Multi-Tender Loyalty Programs: Should Retailers Reward All Forms of Payment?

Nov 24, 2015


Multi-Tender Loyalty Programs

In today’s consumer-empowered environment, there is a trend toward customer choice; therefore, many retailers launching new loyalty programs opt for program structures that reward any form of payment from cash to credit to mobile payment. At the same time,  retailers with established private label credit, co-branded credit, or stored-value, card-based programs are also revising their approach to include all forms of payment. Let’s explore this trend with an eye for balancing customer preferences with program objectives and financials.

Research shows that customers strongly prefer multi-tender loyalty programs, but retailers remain highly divided on whether to require the use of their own branded card, or to allow all forms of payment.

There are pros and cons to the more inclusive, multi-tender approach:

Pros: Cons:
  • Complete view of your customer base
  • Complete view of each individual customer
  • Allows you to anticipate industry shifts as mobile options develop
  • More complex systems integration
  • Less incentive to use your proprietary form of payment
  • Potential lower funding from your bank partner



Increased program penetration and engagement: It makes intuitive sense that a tender-neutral program achieves higher penetration than a program based only on your own card. What may be less intuitive is how big the difference really is:

Most retailers and quick-serve companies with multi-tender loyalty programs regularly see their members account for 70% to 90% of revenue while programs limited to their store credit card rarely go over 10-20% penetration except for regional brands. Though this data is based on credit cards, the penetration for store-branded reloadable cards is similar to or lower than store credit cards because the customer must carry a balance.  In addition, few retailers have the transaction frequency that makes a reloadable card appealing to consumers.

Revenue from Program members

Source: Primary and secondary research by Kobie Marketing Inc. 2015

Why is higher penetration important? Increased visibility into a greater percentage of your customer base is just the start – loyalty members are more engaged with a company across several metrics.

  • Many retailers report that program members are twice as likely to open an email from the loyalty program as general customers are.
  • Among members, subject lines with key program-related words such as “Your Reward…” are almost twice as likely to be opened as purely promotional messages.
  • Members are more likely to keep their contact information updated in order to receive their rewards.

These behaviors make your marketing efforts more cost effective. Some of the differences in engagement are the result of self-selection – highly-engaged customers are more likely to sign up for a loyalty program.  However, programs with over 50% penetration still show higher response metrics from members, which indicates that a program can engage even an average to below average customer.

More actionable data: Gaining the customer’s permission to receive marketing communications is becoming even more important as people become more sensitive to privacy issues.  Communicating under the auspices of a loyalty program creates context for using member data without the content “feeling creepy.” With a program that covers all forms of payment, you’ve received explicit permission from your customers to track everything they do and to communicate with them – and they’ll let you know if you miss even a single transaction.

Improved penetration for “preferred” forms of payment: It is interesting to note that many retailers with multi-tender programs also achieve higher penetrations for their private label and co-branded cards than retailers who focus their program solely on their own credit card. Retailers can use what they learn from the broader customer base to build more effective acquisition campaigns for their private label portfolio. There are many ways to add benefits exclusively for members who use a “preferred” form of payment, which gives members an incentive to adopt those forms.

Greater opportunity to motivate incremental behavior. With a multi-tender program, you are more likely to be able to target customers with unrealized potential; such as consumers who use multiple credit cards but who will consolidate purchases with you if given a reason. A multi-tender program can also help you retain a customer who is about to churn but who could be reactivated with a relevant offer. This allows you to target your marketing budget more effectively.

Appeal for Millennials: The Millennial customer isn’t using credit the same way as previous generations. caused a flurry when they published data showing that two thirds of Millennials do not have a single credit card and are far less likely to add an additional card than customers in other age groups. Credit cards are no longer the default form of payment for Millennials, and increasingly members of all generations. Instead of credit cards, customers are more likely to be using a mix of debit cards and reloadable cards. While mobile payment penetration is still small, acceptance and use is growing rapidly. The retailer who limits its loyalty program to customers willing to carry a private label plastic card may be limiting its ability to reach future customers.

Millennials Major Credit CardsThere are certainly retail programs that have gained traction with Millennials such as DSW, Ulta, Sephora and Walgreens; note that all of these examples are multi-tender programs. 

More insight about individual customers: With a multi-tender program you not only learn about more of your customers, you also learn a lot more about each individual member. Bloomingdales had an anemic private label program with 10% revenue penetration, which they re-launched as the multi-tender “Loyallist” program. As Frank Berman, Bloomingdale’s executive vice president of marketing said:

“[Now] we’re capturing 100% of the information. We are able to understand a great deal more about what our customers are doing in our store which makes our marketing efforts much more relevant.”

The key point is that the customer will cheerfully volunteer their information every time they make a purchase in order to earn program rewards. The resulting information will be more accurate than relying on a model to link transactions for a household behind the scenes.

CASE STUDY: Learning the hard way about customer credit card habits

The marketers at one specialty retailer got a bit of a shock during their loyalty program pilot when they discovered the inadequacies of their customer annual spend model. The retailer thought their very best customers were using two credit cards and spending roughly $500 per year. They also thought their cash customers were an entirely different population. Using some of the best modelers in the business, they confidently set their loyalty program rewards at what they thought would be a stretch goal.

During the pilot, customers did what they always do with a loyalty program – they told the store associate to make sure they got points for every transaction. The retailer quickly discovered that many customers were really using up to 4 different credit cards and a third of their transactions were cash. This meant that the annual spend was almost double what the model had originally predicted. The pilot had substantially more reward qualifiers than anticipated, because the stretch goal was an amount that many, many customers easily met.

Needless to say, the reward structure was quickly redesigned for national rollout.

The specialty retailer also learned that their private label card customers were using the card for less than half of purchases. With that insight, they adjusted their offers and used program incentives to increase marketing efficiency and successfully drive use of their private label card.

A reason to use your card: Even retailers with strong private label card portfolios find that cardholders will not use their private label card every time they shop – sometimes less than 50% of the time. Even though you want to give your customers a strong incentive to chose your card for every transaction, it can be counter-productive based on the customer’s credit profile. You don’t want your customers to feel less connected to your brand because they can’t earn points for the times they need to use another form of payment for entirely personal reasons.

Consistent brand experience: Let’s face it, consumers use different cards for different purposes and they may have very good reasons for doing so. Take for example, the split between business and personal use, which often involves more than one credit card. A multi-tender loyalty program will allow you to track the combined value of their business and personal use and engage with them them accordingly.


There are still some reasons to be cautious when launching a multi-tender program, including:

  • The issuing bank won’t pay the costs of a multi-tender program
  • Increased liability from a broader audience
  • Accepting multiple forms of payment can impact systems and operations

These are valid concerns, but that’s where smart program design comes into play. There are ways to structure the program to minimize operational impact and focus on rewarding incremental purchases more than purchases you would have had anyway. As for the financial implications of the issuing bank, it is important to balance that source of funding with the overall program objectives. Balancing funding requires careful financial modeling and alignment among stakeholders. Retailers with profitable loyalty programs use targeted bonuses and shift their marketing dollars away from markdowns, which are notoriously untargeted. Program rules can also be set to manage liability. Your bank partners will still help you fund a multi-tender program as long as the program design provides strong incentives for obtaining and using the private label card.


Once a retailer decides on the multi-tender model, the decisions are far from over. Retailers who fail to address potential issues can – and sometimes do – end up with an under-performing program. There are many options for structuring a tender-neutral program; they involve varying degrees of complexity and there are trade-offs associated with each.

  • Offer the same program to all customers. Branded cardholders are automatically enrolled.  This is the simplest and most direct value proposition.  All customers automatically receive the same recognition and rewards no matter how they choose to pay. All credit cardholders automatically receive recognition and rewards just by applying for your card. This is the easiest to implement operationally, but it does not feature your branded card or provide clear incentives to obtain and use your card on every visit. Sponsoring banks recognize that private label cards will underperform unless a strong, unique value proposition incentivizes customers to get and use the card. That is why this option is rarely, if ever, used.
  • The card and the program are entirely separate. Cardholders are not automatically enrolled. Similar to the scenario above, there is only one loyalty program. Branded cardholders can join the program but they participate in exactly the same program as everyone else with no extra benefits for holding the card. The difference is that this option assumes that there are credit cardholders who are not interested in participating in a loyalty program and therefore should not be auto-enrolled in a program when they apply for credit – all they need is a new credit limit.

This option has the advantage of not building loyalty liability or paying rewards to customers who would use your private label cards anyway. In theory, there is one uncomplicated loyalty program structure for all customers. In practice, however, the structure ends up being more complex. Every marketing initiative entails identifying the overlap between the credit card customers and the loyalty program membership to ensure the right customer experience. Every communication needs at least two versions because one group of credit customers needs to see an offer with the loyalty program component, but a different group of credit customers should not see anything related to the loyalty program. Driving credit applications and use requires separate promotional overlays so there are competing value propositions for the program and the card – therefore, the marketing messaging and implementation is not simple at all.

Plus, the underlying assumption is often untrue – most private label cardholders want to participate in the loyalty program. The percentage of consumers with at least one credit card with rewards passed 80% in 2015 according to the American Bankers Association. Cardholders are the most engaged segment of the broader member base. Forcing the program structure to be exactly the same for them as for everybody else means that you can’t leverage program benefits to drive desirable credit behavior. This structure tends to result in missed opportunities.

  • Offer one program with extra incentives for private label and co-branded cards: This is the most common option chosen, because it is most likely to deliver on the rationale for having a multi-tender program. The base level of the program creates a broad database of customers for efficient marketing initiatives. With the appropriate program-based incentives, the best of those customers can be identified and you’ll know who migrated to the branded card portfolio over time. The published incentives can usually be structured with an acceptable level of complexity. For example, earn X points when you don’t use a branded card and Y points when you do. Surprise and delight extras can be targeted by specific card type for private label or co-branded cardholders without complicating the overall value proposition at the point of sale.
  • One program with different rewards by card type: This is the kind of program where a member might receive X points for every $1 of non-branded credit, X+Y points for a private label card, and X+Y+Z points for a co-branded Visa, MasterCard, or American Express card. Providing options is good but too many choices can breed confusion. Whenever a program like this is introduced, the reviews by consumers and the business press always note that the program is complicated and downright confusing.

Also, the reasons for choosing a private label vs. a co-branded card tend to be based on credit-worthiness and credit-related features.  Therefore, extra structural loyalty points and rewards by card type will not drive incremental ongoing behavior.  The behavior was already set by the member’s credit profile at enrollment.

  • Offer entirely separate programs for credit cardholders and non-credit members. This is the most complicated structural option of all because the brand is offering two entirely different programs with different earning structures and rewards, promoted with different offers and marketing messages. The parallel structures tend to underperform in market because neither customers nor associates can understand (much less remember) the benefits. Plus, the retailer ends up rewarding behavior that would have happened anyway because no one can articulate what an incremental purchase would earn.

As previously noted, program members and branded credit cardholders tend to be the same person – the high-value customer who is engaged with your brand, wants to be in your program and wants to use your card. This is the exactly the customer you do not want to confuse.

The retailers who have this structure frequently fell into it because the loyalty program and the private label card reported to different organizations. It was either not a conscious strategic choice or it was the result of two teams with separate goals and timelines.

The best program structure: The challenge with a multi-tender program lies in balancing an easily-communicated value proposition with the need to provide special incentives to apply for and use the card. Retailers and issuing banks who recognize the trade-offs and work together to create a unified program are more likely to achieve mutual profitability.

The key insight is that a one-size-fits-all approach does not eliminate complexity – in fact, it will create more complexity over time. Wise marketers will aim for a straightforward core value proposition for the loyalty program and target incentives to the more engaged, high-value customer who is the optimal candidate for private label and co-branded cards. 


Multi-tender programs are increasingly considered a best practice in retail loyalty because of the flexibility it provides to members and the broader scope it gives to the retailer’s program.   We would add that when there is a private label or co-branded card, the value proposition can and should be stronger for members using that form of tender.

In the end, limiting your program to a single branded card can be a greater liability to your overall effectiveness and potential for incremental revenue than the liability of a multi-tender program. Liability can be managed with an intelligently-designed program to create a better experience with your brand for all customers and especially for Millennials who are the leading-edge of broader shifts in how customers pay for their purchases.

Are you considering changing to a multi-tender loyalty program? We at Kobie Marketing, Inc. would be happy to help you consider all the financial implications so that you can structure your program for profitability and increased use of your private label and co-branded cards. Find us at or drop us a line at to learn more.