– Start of Protected Content –

Get free access to this complete Report and your own personalized Account, including the following content:

Loyalty Solutions *

Market Summary – Loyalty Solutions

Market Overview

Loyalty Programs are standard today, but they take many forms. We all know this from the loyalty cards in our wallets, purses, and phones. This assemblage of programs usually requires software and technology to run well. The increasing number of software choices for restaurants and hotels creates numerous possibilities for these businesses. The options don’t stop at the number of solutions but continue into the types of rewards programs they facilitate. Beyond the walls of hospitality, we consumers are familiar with point-based rewards, cash back, buy a certain number – get something free, and other innovative and enticing programs. The solutions in this category cover all of these and more.

This Capsolve report was significantly influenced by solutions that address the needs that regularly arise within hotel and restaurant loyalty programs. While many chain restaurants have loyalty programs intact, the playing field has changed recently, requiring them to port their loyalty programs to the web and mobile ordering realm. The same need occurred for independent restaurants, but these recent market shifts made competing online and with rewards nearly imperative.

The situation is much different within the hotel industry as soft brands now present new options for the independent hotel segment. Those who remain independent now have multiple vendors to choose from and may select from any number of types of loyalty programs. This includes soft brand possibilities, multiple industry-capable loyalty systems, and many hotel-specific solutions. This research will focus much of its attention on the industry-specific category of these possibilities.

Marketplace Context

Capsolve analyzed 75 total Loyalty Solutions in this category, emphasizing solution providers with industry-specific software. As a result, the Loyalty Solution marketplace has a Medium size rating from Capsolve and is experiencing increased competition among restaurant industry vendors. While the hotel-oriented vendor selection is also greater than it was, the growth rate is much lower.

More than 50% of Loyalty Solutions in today’s marketplace are from the United States. When considering the top six countries, this percentage reaches the top decile, creating a Low level of geographic dispersion.

Much of the aforementioned growth has occurred within recent years. When considering the Requirements Complexity, it is apparent that nearly all of the solutions reside within either the Low or Medium classification. You may notice that multi-industry solutions tend to have more capabilities in their solutions, sometimes raising a given solution into the High classification. Capsolve has researched this category of solutions for you and introduces you to the possibilities for your team, company, and customers.

Solution Paths

Changing your Loyalty System can feel laborious since it is intertwined with your marketing and ecommerce systems. However, having a competitively positioned loyalty program is imperative to its success. The most common path is to determine your most important strategic and tactical decisions and then search for systems that meet this minimum set of requirements. A few standard approaches enabled by today’s technology solutions within this category include:

• Comprehensive Core: a solution with multiple modules designed to provide a fully integrated approach to covering most or all business needs
• Best Fit Core: a solution with multiple modules covering the minimum requirements in combination with critical strategic capabilities
• Minimized Core: a solution typically covering the most crucial strategic and operational needs but providing significant flexibility to connect to other best-of-breed solutions to complement the core
• Best Strategic Fit: a solution providing a balance between comprehensiveness and long-term strategic needs

These solution paths are not necessarily mutually exclusive. Solutions within the marketplace may create the opportunity to combine one or more paths and meet more of your selection criteria. Appropriately formulating an RFP to share with potential vendors will help to ensure you ask the best questions specific to your business while allowing you to learn about the depth of each potential vendor partner.

Pricing Information

Numerous pricing models exist in the marketplace, and it is crucial to understand how each one will affect your total cost of ownership. The standard pricing structures are:

• Base Software Price plus a Maintenance Charge: This pricing is usually charged for on-premise software installed on local servers. It is generally charged based on the number of servers, user licenses, or user accounts. There is an ongoing charge for modifications and upgrades based on the percentage of the base software.
• Subscription Price: This pricing is more common with the adoption of Software-as-a-Service. The price is often charged annually, quarterly, or monthly and applied to each brand, location, or user account. This type of pricing is usually aligned with the features selected across the loyalty solution’s scope. These features may vary in cost structure and include software, modules, a rewards marketplace, and more.
• Revenue or Transaction Based Price: These fees are based on the volume of activity flowing through the software and closely align with its usage. This type of pricing is usually experienced as part of a brand affiliation where the Loyalty Program is provided as part of the agreement. It may be defined by a flat transaction fee or a percentage of revenue.

As you might expect, a combination of these pricing approaches may be applied to any given software.

Sales & Marketing Considerations

When a Loyalty system is in place, it becomes an incentive for customers to transact with your business more regularly. The program’s rewards and details must drive the desired customer behavior despite the surrounding competitive marketplace. The system must be merged with other operational and transactional systems to provide and track rewards. While certain businesses may be able to handle this with simple punch cards, most companies need to track and report activity for financial reporting and customer reporting. The program should be reflected across your marketing communications and promotional offers digitally and otherwise.

Current Trends

1. Recent Economic Influences: Numerous digital restaurant ordering systems were launched before and during the pandemic. Many of these systems have added loyalty functionality to compete in the marketplace.
2. Soft Brands: Are now available from most major hotel chains and are provided to independents seeking this type of solution in combination with other chain-level resources, such as loyalty programs and other systems.
3. Rooms, F&B, and Amenities: It is important to choose the scope of your loyalty program. The chosen technology or partner will influence the types of purchases that may be included in the program.
4. More Crowd in the Field: While not the largest of categories, the field is much more crowded than it used to be. If the vendors have success, you will continue to see innovation in this sector or software.
5. A New Loyalty Basis: Many loyalty programs started as counting mechanisms, sometimes with only a card. Now, just choosing the basis for your program could have a lasting effect on your strategy and level of success.
6. Platforms, Networks & Systems: Similarly, a key decision is the structure of your program and how it interacts with your Loyalty Basis as well as the many capabilities you may choose.

– End of Protected Content –

About this Report

This document reviews marketing information and capabilities of this category’s solutions and the surrounding technology ecosystem. It contains original content written by Capsolve to provide a perspective of current trends affecting one or more of the hotel, restaurant, golf, and country club industries. The analysis covers a statistically significant portion of the previously defined category marketplace.