CLOS-ing the Deal on Loyalty

Sep 21, 2018

Ask businesses what they want and expect from their loyalty programs performance, and you’re likely to hear a variety of goals and benchmarks – increased engagement, improved retention rates, sales growth, attract more Millennials, create more brand “stickiness,” etc. But in order to achieve these goals, a loyalty program must first be something people want to participate in.  After all, a loyalty program can’t have any effect if customers are unaware of it.

It should come as no surprise then that an increasing number of companies – both merchants and card issuers – are incorporating card-linked offers into their loyalty and promotional strategies. Card-linked offers, or CLOs, enable consumers to receive offers and discounts from brands by opting in with their existing payment card account. They redeem the rewards or discounts automatically when they use that card for a purchase in-store or online. Simple, right?

Simplicity Sells… For Consumers and Merchants

The simplicity and “set-it-and-forget-it” nature of CLOs meet the typical consumer expectations of simplicity and ease of use. And their popularity with consumers have prompted businesses to increase their participation in CLO programs by nearly 50% between 2016 and 2017, according to a CardLinx Association survey[1].

Consumer participation may be the most significant driver of the resurgence of CLOs, but that’s not the only advantage they deliver to merchants. Traditional discounting processes, such as paper or digital couponing and POS-based discounts, can be slow, inefficient and expensive. More importantly, they can be difficult to track and analyze.

CLOs, in contrast, eliminate the need for the consumer to remember a coupon or a code, or to download and open an app at the point of sale – they use their associated card to pay and the offer is triggered. For consumers, this delivers a great experience on the card of their choice and 100% success rate in redemption, as well as confirmation at statement date that they got their discount. For merchants, card-linked offers streamline operations by removing redemption from the point of sale, increasing frequency across a targeted segment of cardholders, and making the path to purchase more efficient both online and in-store. For card issuers, they get a ready-made tool to stimulate card usage and spend, increased cardholder longevity, and incremental revenue from participating merchants.

In the loyalty landscape, card-linked offers are a rare and wonderful “win-win” proposition.

CLOs and Customer Data

And that doesn’t even account for perhaps their most valuable aspect – unparalleled access to customer data. Because of their straightforward and near-automatic application, card-linked offers provide a clear view into customers’ selection and purchasing behavior, allowing merchants and card issuers alike to have a clear view into how offers perform, and what offers are best influencing the consumer. If the customer experience is driven by customer opt-in to selected card-linked offers, the data can be even more telling, and merchants can feel an elevated level of security about the value they are receiving from providing offers to consumers who are engaging in their promotions. By understanding which offers drive value and engagement, future offers can be optimized to be more personalized, delivered at better times or dates, offering deeper discounts or tied to different behaviors.

Card-Linked Optimization & Monetization

Even as co-branded credit cards and cash-back schemes have waned in recent years, card-linked offers have endured. And the reasons why are as easy to understand as CLOs are for consumers to use. Card-linked offers:

  • Generate spend and engagement for merchants, particularly among their most valuable demographics
  • Provide funding mechanisms to the credit card providers at a time when interchange rates are declining and margin to support customer incentives is becoming limited
  • Increase cardholder longevity and loyalty for card issuers and banks
  • Provide clear, measurable value to consumers in an understandable, simple-to-use way

The additional spend generated for merchants makes for a clearly defined value proposition for those who provide the promotions, but what about the card issuers?  Why develop the partnerships and support the technology necessary to add these offers to their earning structure? The monetization of their rewards program is key! Traditional loyalty rewards and benefits are funded directly by the card issuers. In recent years, we have seen a decline in interchange rates – particularly in Europe where laws capped the current rate. The interchange rate was traditionally one of the largest sources of funding for consumer benefits so staying competitive with a shrinking margin is a challenge in any industry. CLOs are providing card issuers with value to their customer and limited impact to their expenses or profit margin. Truly, a win-win with the merchants having access to the power segment of customers who benefit their brand and know exactly where they are providing offers in the market. Card issuers can provide direct value back to their consumer creating added stickiness in the relationship with financial assistance from the merchant.

Additionally, CLOs provide access to customer data that fuels the development of personalized, high-impact future offers ad generate insights into consumer behavior that can influence a loyalty strategy going forward. With these insights – and with CLOs’ inherent flexibility – offers can be refined to match customer behavior, deployed at low-performing time periods to boost activity, tailored to support specific products, or time-limited to create urgency. And with all of this data available, CLOs are imminently trackable and measurable, both in terms of individual offer performance and overall impact.

CLOs are a valuable addition to any successful loyalty program, and businesses looking to increase engagement, loyalty and financial performance would do well to explore this versatile approach. Email Kobie at to learn more about how we can help!

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