‘Consumers want brands that resonate with who they are’: Exploring the changing meaning of loyalty with Mastercard’s Kyle Clark

The pandemic and its new normal has caused a fundamental shift in consumers’ behaviors, habits, and preferences. But are loyalty programs sufficiently evolving to account for this shift?

To answer this question, it’s important to first consider how consumers’ lives have changed as a result of the pandemic.

The consumer is evolving

Speaking at Tearsheet’s Acquire Conference in February, Kyle Clark, svp of loyalty at Mastercard, said that over the last couple of years, the constant uncertainty around lockdowns, restrictions, and lack of mobility caused consumers to reconsider and re-evaluate their consumption behaviors.

“I think for the first time in history there was this pause, where we as consumers said, ‘Well, what am I getting out of these interactions with brands? And what do I want out of these interactions?’ It really caused a shift in what we’re looking for and it redefined loyalty,” he said. “It also shifted our thinking beyond just the points programs, discounts and offers that were and still are predominant in our space.”

One important way in which consumer behavior changed was around the acceleration of digital adoption. Clark says there was a 20% shift to global digital retail in 2020, which amounted to $900 billion in total spend shift.

The growth in digital adoption was accompanied by an increase in the demand for a more convenient customer experience, as well as the growing popularity of the notion of ‘meeting customers where they are’. This entails reaching customers via the channels that are most convenient to them, instead of making them jump through unnecessary hoops to reach companies.

“Brands are now increasingly going to where the consumers are, instead of the other way around,” said Clark. “I think the metaverse is a good example of this. You can now order food from within the metaverse and have it delivered to your home. It’s meeting the consumers where they are and interacting with them on their terms.”

Another important shift in consumer preferences can be seen in the growing adoption of subscription programs. According to recent Mastercard research, 88% of companies across 32 markets experienced an increase in demand for their subscription-based offerings. And between 2020 and 2021, subscription programs saw a 209% year-over-year increase in adoption.

Clark believes that subscription-based offerings like those of Netflix and Amazon Prime are redefining what loyalty is and how brands can extend loyalty beyond the purchase transaction. The proliferation of subscription programs has also led to a much greater focus on a personalized customer experience, which is increasingly becoming an expectation for consumers.

“Netflix conquered personalization very early on, but I think personalization has been a trend for longer than trends should exist – now it’s an expectation. As brands, we need to tap into consumers’ passions, and what interests them. And we need to speak to those consumer needs,” said Clark. “That, to me, is the next big thing that consumers are going to demand – they want to interact with brands that resonate with who they are.”

How should brands react?

How is Mastercard pivoting to meet the changing expectations of the post-pandemic consumer?

One topic that many customers today feel particularly strongly about is sustainability. Mastercard research shows that 62% of consumers say it’s more important now than before the pandemic for companies to act in a sustainable and eco-friendly way. In order to cater to the growing concerns around sustainability, Mastercard launched its Priceless Planet Coalition, which allows cardholders from some of its partner banks to redeem rewards for the planting of trees, and aims to restore 100 million trees by 2025.

Mastercard has also collaborated with Swedish fintech Doconomy to develop a carbon calculator that enables people to track their environmental footprint. “This one’s really cool, because I don't know how many people have ever thought about how their spending habits contribute to emissions,” said Clark. “Doconomy enables that to be put out there so you can start to think about how you're spending, and even change your spending habits based on that carbon calculator.”

Another area of interest for consumers that has garnered a great deal of attention lately is that of cryptocurrencies. In response to increasing consumer demand, Clark says Mastercard is actively looking for ways to make crypto more accessible to cardholders.

One way to achieve this is by offering a crypto-based loyalty program that allows consumers to earn crypto by replacing traditional rewards with crypto rewards. This can serve as a good onramp for new entrants who want to dip their toes in crypto without going into full-blown investing.

Gemini recently worked with Mastercard to launch the Gemini Credit Card, which allows users to earn rewards for their spend in real time in over 75 cryptocurrencies.

At the beginning of this year, Mastercard also inked a deal with Coinbase to allow its users to make purchases with Mastercard credit and debit cards on the crypto exchange’s upcoming NFT marketplace, called Coinbase NFT. The partnership aims to make it easier and simpler for cardholders to buy NFTs.

“Crypto is a very complex space, and the winners in this space will be those that can incorporate these digital assets into a loyalty program that’s easy to understand, easy to adopt, and easy to utilize,” said Clark. “If it’s complicated or confusing, people will shy away from it.”

What comes next?

Looking into the future, Clark says the next generation of consumers, particularly Gen Z, are changing the meaning of loyalty. Being the first truly digitally native generation that grew up alongside the iPhone, Gen Z consumers are naturally much more likely to use mobile banking, and have consumption patterns that differ from those of previous generations.

“Gen Z is interesting, because they’re not following the same formula as prior generations. They’re using debit instead of credit. They’re using BNPL to finance purchases, as opposed to putting those purchases on their card,” said Clark. “And so, Gen Z is kind of redefining how they want to interact with their brand, which takes us back to meeting customers where they are.”

Clark says financial service providers will need to adapt to these evolving preferences quickly in order to remain relevant and engage the next generation of customers.

“In my view, the key for the loyalty space is, we have to redesign our marketing and our offers, and we have to think through the channels and the payment products that Gen Z wants to use,” Clark said. 

“We have to look at loyalty through their lens.”