New book examines potential to unlock various sources of value creation
Loyalty currencies are estimated to represent the world’s third largest foreign currency reserve after the USD and Euro. And this figure is growing, with US$300 billion of new points issued every year.
Historically, loyalty programs were launched to increase consumer purchase behaviors. With that objective in mind, operators were primarily focused on driving and measuring the member effect. But what would be the result if it was the dynamic of loyalty currencies, and the financial proposition for loyalty points issuers that were explored instead?
This is what Evert de Boer and Xiao Yao Chin have done for their new book to be published this week, by Palgrave Macmillan. Called Loyalty Programs and the Currency Effect, the book explores why firms (and consumers) love points so much – and how firms can get optimal value from them.
It also explains how companies can make material profits from taking on a central bank role – issuing the currency and managing redemptions.
What makes this book different is the departure from the traditional marketing focus when analysing loyalty programs, to the actual management and optimization of currencies. Taking this approach, the authors come to the conclusion that as much value can be derived from the currency itself as from the member impact of programs.
“Loyalty points are more than just rewards – they have become a global financial force,” the authors explain. “Each year, an estimated $300 billion worth of new points is issued. When combined with existing balances, loyalty currencies would rank as the world’s third-largest virtual reserve, trailing only the U.S. Dollar and Euro.”
Perception
Despite their scale and profitability, loyalty programs are still largely viewed as traditional marketing tools. The book challenges this perspective by introducing a new framework that highlights how businesses can strategically manage loyalty currencies to unlock various sources of value creation, ranging from measurable bottom-line contributions to enhanced enterprise valuations.
“Our aim was to provide a comprehensive guide to all facets of loyalty currencies,” say de Boer and Chin. “We introduce the ‘currency effect’ – the value that can be unlocked by optimally managing a loyalty currency. Our book provides both a strategic framework and practical insights, helping industry stakeholders maximize the potential of their programs.”
Drawing from their extensive experience advising the world’s top loyalty programs, the authors offer a behind-the-scenes look at how points work, how they generate profits, and how businesses can leverage them for competitive advantage.
Loyalty Programs and the Currency Effect is now available for purchase. For more information, visit www.thecurrencyeffect.com
About the authors:
Evert de Boer is a Managing Partner at On Point Loyalty, Singapore, and CEO at Fidivio. He has re¬searched and worked in loyalty strategy since 2000, providing strategic guidance to leading companies globally, including more than 40 airlines. Evert has published numerous articles and white papers on loyalty strategy and finance, including the Harvard Business Review. He is the author of Strategy in Airline Loyalty (Palgrave Macmillan, 2017).
Xiao Yao Chin is a Partner at On Point Loyalty, Kuala Lumpur, Malaysia. Her loyalty experience spans program design, strategic planning, member analytics and program valuations. Prior to joining On Point Loyalty, Xiao Yao worked for AirAsia’s loyalty program and contributed to various strategic projects for top financial institutions at Bain & Company in Southeast Asia. She holds a PhD from the University of Cambridge, UK.