Can loyalty be more than a 'points' game?

Loyalty programs are getting more sophisticated, but they still typically boil down to a game of collecting and redeeming points.

This setup doesn't help the issuer or the merchant, particularly when consumers feel compelled to hoard points for one big splurge rather than make more trips retailer, according to technology investor Spencer Hoffman, a partner at Lovell Minnick Partners.

Lovell Minnick's portfolio includes Engage People, a company that enables redemption for loyalty programs on most e-commerce sites. It combines this with data analytics to add personalized marketing to the loyalty.

While its roots are mostly in airline miles and e-commerce, Engage has started work on an offline version of its program for physical stores. It's using Lovell Minnick's investment to expand its loyalty program both functionally and geographically.

Engage plans to launch the new loyalty technology in 2018, enabling the e-commerce redemption experience to work at retailers.

The concept of is the same as the e-commerce version, according to Jonathan Silver, CEO of Engage, adding consumers will be able to redeem points at a wide range of retailers seamlessly without an integration with the retailer's point of sale system, deepening the relationship with the issuer. "It broadens the ability to use loyalty to manage a day to day lifestyle rather than saving up over a long period for a trip," Silver said.

Engage's initiative is a similar model to Sionic Mobile, in which loyalty points can act as a form of virtual currency at multiple retailers.

The strategy is to lure companies that offer loyalty and incentive programs, such as financial institutions and airlines, by offering a program that's more likely to lead to return business from the consumer.

The new use case is using points for a ride sharing app trip to a concert, with the cost discounted via points, Hoffman said.

"Consumers, especially millennials, expect a different engagement model with brands," Hoffman said. "Engage is playing into the millennial mindset of the 'on demand' culture. They want to use the points now on something they want, not looking at a general catalogue of older stuff...we're not abandoning points"

Writing for PaymentsSource, Filippo De Montis, a director at Software AG, argues younger consumers are fickle regarding loyalty, requiring issuers, loyalty and gift card providers to develop solutions that are more directly tailored to their shopping tendencies, acknowledging the difficulty in combining CRM and loyalty points in this manner.

There's also a potential benefit in tying loyalty to specific experiences. According to the Collinson Group's Mass Affluent survey, consumers place the most value on loyalty programs that address travel, points tied to complementary lifestyle brands, and offers for specific services such as dining.

"That level of enhancement can resonate more than cash back, because it speaks to an appreciation," said Joe Walent, an associate director at Mercator. "It's almost like a 'club' mentality, where repeat purchases leads to certain benefits."