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Making participation in a loyalty or engagement program contingent upon customers using only one given payment vehicle is a thing of the past. Multi-tender programs are today’s best practice, in order to ensure maximum program participation. Let’s discuss why multi-tender payments are so relevant right now.

Adapting with the Times

Many loyalty programs began as a tool not just to reward customer behavior, but to incent a specific form of payment (FOP). Obviously, when a patron uses a company’s private label credit card (PLCC), there is a bit more profit for the merchant, who earns a share of revenue from the card-issuing bank, but because today’s loyalty and engagement programs’ greatest value is in the consumer data they collect, brands are finding that a single FOP program is a disadvantage.

So, companies are adapting. Various companies have evolved to adapt the multi-tender model, giving customers more control over their payment preferences. This fluid, flexible ecosystem marries different modes of payment with loyalty mechanics and, of course, advanced technologies.

Take Starbucks. The home of the frappuccino officially embraced multi-tender payment methods at the end of Q3 2020. Whereas before, they utilized preloaded gift cards exclusively for Starbucks Rewards payments, now they offer a range of different modes of payment for their customers. Starbucks lovers can now link their credit/debit cards and PayPal accounts to the coffee company’s app for easier payment. Traditional in-person payments are still available as well, of course, and customers earn loyalty points with any FOP.

Embracing this new multi-tender model, however, was not a spur-of-the-moment decision for the company. According to Brady Brewer, chief marketing officer of Starbucks, this evolution was hugely driven by their customers.

“This has been a top request for customers for a long time. Under these conditions, it’s just even more relevant,” says Brewer, referring to the pandemic as another driving factor of the adoption.

Multi-Tender: The Next Generation

This level of flexibility has increased due to the onset of the COVID-19 pandemic. In fact, Mastercard reports a 40% increase in contactless payments, as customers fear viral transmission from the possibly contaminated surfaces of cash and credit cards.

However, even if there wasn’t a pandemic to accelerate things, companies should naturally evolve into multi-tender mode. When a program accepts only one payment preference – for example, a branded credit card or wallet – the brand is leaving money on the table.

Naturally, some brands want to promote the use of a preferred payment method, which is absolutely fine. The best practice, however, is to allow customer participation and facilitate their true payment preferences. If you have a preferred payment method, the smart move is to provide bonuses and other incentives beyond the base-level value prop.

This is also what Starbucks did. When they opened their program beyond their app-based payment system, they enabled a lot more people into their rewards program. However, they maintained the “sanctity” of payments completed via gift cards. These payments earn loyal customers two stars (as per their point system) for every dollar spent, while multi-tender payments only earn half as much per dollar spent.

This balancing act of adapting to changing customer needs and behaviors while increasing revenue and profit will be worth it in the end. Multi-tender programs are here to stay. Brands that fail to adapt will also fail to effectively build trust with their customers and create mutually beneficial partnerships.

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