In today’s consumer-empowered environment, there is a trend toward customer choice; therefore, many retailers launching new loyalty programs opt for program structures that reward any form of payment from cash to credit to mobile payment. At the same time, retailers with established private label credit, co-branded credit, or stored-value, card-based programs are also revising their approach to include all forms of payment. Let’s explore this trend with an eye for balancing customer preferences with program objectives and financials. Read more...

1. SHOULD RETAILERS REWARD
ALL FORMS OF PAYMENT?
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MULTI-
TENDER
LOYALTY
PROGRAMS
WRITTEN BY KATE HOGENSON

2. In today’s consumer-empowered environment, there is a trend toward customer choice;
therefore, many retailers launching new loyalty programs opt for program structures
that reward any form of payment from cash to credit to mobile payment. At the same
time, retailers with established private label credit, co-branded credit, or stored-value,
card-based programs are also revising their approach to include all forms of payment.
Let’s explore this trend with an eye for balancing customer preferences with program
objectives and financials.
2
Research shows that customers strongly prefer multi-tender loyalty programs, but retailers
remain highly divided on whether to require the use of their own branded card, or to allow
all forms of payment. There are pros and cons to the more inclusive, multi-tender approach:
PROs
Complete view of your customer
base
Complete view of each individual
customer
Allows you to anticipate industry
shifts as mobile options develop
CONs
More complex systems integration
Less incentive to use your
proprietary form of payment
Potential lower funding from your
bank partner

3. BENEFITSOF MULTI-TENDER
LOYALTY PROGRAMS
INCREASED PROGRAM PENETRATION & ENGAGEMENT
It makes intuitive sense that a tender-neutral program achieves higher penetration than a program based only on
your own card. What may be less intuitive is how big the difference really is:
Most retailers and quick-serve companies with multi-
tender loyalty programs regularly see their members
account for 70% to 90% of revenue while programs
limited to their store credit card rarely go over 10-20%
penetration except for regional brands. Though this
data is based on credit cards, the penetration for store-
branded reloadable cards is similar to or lower than store
credit cards because the customer must carry a balance.
In addition, few retailers have the transaction frequency
that makes a reloadable card appealing to consumers.
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
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4. Why is higher penetration important? Increased visibility into a greater percentage of your customer
base is just the start – loyalty members are more engaged with a company across several metrics:
• Many retailers report that program members are twice as likely to open an email from the loyalty
program as general customers are.
• Among members, subject lines with key program-related words such as “Your Reward…” are almost
twice as likely to be opened as purely promotional messages.
• Members are more likely to keep their contact information updated in order to receive their rewards.
Source: Primary and secondary research by Kobie Marketing Inc. 2015
MULTI-TENDER PLCC ONLY
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
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RETAIL
(Member
Pricing)
PHARMACY
(Points)
GROCERY
(Member
Pricing)
MASS RETAIL
(Points)
SPECIALTY
RETAIL
(Points)
SPECIALTY
RETAIL
(Hybrid)
MASS RETAIL
(Member
Pricing)
SPECIALTY
RETAIL
(Points)
SPECIALTY
RETAIL
(Points)
95%
90%
80%
74%
71%
% OF REVENUE
FROM PROGRAM MEMBERS
38%
19%
10%
10%

5. These behaviors make your marketing efforts
more cost effective. Some of the differences
in engagement are the result of self-selection
– highly-engaged customers are more likely
to sign up for a loyalty program. However,
programs with over 50% penetration still show
higher response metrics from members, which
indicates that a program can engage even an
average to below average customer.
MORE ACTIONABLE DATA
Gaining the customer’s permission to receive
marketing communications is becoming even
more important as people become more
sensitive to privacy issues. Communicating
under the auspices of a loyalty program creates
context for using member data without the
content “feeling creepy.” With a program that
covers all forms of payment, you’ve received
explicit permission from your customers to
track everything they do and to communicate
with them – and they’ll let you know if you miss
even a single transaction.
IMPROVED PENETRATION FOR “PREFERRED”
FORMS OF PAYMENT
It is interesting to note that many retailers
with multi-tender programs also achieve
higher penetrations for their private label and
co-branded cards than retailers who focus
their program solely on their own credit card.
Retailers can use what they learn from the
broader customer base to build more effective
acquisition campaigns for their private label
portfolio. There are many ways to add benefits
exclusively for members who use a “preferred”
form of payment, which gives members an
incentive to adopt those forms.
GREATER OPPORTUNITY TO MOTIVATE
INCREMENTAL BEHAVIOR
With a multi-tender program, you are more
likely to be able to target customers with
unrealized potential; such as consumers
who use multiple credit cards but who will
consolidate purchases with you if given a
reason. A multi-tender program can also help
you retain a customer who is about to churn
but who could be reactivated with a relevant
offer. This allows you to target your marketing
budget more effectively.
APPEAL FOR MILLENNIALS
The Millennial customer isn’t using credit the
same way as previous generations. Bankrate.
com caused a flurry when they published data
showing that two thirds of Millennials do not
have a single credit card and are far less likely
to add an additional card than customers in
other age groups. Credit cards are no longer
the default form of payment for Millennials, and
increasingly members of all generations. Instead
of credit cards, customers are more likely to
be using a mix of debit cards and reloadable
cards. While mobile payment penetration is still
small, acceptance and use is growing rapidly.
The retailer who limits its loyalty program to
customers willing to carry a private label plastic
card may be limiting its ability to reach future
customers.
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
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multi-tende

6. MORE INSIGHT ABOUT INDIVIDUAL
CUSTOMERS
With a multi-tender program you not only
learn about more of your customers, you also
learn a lot more about each individual member.
Bloomingdales had an anemic private label
program with 10% revenue penetration, which
they re-launched as the multi-tender “Loyallist”
program. As Frank Berman, Bloomingdale’s
executive vice president of marketing said:
“[Now] we’re capturing 100% of the information.
We are able to understand a great deal more
about what our customers are doing in our
store which makes our marketing efforts much
more relevant.”
The key point is that the customer will
cheerfully volunteer their information every time
they make a purchase in order to earn program
rewards. The resulting information will be
more accurate than relying on a model to link
transactions for a household behind the scenes.
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
There are certainly retail programs that have gained traction with Millennials such as DSW, Ulta,
Sephora and Walgreens; note that all of these examples are multi-tender programs.
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multi-tende
Source: Bankrate August 2014 Financial Security Index
None
1 card
2 cards
3 cards
63%
6%
Ages
18-29
Ages
30-49
Ages
50-64
Ages
65+
13%
18%
21%
23%
6%
2%
NOTE: MILLENNIALS ARE PEOPLE
AGE 18 TO 29 YEARS OLD
PERCENT OF CONSUMERS
WHO CARRY 2 CREDIT CARDS
MILLENNIALS: HOW MANY MAJOR
CREDIT CARDS DO YOU HAVE?

7. The marketers at one specialty retailer got a bit of a
shock during their loyalty program pilot when they
discovered the inadequacies of their customer annual
spend model. The retailer thought their very best
customers were using two credit cards and spending
roughly $500 per year. They also thought their cash
customers were an entirely different population.
Using some of the best modelers in the business, they
confidently set their loyalty program rewards at what
they thought would be a stretch goal.
During the pilot, customers did what they always do
with a loyalty program – they told the store associate
to make sure they got points for every transaction. The
retailer quickly discovered that many customers were
really using up to 4 different credit cards and a third of
their transactions were cash. This meant that the annual
spend was almost double what the model had originally
predicted. The pilot had substantially more reward
qualifiers than anticipated, because the stretch goal was
an amount that many, many customers easily met.
NEEDLESS TO SAY, THE REWARD STRUCTURE WAS
QUICKLY REDESIGNED FOR NATIONAL ROLLOUT
The specialty retailer also learned that their private label
card customers were using the card for less than half of
purchases. With that insight, they adjusted their offers
and used program incentives to increase marketing
efficiency and successfully drive use of their private
label card.
LEARNING THE HARD WAY
ABOUT CUSTOMER CREDIT
CARD HABITS
7
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
CASE STUDY

8. A REASON TO USE YOUR CARD
Even retailers with strong private label card
portfolios find that cardholders will not use
their private label card every time they shop
– sometimes less than 50% of the time. Even
though you want to give your customers a
strong incentive to chose your card for every
transaction, it can be counter-productive based
on the customer’s credit profile. You don’t want
your customers to feel less connected to your
brand because they can’t earn points for the
times they need to use another form of payment
for entirely personal reasons.
CONSISTENT BRAND EXPERIENCE
Let’s face it, consumers use different cards for
different purposes and they may have very good
reasons for doing so. Take for example, the split
between business and personal use, which often
involves more than one credit card. A multi-
tender loyalty program will allow you to track the
combined value of their business and personal
use and engage with them them accordingly.
There are still some reasons to be cautious when
launching a multi-tender program, including:
• The issuing bank won’t pay the costs of a multi-
tender program
• Increased liability from a broader audience
• Accepting multiple forms of payment can
impact systems and operations
These are valid concerns, but that’s where
smart program design comes into play. There
are ways to structure the program to minimize
operational impact and focus on rewarding
incremental purchases more than purchases
you would have had anyway. As for the financial
implications of the issuing bank, it is important
to balance that source of funding with the
overall program objectives. Balancing funding
requires careful financial modeling and alignment
among stakeholders. Retailers with profitable
loyalty programs use targeted bonuses and shift
their marketing dollars away from markdowns,
which are notoriously untargeted. Program rules
can also be set to manage liability. Your bank
partners will still help you fund a multi-tender
program as long as the program design provides
strong incentives for obtaining and using the
private label card.
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
CONCERNS
POTENTIAL MULTI-TENDER PROGRAM
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multi-tende

9. Once a retailer decides on the multi-
tender model, the decisions are far
from over. Retailers who fail to address
potential issues can – and sometimes
do – end up with an under-performing
program. There are many options for
structuring a tender-neutral program;
they involve varying degrees of
complexity and there are trade-offs
associated with each.
OFFER THE SAME PROGRAM TO ALL
CUSTOMERS. BRANDED CARDHOLDERS
ARE AUTOMATICALLY ENROLLED
This is the simplest and most direct value
proposition. All customers automatically
receive the same recognition and rewards
no matter how they choose to pay. All
credit cardholders automatically receive
recognition and rewards just by applying
for your card. This is the easiest to
implement operationally, but it does not
feature your branded card or provide
clear incentives to obtain and use your
card on every visit. Sponsoring banks
recognize that private label cards will
underperform unless a strong, unique
value proposition incentivizes customers
to get and use the card. That is why this
option is rarely, if ever, used.
THE CARD AND THE PROGRAM ARE
ENTIRELY SEPARATE. CARDHOLDERS
ARE NOT AUTOMATICALLY ENROLLED
Similar to the scenario above, there is
only one loyalty program. Branded
cardholders can join the program but
they participate in exactly the same
program as everyone else with no
extra benefits for holding the card. The
difference is that this option assumes
that there are credit cardholders who are
not interested in participating in a loyalty
program and therefore should not be
auto-enrolled in a program when they
apply for credit – all they need is a new
credit limit.
This option has the advantage of not
building loyalty liability or paying rewards
to customers who would use your private
label cards anyway. In theory, there is one
uncomplicated loyalty program structure
for all customers. In practice, however,
the structure ends up being more
complex. Every marketing initiative entails
identifying the overlap between the credit
card customers and the loyalty program
membership to ensure the right customer
experience. Every communication
needs at least two versions because
one group of credit customers needs
to see an offer with the loyalty program
component, but a different group of
credit customers should not see anything
related to the loyalty program. Driving
credit applications and use requires
separate promotional overlays so there
are competing value propositions for the
program and the card – therefore, the
marketing messaging and implementation
is not simple at all.
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
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MULTI-TENDER
PROGRAM OPTIONS

10. MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
Plus, the underlying assumption is often
untrue – most private label cardholders
want to participate in the loyalty program.
The percentage of consumers with at
least one credit card with rewards passed
80% in 2015 according to the American
Bankers Association. Cardholders are the
most engaged segment of the broader
member base. Forcing the program
structure to be exactly the same for them
as for everybody else means that you
can’t leverage program benefits to drive
desirable credit behavior. This structure
tends to result in missed opportunities.
OFFER ONE PROGRAM WITH EXTRA
INCENTIVES FOR PRIVATE LABEL AND
CO-BRANDED CARDS
This is the most common option chosen,
because it is most likely to deliver on
the rationale for having a multi-tender
program. The base level of the program
creates a broad database of customers
for efficient marketing initiatives. With the
appropriate program-based incentives,
the best of those customers can be
identified and you’ll know who migrated
to the branded card portfolio over time.
The published incentives can usually be
structured with an acceptable level of
complexity. For example, earn X points
when you don’t use a branded card and Y
points when you do. Surprise and delight
extras can be targeted by specific card
type for private label or co-branded
cardholders without complicating the
overall value proposition at the point of
sale.
ONE PROGRAM WITH DIFFERENT
REWARDS BY CARD TYPE
This is the kind of program where a
member might receive X points for every
$1 of non-branded credit, X+Y points for
a private label card, and X+Y+Z points
for a co-branded Visa, MasterCard, or
American Express card. Providing options
is good but too many choices can breed
confusion. Whenever a program like this
is introduced, the reviews by consumers
and the business press always note
that the program is complicated and
downright confusing.
Also, the reasons for choosing a private
label vs. a co-branded card tend to
be based on credit-worthiness and
credit-related features. Therefore, extra
structural loyalty points and rewards
by card type will not drive incremental
ongoing behavior. The behavior was
already set by the member’s credit profile
at enrollment.
OFFER ENTIRELY SEPARATE
PROGRAMS FOR CREDIT
CARDHOLDERS AND NON-CREDIT
MEMBERS
This is the most complicated structural
option of all because the brand is
offering two entirely different programs
with different earning structures and
rewards, promoted with different offers
and marketing messages. The parallel
structures tend to underperform in
market because neither customers nor
associates can understand (much less
remember) the benefits. Plus, the retailer
ends up rewarding behavior that would
have happened anyway because no
one can articulate what an incremental
purchase would earn.
As previously noted, program members
and branded credit cardholders tend
to be the same person – the high-value
customer who is engaged with your
brand, wants to be in your program and
wants to use your card. This is the exactly
the customer you do not want to confuse.
The retailers who have this structure
frequently fell into it because the loyalty
program and the private label card
reported to different organizations. It was
either not a conscious strategic choice
or it was the result of two teams with
separate goals and timelines.
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11. 11
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
The challenge with a multi-tender program lies in
balancing an easily-communicated value proposition
with the need to provide special incentives to apply
for and use the card. Retailers and issuing banks who
recognize the trade-offs and work together to create
a unified program are more likely to achieve mutual
profitability.
The key insight is that a one-size-fits-all approach
does not eliminate complexity – in fact, it will create
more complexity over time. Wise marketers will aim
for a straightforward core value proposition for the
loyalty program and target incentives to the more
engaged, high-value customer who is the optimal
candidate for private label and co-branded cards.
THE BEST
PROGRAM STRUCTURE

12. Multi-tender programs are increasingly considered a best practice in retail loyalty because of the
flexibility it provides to members and the broader scope it gives to the retailer’s program. We
would add that when there is a private label or co-branded card, the value proposition can and
should be stronger for members using that form of tender.
In the end, limiting your program to a single branded card can be a greater liability to your overall
effectiveness and potential for incremental revenue than the liability of a multi-tender program.
Liability can be managed with an intelligently-designed program to create a better experience with
your brand for all customers and especially for Millennials who are the leading-edge of broader
shifts in how customers pay for their purchases.
IN SUMMARY
MULTI-TENDER LOYALTY PROGRAMS
SHOULD RETAILERS REWARD ALL FORMS OF PAYMENT?
ARE YOU CONSIDERING CHANGING TO A MULTI-TENDER LOYALTY PROGRAM?
We at Kobie Marketing, Inc. would be happy to help you consider all the financial
implications so that you can structure your program for profitability and increased
use of your private label and co-branded cards. Find us at www.kobie.com or drop
us a line at info@kobie.com to learn more.
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multi-tende

13. Kate is a Loyalty Strategy
Consultant at Kobie Marketing.
She has been launching
influential loyalty programs for
some time – she can tell you
the inside story of how Mileage
Plus 100k elite status came to
be called 1K.
Before Kobie, Kate was a
Partner at Metzner Schneider Associates, a consultancy
for program design, building the case for loyalty, and
customer experience implementation. While there, she
was vital to the launch of Virgin America’s innovative
Elevate program and the ShopYourWay Rewards
program for Sears and Kmart. Kate also has hands-on
experience managing the global expansion of Mileage
Plus and launching elite benefits for United Airlines.
Kobie Marketing is a global leader in loyalty marketing
and an industry pioneer, delivering end-to-end strategy,
technology and program management solutions. For 25
years, Kobie has provided innovative loyalty experiences
to the world’s most successful brands, helping clients
receive incremental revenue, product and household
penetration, and brand advocacy. The company drives
results and ROI through Kobie Alchemy®, a best-in-class
loyalty marketing technology platform. To learn more,
visit www.kobie.com.
ABOUT THE AUTHOR
PUBLISHED BY
ABOUT KOBIE MARKETING
KOBIE MARKETING, INC.
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Suite 1000
St. Petersburg, Fl 33701
P: +1 (727) 822-5353
F: +1 (727) 822-5265
@Kobie_Marketing
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