Loyalty rewards to include shares in the company?

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By: Wise Marketer Staff |

Posted on October 20, 2011

Loyalty rewards to include shares in the company?

Rather than simply reward loyal customers with points and perks, there is an argument for trying to build up their engagement with the whole company, according to a new loyalty platform provider LoyaltyShares, based in New York.

The company's new platform rewards loyal customers with company stock, not just points. For marketers who are anxious to inject new life into their existing customer loyalty programme, and for loyal customers who have built up huge numbers of points or miles, a redemption option offering shares of the programme sponsor's publicly traded stock seems like a good idea.

"We believe this is a concept whose time has truly arrived," said Skip Kitchen II, a loyalty industry veteran and a principal in LoyaltyShares. "Traditionally, loyalty programme reward points are redeemable for travel, merchandise, or even services from the sponsor. But one third of points go unredeemed in the US, and that's a real shame. All that work to acquire a loyal audience, only to find members aren't really engaged with the brand."

LoyaltyShares has announced the launch of what it calls a 'Loyalty Equity Acquisition Programme' or LEAP. LEAP is not actually a loyalty platform as such, but rather it offers a way to include the sponsoring company's publicly traded stock as a reward redemption option without disrupting or changing existing loyalty programme processes and technologies.

According to Kitchen, using company stock as a reward creates a feeling of company ownership, and drives true customer engagement in the programme sponsor's success. Early research suggests that this idea will be attractive to consumers, and could significantly add to the ways in which customers choose to support and promote the companies and brands that earn their loyalty.

Paul Hebert, another industry veteran and a principal in LoyaltyShares, foresees other advantages relating to a sponsor company's balance sheet and marketing efforts: "Not only will this option drive increased active loyalty, but it also provides an answer to a huge liability issue for many sponsors - maintaining a reserve for unredeemed points (breakage)."

Indeed, a loyalty programme's breakage value is a reserve of money this is doing nothing to drive loyalty. The LEAP idea enables a programme operator to change that debt reserve into equity in the form of shares of company stock. Those shares are then put into the hands of the company's most engaged customers, who are then even more invested in the company's success. Another bonus for those who redeem points or miles for shares is that, as the company grows stronger, their value has real potential to increase in value.

The LEAP idea, for which a US patent is currently pending, is based on methodology developed by Ellen Philip Associates Inc., a New York company that specialises in IT support projects for firms in the securities transfer community, and which has partnered with LoyaltyShares in a working alliance.

In addition to providing a template for implementation and guidance in planning, LoyaltyShares will retain an ongoing programme role as data intermediary, seeing itself as something of a 'traffic cop' to monitor and facilitate the flow of information to and from programme members, the reward-points system, and the system for administering programme shares.

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