- 1
A well-designed loyalty program is commercial infrastructure: it generates data, structures the customer relationship and enables new revenue.
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Regional retailers compete better when they share the platform and keep the relationship with their customers.
- 3
Profitability depends on incremental behavior, not on the number of members.
More than points
In many mid-sized cities across the region, local retailers compete against national chains and digital platforms with bigger budgets, more technology and more data. The usual response is discounting, which erodes margin without building a relationship. A well-designed loyalty program offers another way out: recognizing the returning customer, understanding what they buy and giving them reasons to keep choosing their neighborhood store.
Each retailer keeps the relationship with its customer; the infrastructure is shared.
BCG estimates that a grocer with a best-in-class loyalty program and one-to-one personalization typically improves revenue and profit by 3% to 5% (BCG). The condition is that the program is managed as a product, with a value proposition, unit economics and an owner, not as a campaign.
Loyalty as a shared service
A mid-sized retailer can hardly afford, on its own, the technology, analytics and operations of a modern loyalty program. That is where the loyalty-as-a-service model comes in: a shared platform that several retailers use under their own brand, with shared costs and common learning. Each retailer keeps the relationship with its customer; the infrastructure is shared.
In our work with regional chains, trade associations and chambers of commerce, the shared model has an additional effect: it gives the territory scale. A group of retailers in the same region, connected by a common program, offers brands an audience that none of them would have separately. That audience is the foundation of commerce media.
What makes a program profitable
- Measure incremental behavior: how much more members buy compared with similar customers who are not in the program.
- Deliver value from the first purchase, so the customer perceives the benefit before forgetting they signed up.
- Fund benefits with partners: brands, suppliers and complementary retailers that gain from the relationship.
- Govern data transparently, with explicit consent and clear rules on its use.
What can leaders do?
- Decide which behavior you want to change (frequency, ticket, basket, channel) before designing the benefits.
- Assess the shared-service model before building a proprietary platform.
- Appoint a program owner with business targets, not just enrollment targets.
- Connect loyalty with the retailer’s strategy: assortment, pricing, experience and alliances.
Sources
Practice article Loyalty as a Service.
