ANA unveils Loyalty Marketing Report highlighting growing Importance, Challenges, and Fraud Concerns

The Association of National Advertisers (ANA) and HUMAN Security (HUMAN) have released a new report on loyalty marketing, revealing the increasing significance of loyalty programs for brands in the current marketing landscape. Loyalty marketing, which rewards customers for repeat purchases or interactions with a brand, has become a key strategy for companies seeking to deepen customer relationships and drive long-term value.

“As loyalty marketing continues to grow in importance, it is critical for marketers to not only leverage its benefits but also address the potential risks, especially fraud,” said Bob Liodice, CEO, ANA. “This new research highlights the need for proactive measures and a comprehensive strategy to safeguard loyalty programs and optimize their effectiveness.”’

The ANA and HUMAN conducted extensive research to understand the benefits, challenges, and concerns surrounding loyalty marketing, particularly in the context of fraud. Both organizations have a longstanding partnership focused on combating digital advertising bot fraud, also known as invalid traffic (IVT), and have previously collaborated on four studies addressing this issue.

“Loyalty programs offer marketers invaluable data, but that same data makes them a prime target for cybercriminals. Fraudsters use tactics like account takeovers, fake accounts, and bot-driven attacks to steal and monetize customer information. At HUMAN, we apply advanced security measures to protect against these threats, ensuring that every interaction is real and that your customer data remains secure. By staying ahead of evolving attacks, we help you protect your most critical asset—the trust of your customers,” said Stu Solomon, CEO, HUMAN.

The Loyalty Marketing report found that a majority, 59% of survey participants, indicated that loyalty marketing is expected to become more important for their organizations over the next year compared to the recent past. Key drivers behind this trend include the necessity for brands to establish one-to-one relationships with customers, providing the ability to collect customer data and insights. and market directly to customers. And often loyalty members are a brand’s best customers. In turn, consumers are increasingly turning to loyalty programs to find value and combat the effects of inflation.

The report categorizes the aspects of loyalty marketing into three main areas:

• The Good: Loyalty programs offer multiple benefits, including increased customer lifetime value, the ability to collect data and insights for improving products, services, and the overall customer experience, and serving as a gateway to personalization. In fact, an overwhelming majority, 87% of respondents, noted that loyalty marketing programs increased customer lifetime value.
• The Bad: Despite the benefits, challenges persist in loyalty marketing. Differentiating a loyalty program from competitors and determining the appropriate frequency of communication with members remain significant obstacles for marketers.
• The Ugly: Fraud poses a major threat to loyalty programs. The report identifies common forms of loyalty fraud, such as exploitation by professional hackers and customers taking advantage of loopholes or errors in program rules. It also found that 33% of respondents are with organizations where the loyalty program has been subject to fraud, but almost half of respondents (46% of respondents) don’t know if their organization’s loyalty program has been subject to fraud.

The report emphasizes the importance of preventing all potential forms of loyalty fraud, which often requires identifying gaps in the system. Key recommendations for protecting loyalty programs include:

• Reviewing Past Campaigns: Marketers should analyze past performance metrics and track the entire customer journey, from impressions to redemptions, to identify unusual patterns.
• Evaluating Loyalty Program Benefits: Limiting the transferability or conversion of points to real currency can reduce the incentive for fraud.
• Conducting Comprehensive Audits: A thorough audit of loyalty program design, promotion, and execution can help uncover vulnerabilities.
• Partnering with a Specialist: Engaging with experts in loyalty fraud protection allows marketers to focus on enhancing the program while ensuring security.
• Breaking Down Internal Silos: Collaboration between teams managing different program aspects, such as advertising, apps, and accounts, is essential for a holistic approach to fraud prevention.
• Design for the Possibility of Fraud: Organizations should consider how to address fraud from the start, i.e., when they are designing their loyalty program and/or initiating new rewards/offers.