Loyalty Programs Market Overview
The market for global loyalty programs is expected to reach $215-$216 billion while growing at a CAGR of 5-6 percent between 2017 and 2022. By 2020, the global loyalty management market was expected to reach anywhere between $184 and $186 billion according to Beroe’s loyalty management market report.
In the loyalty management market, high market maturity would be experienced in regions such as Western Europe, North America, and some parts of APAC such as Australia, Japan, Hong Kong, and Singapore. In addition to this, APAC and parts of the LATAM are also expected to be the future growth driving markets for loyalty program services. The participant rewards can constitute up to 75% of the total costs.
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Loyalty Program - Global Industry Analysis
- The global Loyalty Program market was valued at $172.5 billion in 2018.
- The Loyalty Program market in North America was valued at $72 billion in 2018 and is growing at a CAGR of 2-4 percent.
- Regions such as Western Europe, North America, and some parts of APAC, such as Australia, Japan, Hong Kong, Singapore, have high market maturity.
- Poland, Morocco, Canada, central US regions, Brazil, Mexico, and India are among the various medium market maturity regions.
- The APAC and parts of Latin America are expected to be the future growth driving markets for loyalty program services as the loyalty management market size will increase tremendously.
- The top global service providers include Connexions Loyalty, Aimia, Blackhawk Network, and Maritz Motivation.
- The cost-saving strategies such as service bundling and payment term optimization among others can be utilized to cut costs.
Loyalty Program - Global Industry Trends
- The growing geographic footprint of service providers and the adoption of global loyalty program strategy by buyers indicate the increasing maturity and willingness of both the 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 the outsourcing of services by buyers to ensure customer loyalty while driving down costs.
- 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. This can be a game-changer in the region whereby customers have been wary of such programs. It can help bring this region into the spotlight as more customers will be willing to participate thereby fuelling the growth of the market.
- Globally, suppliers are increasingly focusing on customer acquisition and retention operations. Customer retention ensures that existing customers can be retained and new customers can be acquired and turned into loyal customers. This has allowed suppliers to offer a range of loyalty programs that are suited for different needs.
- Rather than take a single approach, suppliers are focusing on providing a range of loyalty programs depending on their customers. These include loyalty card schemes such as card rewards, affinity programs, cashback programs, and point-based card rewards.
- The pricing component is based on the specific project. Sometimes, the pricing is based on the volume too, and can vary from industry to industry and the particular requirements.
Why should you Buy this Report?
The report also provides a descriptive overview of the market for loyalty programs 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 can 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.
Loyalty Programs Market Trends
Category Intelligence on Loyalty Programs covers the following
- Information relating to market, supply, cost, and pricing analysis
- Hard to find data on cost and TCO models, supplier details, and performance benchmarks
- Macroeconomic and regional trends impacting cost, supply, and other market dynamics
- Category-specific negotiation and sourcing advice
Loyalty Program - Global Market Maturity
- 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.
Drivers
Cost Benefits
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Outsourcing in the reward programme 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 is high and the supplier passes on a part of the 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 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.
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 fulfilment (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 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
Government Regulations
