a challenge in rewards sourcing, fulfillment, and delivery in certain locations

Global Loyalty Program Industry Trends

The growing geographic footprint of service providers and adoption of global loyalty program strategy by buyers indicate the increasing maturity and willingness of both supplier and buyers to partner on a global scale. Suppliers are also improving their supply capability while adopting performance-based metrics for evaluation and monitoring of both channel and customer loyalty program. E–commerce is fueling the demand for B2C loyalty, whereas B2B is driven by customer retention, as the marketers aim to guard their brand against generic products in the market. This has led to outsourcing of services by buyers

In order to boost loyalty program participation in the Middle East, suppliers are investing in analytics and business intelligence tools to personalize the program for relevant rewards and incentive schemes

Growth Drivers and Constraints

The growth of retail and e–commerce in the emerging markets is expected to drive loyalty program budgets in these markets. Growth in online buying culture, high adoption of mobile and smartphone by the consumers had raised the need for digital loyalty program strategy. This will be a major growth driver in mature markets

Drivers

Cost Benefits

  • Outsourcing has led to reduction in the number of hours billed for technology platform. The initial infrastructure cost for creating a technology platform, is a one–time spend and this platform is customized to suit client requirements. Hence, the margins on a long term contract in providing this platform to clients is high and the supplier passes on a part of margin as a discount to clients

Potential Industry Sectors 

  • The demand for loyalty services is primarily driven by the retail, financial services, consumer product and food and beverage industries. Demand for digital reward program, analytics and business intelligence for customization by the retail, food and beverage industries is a key driver

Operational Benefits

  • Outsourcing allows buyers to standardize the level of services across various locations. Productivity and efficiency could be enhanced through the introduction of various critical performance indicators and compliance clauses in the contract 
  • Centralized procurement through global/regional service provider will save cost by reduction of the cost per unit of reward fulfillment (supplier provides discounts as the number of merchandising units increases owing to economies of scale) 

Constraints

Subcontracting Practices

  • Subcontracting of reward sourcing and delivery is done in case of suppliers lack proper network in a particular region or when the program requires high localization. This practice indirectly affects the buyer since subcontractors (Local Agency) charge a margin to the service provider, which is eventually passed on to the buyer. This margin–on–margin increases the spend of the buyer

Limitation of Technology Platform 

  • The loyalty program that runs on plug and paly SaaS model and is limited by SaaS capability, customization of program may spike cost of program, cost saving by avoiding customization may lead to dissatisfied customer