When it comes to revenue generation or new customer acquisition, loyalty partners can be incredibly lucrative, high-value partners for brands in almost every vertical.
From internal data that we've gathered of over 90 industry-leading brands – from one quarter alone – the top ten largest loyalty partners drove an average of 30% of clients' total program revenue.
While many successful brands have already discovered the unique benefits of partnering with loyalty sites, these types of partners remain a mystery to others.
This post is meant to pull back the curtain on loyalty partners as well as dispel some common misconceptions associated with them.
Table of Contents
- What is a Loyalty Partner?
- How Loyalty Partners Differ
- Types of Brands Working with Loyalty Partners in Affiliate Programs
- Misconceptions on Working with Loyalty Partners
- What Loyalty Partners Look for When Partnering with a Brand
Loyalty partners come in many forms but generally, these partners are most often websites, apps or companies that actuate potential consumers with a reward in anticipation of a desired action, typically a sale. Regarding these rewards, however, a sale isn't the only action for which a loyalty partner will offer a reward. Other actions may include accepting free trial offers, signing up for a service, form-fills and the like.
At the end of the day, a loyalty partner can incentivize potential consumers with rewards on any action within the sales funnel deemed appropriate.
Just as loyalty partners take many forms, the rewards they offer also vary. Some typical rewards include cashback, redeemable points, special offers or gift cards. Other more specialized examples of these rewards are airline miles rewards programs, college fund accounts and even offers to apply rewards toward charitable organizations.
Loyalty partners tend to differ from other types of partners (e.g. content, coupon or deal partners) because of their ability to drive specific actions along with nuanced targeting capabilities. For example, a loyalty partner can target customers on a more granular level. This targeting could include purchase history, geo-targeting and other types of intricate targeting capabilities.
What makes this possible is the platform structures of most loyalty partners. Their members create profiles on their systems about themselves and provide information that is often quite detailed, including information such as their name, email address and zip code.
In addition, the loyalty partner audience is also very rewards-driven. This allows brands to work creatively with loyalty partners to drive consumers to complete an action (e.g. signing up for something) or moving them further down the purchase funnel.
Any brand can work with loyalty partners. Some specific examples include:
- Brands that categorize themselves as non-promotional or those who don't want to be considered discount-heavy. Loyalty partnerships tend to be attractive to these types of brands because the consumer is getting a reward (e.g. cashback on points), not a discount.
- Brands desiring a higher order value on recurrent purchases. Loyalty partners are perfect for this goal due to their dynamic targeting capabilities and the ability to entice customers to return and repeat purchases. Additionally, loyalty partners tend to have a greater degree of ability to support a higher average order value. In turn, this increases overall customer lifetime value.
- Brands needing geo-targeting capabilities. These types of brands are most often only offered in specific markets and need the tools to target customers at much more intimate level. As noted above, loyalty sites typically require some sort of profile creation from a consumer in order to get their rewards – information that often includes their geographic location. By partnering with loyalty sites, brands can reach consumers in a specific market that may offer higher value for their brand.
- Brands looking to increase sales when business is slower. A great example would be right after parents do all their back-to-school shopping or times that fall outside of holiday spending. During these times, loyalty sites can hosts sales, double-points or whatever reward they and their brand partner choose to incentivize customers. And because loyalty partners typically pass increased rewards (commissions) on to consumers, brands can work with these partners to adjust commissions in ways that will create more demand during these slower months.
A common misconception among brands is the idea that loyalty partners don't drive higher new customer percentages. Contrary to this belief, and especially due to the specific targeting found within loyalty platforms, loyalty partners are actually quite effective at driving new customer growth. This is because they're able to leverage their customer data in many ways. As brands work with loyalty partners and extrapolate more data, new strategies can be formed and, in turn, the loyalty partner is often responsible for a high number of new customers.
Another notable misconception with loyalty partners is around incrementality. Some brands contend that loyalty partners don't drive incremental value for them. However, it's critical to understand what "incremental value" actually means for your brand. Once this is established, brands can work with loyalty partners to ensure specific KPI's are being satisfied. Whether this is based on targeting, new offers, testing or even increasing sales during slower times, smart strategies can be developed to meet desired KPI's through loyalty partnerships.
Most loyalty partners are fairly selective when it comes to determining what brands to partner with. It takes a lot of resources to build out the campaigns, manage order inquiries and set up tracking.
To set your brand apart so that loyalty partners are in interested in working with you, there are a few things to know and do:
- Establish competitive commission rates. Commission rates are a critical deciding factor that will ultimately dictate whether a loyalty partner will choose to work with a brand or not. Many of these partners are looking for competitive commission rates or a minimum rate because they often use part of their commission earnings to help fund their rewards programs, whether this is in the form of cashback or in a points format.
- Be easy to work with. Loyalty partners want brands that are easy to work with and offer a simple commission structure. Though some of these partners are willing to work on different compensation tiers, generally a standard commission structure is the most desirable.
- Strategically increase commissions. As the partnership develops and proves to be fruitful for both parties, many loyalty partners also want to promote brands that are open to increasing commission during special events or when higher rewards are offered such as with double or triple points or cashback. This creates a greater incentive not only for the consumer but for the loyalty/brand partnership as well.
It's not about whether or not a brand should work with loyalty partners, it's really a matter of how to best work with these partners to achieve your goals.
With this in mind, brands should consider their overall goals—both short and long-term. Once these have been established, choosing the type of partnership projected to be the most lucrative—as well as the most beneficial to both brand and consumer—will ultimately enhance this type of brand/partner relationship.
To better articulate the nuances of how brands are working with loyalty partners within affiliate programs, give our, Loyalty Partners: What They Do and How to Leverage Them for Your Brand episode on AP's Outperform podcast a listen.
Amy Crider is an Associate Account Director at Acceleration Partners