Loyalty programs are structured marketing strategies designed by merchants to encourage customers to continue to shop at or use the services of businesses associated with each program. These programs exist covering most types of commerce, each one having varying features and rewards-schemes.
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global market outlook
- The global loyalty program market is valued at $180 billion in 2022 (E). The market is forecasted to grow at a CAGR of 5–6 percent to $179–191 billion between 2022 and 2026(F) . 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.
- Price, input cost and demand movements are in a neutral/almost favorable condition to procurement, while the competition is stable.
- 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.
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Loyalty Programs market frequently asked questions
The global loyalty management market is expected to reach a market size of $215-$216 billion by 2022.
As per Beroe's loyalty program report, the high market maturity regions in the loyalty management market are West, East, and Gulf coast of US, UK, France, and Germany, Singapore, Hong Kong, China, Japan, and Australia, South Africa, UAE, Egypt, and Nigeria. The medium maturity markets are Canada and the central regions of the US, Spain, Portugal, Spain, Portugal, Poland, Morocco, Korea, Vietnam, India, Brazil, Argentina, Chile, and Mexico.
The various loyalty program trends are that there is an increasing cooperation between buyers and sellers in the loyalty management market which is leading to growing maturity. Suppliers are also ramping up their supply capability and monitoring their performances. E-commerce is also leading to rising demand for B2C loyalty.
Beroe's loyalty program analysis shows that the global loyalty management market is expected to grow at 4-5% by 2022.
Some of the key drivers for the loyalty programs market are cost benefits, demand from potential industries, and operational benefits.
Loyalty Programs market report transcript
- The global Loyalty Program market was valued at $181 billion in 2019.
- The market is forecasted to grow at a CAGR of 3–4 percent to $185–195 billion between 2020 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.
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 a digital loyalty program strategy. This will be a major growth driver in mature markets. Adoption of schemes such as a loyalty scheme under which you get customer loyalty and channel loyalty programs, membership programs, frequent flyer programmes, and digital rewards can help drive the market further.
- Outsourcing in the reward program market has led to a reduction in the number of hours billed for the 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 are high and the supplier passes on a part of the margin as a discount to clients.
Adoption of Advanced Technologies
The success of a business is measured by the success of its consumers. Leading-edge technologies such as artificial intelligence (AI) and machine learning (ML) predict human behavior and buying patterns through various analytics.
- Moreover, AI and ML hold the potential to shape the strategies of loyalty program service providers. The AI-based predictive analysis helps businesses target relevant consumers to improve their customer experience (CX).
- AI and ML track several transactions as well as monitor and prevent hackers or crackers who might break into loyalty account points.
- Furthermore, both these innovative technologies provide retailers intelligent insights that can help improve consumer conversation, experience - and total sales.
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 and marketing services, food and beverage industries is a key driver. This can help propel the customer engagement program and reward plan schemes that can be a major driver.
- 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 providers will save cost by reducing the cost per unit of reward fulfillment (supplier provides discounts as the number of merchandising units increases due to economies of scale).
Rising Trend of Personalization
- To extract substantial revenue from loyalty programs, leading market players are integrating personalization into their loyalty platforms.
- Customers are getting attracted to custom coupons, recommendations, and promotions.
- Such loyalty programs improve customer satisfaction thus auguring well for loyalty program providers.
- By leveraging data gathered from omnichannel loyalty platforms, companies can make custom offers and recommendations to grab consumers' attention and trust.
- Subcontracting of reward sourcing and delivery is done in case of suppliers lacking a 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 spending of the buyer.
Limitation of Technology Platform
- The loyalty program that runs on the plug-and-play SaaS model and is limited by SaaS capability will face issues as the customization of the program may spike the cost of the program and cost-saving by avoiding customization may lead to a dissatisfied customer.
Regulations specified by the government can hinder the market in some ways. For example, Ontario’s Protecting Rewards Points Act changed the process of reward programs in Ontario. A thorough look into the regulations and how it affects the business processes is crucial to understand its impact.
COVID-19 Impact on Loyalty Program Market
The COVID-19 crisis is positively impacting the loyalty market as a majority of customers are rapidly shifting toward digital channels to buy products or services amidst the nationwide lockdown and related restrictions. The unprecedented growth of the e-commerce industry during the public-health crisis has influenced retailers to attract and retain maximum consumers to their websites, setting high hopes for loyalty platform providers.
Why Should You Buy this Report?
This report on the loyalty market also provides a descriptive industry overview in areas such as North America, Europe, Middle East, Africa, APAC, Australia, and Latin America. It also explores the various opportunities and challenges affecting the loyalty programs industry, along with Porter's five forces analysis of developed and emerging markets.
Methodology for Writing This Report
Beroe gathers intelligence through primary sources that include industry experts, researchers, and consultants, as well as current suppliers, producers and distributors. Secondary sources include business journals, newsletters, magazines, market research data, company sources, and industry associations. Following data collation, analysis, and strategic review, the Final Research Report is published on Beroe LiVE.