Reward Program Aggregators Offer Challenges, Opportunities for Loyalty Program Operators

The number of loyalty programs has risen, as has the average number of enrollments within a household. What hasn't risen is the number of hours in a day, meaning that consumers have less time to give to the various schemes in which they participate.

As a result, consumers' use of some programs can fall by the wayside. In some cases they simply don't make use of the programs at all. In other instances, they don't interact enough to bring their reward currency levels up to where they can be redeemed for desired rewards.

These circumstances have given rise to intermediary organizations called rewards aggregators, which provide a one-stop location for whichever programs they cover. Aggregators offer consumers a variety of services, including tracking balances and expiring currency, assisting in searching for and booking travel (aggregators have flourished among travel- and hospitality-related schemes), enabling – in some cases – consumers to merge program currencies, and providing redemption tips and other information.

Aggregators represent both opportunities and pitfalls for loyalty marketing platform managers. Pulling together loyalty programs into a single dashboard offers consumers a one-stop view of several programs they are enrolled in, and could spur participation in otherwise underused schemes. But aggregators also bring the potential of reducing the individual brand program equity.

"They allow consumers to have an aggregated view, but it is not true collaboration" between the aggregators and the program sponsors, says Kelly Hlavinka, managing partner at Colloquy, which in partnership with Swift Exchange recently released a white paper on aggregators.

Aggregators gain permission from consumer participants to scrape information from program websites, Hlavinka adds. But, she says, the aggregators don't necessarily do so in ways that further the relationship between the consumers and the company that issued the loyalty currency.

At least a few program managers are resisting. Both Southwest Airlines and American Airlines have sent cease-and-desist orders to aggregators. Their objections – at least, the public objections – stem from potential security lapses, although travel industry observers wonder if it has more to do with losing control of the customer dialog.

In truths, the U.S. loyalty sector already makes use of programs have similar functionality to aggregators. As the Colloquy/Swift exchange white paper notes, American Express Memberships Rewards enables participants to swap its currency for frequent-flier rewards. Citi's ThankYou Rewards Bonus Center provides point offers from hundreds of online merchants. And United airline's MileagePlus members earn miles from Mileage Plus partners such as Chase and Hertz.

But in each of these cases the rewards and communications are directly linked to the program the consumer has opted into. The brand-building aspects of the programs remain in front of the participant.

This isn't necessarily the case if a consumer relies on an aggregator, which means the consumer may miss touches designed to spur behavior. "If a company is trying to communicate [with participants] who are close to a bonus, but the consumers [use aggregators] to manage relationships in a time-starved environment, and is turning off or opting out of communication from a company, they could be missing vital messages," says Hlavinka.

Does this mean aggregators are de facto detrimental to marketers? Not necessarily, especially if their use causes participants to redeem more program currency. "Redemption has been proven to drive customer profitability," says Nancy Gordon, COO of Swift Exchange. "[Marketers recognizing that redemption is good for business is the first step in establishing collaborative relationships."

The second step, according to Gordon, is working with aggregators to make sure program providers maintain control of the key components of their value proposition, branding and messages, as well as maintaining control of the segments to which they offer rewards.

Program providers have to realize the consumer pain points of less time, more relationships to manage and, in some cases, slowness of earning rewards are real, adds Hlavinka. "That is why these aggregators are popping up," she says. "Companies can't just sit back and say 'I prefer to have a proprietary program' while these customer pain points continue to boil and become more acute."