"Card-Linked Offers" (CLOs) encompass the genre of data-driven retailer funded promotions that began as “merchant funded offers” about 10 years ago. The names have changed, and the methods of execution have vastly improved. Both marketers and investors alike are continually on the hunt to capitalize on relevant trends, so we thought we would take a look at the latest developments in this category.
The most notable signal of success in the category was posted recently by Cardlytics, a company specializing in connecting marketers and their customers to digital bank channels. The company recently reported an 18% leap in stock price after their Q4 earnings results towered over previous fiscal expectations. The company's growth is commentary on the larger conversation around CLOs and their place in the future of loyalty.
Will this integrated engagement mechanic continue to add value as brands at the start of the new decade seek to identify optimal solutions among an increasingly convoluted customer landscape? And what concerns should loyalty marketers have before trialing Card Linked Offers in their own infrastructure?
Card-Linked Loyalty: An Organic Solution
Looking back over the past decade, the so-called "retail apocalypse" was perhaps a little less apocalyptic than some might have expected. Even still, we are witnessing a transformative moment for brick-and-mortar stores as they grapple with environmental paradigm shifts that show no sign of slowing down. In this "evolve, survive, or die" situation many find themselves in, the next "big thing" in loyalty will need to stack up to a few key challenges:
- Loyalty must find a way to compel customers back into brick-and-mortar locations
- Next-level personalization must take advantage of real-time opportunities
- Digital integrations must be seamless and non-intrusive
- Solutions must be organic — inconspicuously inhabiting the customer's constantly evolving world
The customer path-to-purchase used to be very linear and predictable, but there are now a jungle of variables to contend with: from social media to curated content, digital ads, and organic search, the amount of information that customers are constantly exposed to has dramatically influenced their purchase motivations.
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So why is card-linked loyalty such an exciting strategy for so many loyalty practitioners? It is precisely because of how seamlessly the tactic is able to slide into every key consideration that loyalty must now abide by. With offers of real value only available at physical locations, and rewards sent straight to the cards and financial institutions that are already an inseparable aspect of their everyday lives, customers are empowered to make that shopping trip they might otherwise have been putting off.
The technology itself has only continued to leap upwards at tremendous pace - and a quick glance back at Cardlytics’ own roster of capabilities will reinforce this - evoking concepts such as deep-AI, algorithmic processing, and data in volumes never-before seen. The result has enabled CLOs to be instantaneous reflections of the customer's hyper-individualized habits. And by taking advantage of mobile devices and their respective features, customers are not repelled by the messages disseminated to them; rather, they look forward with anticipation to receiving them.
In a recent study by McKinsey, it was revealed that customer adoption of card-linked mobile and digital coupons have more than quintupled in each of the past two years, with further growth predicted by trailblazing brands. And when navigating the relationship between loyalty offers and brick-and-mortar stimulation, it seems that customers who adopt card-linked plays are more motivated than ever to re-enter physical retail spaces. In a recent survey, over half of respondents stated that card-linked loyalty programs would be a definite catalyst for drawing them back into shopping centers. As summarized by Silvio Tavares, Cardlinx president and CEO: “...card-linking has emerged as the killer app in online-to-offline (O2O) commerce and the Internet of Things”, indicating that this platform architecture could be the answer for the next generation of loyalty models.
Challenges Facing Card-Linked Offers
As with anything labelled as a grace-saving industry game changer, it is useful to take a hard look at some of the potential pitfalls of new technology. While CLOs holds a great deal of promise for the loyalty industry, there are some concerns to address before stepping blindly into its adoption.
Data Sensitivities
With customers today raising frequent concerns about how their data is being used, relying on a platform that is deeply entrenched in the world of data access and personalized communications can pose challenges. This utilization becomes especially sensitive when the end result is hyper-targeted communications; though, on one hand, the better the targeting, the more value that can be offered. But in the customer's mind, there can be a fine line between a reasonable proposition and an intrusive behavior. Vendors leveraging card-linked offers must conduct extensive research on their specific audience segments, maintain transparency, and ultimately be responsible and accountable for the data under their stewardship.
Demographic Variability
While card-linked offers stand at the next frontier of digital integrations with physical retail spaces, not all demographics respond to technological tools equally. CLOs are positioned to replace cumbersome traditions like print-out coupons and in-store circulars, but the reality is that many demographic categories still respond quite well to these tried-and-tested tools. And just which demographics are attracted can surprise less-than-astute marketers.
Older demographics like Baby Boomers and seniors are sometimes pinned with digitally naive labels, even though older demographics are more digitally connected than ever. Surprisingly, even after growing up surrounded by the tech revolution, a survey by Valassis revealed that 91% of Millennials have adopted paper coupons — an even larger number than both Gen X'ers and Boomers. A look at the research further supports an interesting dichotomy about the continued prevalence of paper-based tactics and their existence alongside digital marketing:
- Paper coupons live on, as 55% of consumers state they use both paper and digital coupons in their shopping.
- 75% of customers surveyed by Valassis claim that they print off paper coupons from the internet.
- 30% of customers reported actually increasing their use of paper coupons in 2017 compared to 2016.
The Final Word
Could Card-Linked Offer's be a true game-changer for marketers seeking to bridge digital and physical worlds? With so many benefits to brands and customers alike, we would not be surprised to see expanded adoption over the next few years. But exactly how the mechanic is integrated into an overall loyalty scheme is another matter.
At the end of the day, a tool - which is really what CLOs are - is only as good as the craftsman wielding it. In order to make a decisive impact and create long term loyalty, CLOs must be properly structured within a relevant loyalty ecosystem, tailored to the brand's messaging, and above all, constantly offering real value to the customers they strive to reach.
