How Open Currency Affects Loyalty Programs

The following interview summary is from Clark Buckner with TechnologyAdvice, a website that offers resources on customer loyalty plans, platforms in the enterprise customer loyalty space, and much more. 

Ashley Tate, Director of Marketing for BigDoor, and Barry Kirk, VP of Loyalty Strategy for Maritz Motivation Solutions talked loyalty programs and open currency with TechnologyAdvice host Clark Buckner. The two customer loyalty experts spoke about “the next big wave” that’s about to hit the customer rewards space.

What is Open Currency?

For those unfamiliar with the phrase, Kirk defines “open currency” as reward points that loyalty programs “essentially allow you to burn … outside of the program catalog.” He cites Citibank as a company currently offering open currency in their customer rewards program, where loyalty members can redeem their points like money on other ecommerce sites. He believes that open currency is “going to hit [customer loyalty programs] before we completely figure it out.”

Brand Dilution with Open Currency

However, Kirk also notes that while open currency might be enticing for the wide options it allows for consumer redemption, loyalty programs may suffer “brand dilution” because the reward doesn’t ultimately engender more loyalty to the brand. In other words, it may be better for the consumer, but it’s typically not an effective motivator for brand loyalty.

This move toward open currency and saying, ‘You can use my points like money anywhere’ essentially makes your whole program look like a big discount program. … And discounting your product is never the way you want to go because it devalues the brand. It devalues the product value. It’s generally a trend that I would warn people to be very careful before you move to that.

If you’re going to let your customers take their points they earn in your program and burn them on Amazon, well, whose loyalty are you engendering? Are you engendering your brand’s loyalty? Or are you just deepening people’s loyalty to Amazon as a retail outlet?

Tate echoed Kirk’s cautions, but said there are “a lot of opportunities right now to really connect points between brand and brand.” In other words, some brands can work together in offering open currency, but the relationship needs to be strategic and intentional. She noted that open currency “might be great for e-commerce, but it’s probably not great for driving loyalty.”

American Loyalty Programs vs. European Customer Rewards Programs

The two then discussed the major differences between American and loyalty rewards programs in other parts of the world. American loyalty programs are often proprietary, while European and Canadian loyalty programs are often built around “coalition loyalty,” where a coalition of brands join together and allow consumers to earn and burn their points with any member of the coalition.

In other words, open currency may work well in non-U.S. markets, but the American proprietary system favors individuality and “establishing your own identity.” Consequently, as Kirk said, “As soon as you start bringing other brands into that mix, you begin to lose the purity of your identity, and especially your brand.”

To hear Kirk and Tate talk about open currency, loyalty currency, and loyalty mobile apps, listen to The Customer Loyalty Space interview in iTunes.