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10 minutes of expert insights every weekday. Your morning ritual for staying ahead in retail media.
Loyalty as the Retail Media Backbone
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[00:00:00] Kiri Masters: A couple of weeks back, I sat on a retail media panel at Loyalty Connect, a conference in Atlanta for all the people who have been designing, launching, and fixing loyalty programs at [00:00:15] retailers and other brands for decades. I was definitely the odd one out.
[00:00:21] Most of my work is parallel to loyalty in the retail media ecosystem. But the two, in fact, are [00:00:30] inseparable. Loyalty data is the behavioral signal that powers audience creation, and it is the match key that makes closed-loop measurement work. ~What I left the event thinking about was something else.~
[00:00:42] ~But what I left, but ~what I left thinking about after the [00:00:45] event was something else. As AI compresses the shopping journey and threatens some of those on-site surfaces where RMNs earn their highest margins, the loyalty program is becoming the thing that [00:01:00] keeps shoppers in a retailer's ecosystem at all, the data layer underneath and the emotional layer on top, and in fact, might even create a new surface that is defensible for retailers to [00:01:15] continue building on.
[00:01:16] Let's jump in.
[00:01:17]
[00:01:18] Kiri Masters: Christine Foster, who is the group vice president of commercial strategy and operations at Kroger Precision Marketing, made this concrete on a live stream that I hosted [00:01:30] recently. Kroger Precision Marketing launched an integration with Google DV360 with a conversion API that lets brands optimize against actual retail KPIs, actual sales dollars down to the SKU level.
[00:01:44] And [00:01:45] what makes that possible is, in part, a loyalty program that has been running for more than twenty years. Christine said ninety-five percent of all Kroger transactions are connected to that loyalty account.
[00:01:59] She [00:02:00] said that a lot of retailers don't really have that level of confidence in their datasets.
[00:02:05] A lot of the more advanced retail media networks that I've profiled in the last year have a really robust loyalty [00:02:15] program and along with that, a high number of addressable IDs that are often associated with a loyalty account. So just to rattle off a few, Kroger, as I mentioned, ninety-five percent of transactions can be tied to a loyalty [00:02:30] account.
[00:02:30] Costco, a hundred percent member-identified transactions. That's because everybody who shops at Costco must be a member. CVS Media Exchange, ninety million ExtraCare [00:02:45] members with a more than ninety percent transaction match back to ExtraCare loyalty members. And then we have a couple which are tied back to customer IDs.
[00:02:59] A little note on [00:03:00] that in a second. But Best Buy, ninety-three percent of transactions can be tied back to a customer ID, and Albertsons Media Collective has a hundred million addressable IDs. And so a quick note on this, addressable IDs [00:03:15] are broader than loyalty members. You can have a addressable member without them being a loyalty member, but loyalty-derived identity is usually the stronger version of identity in that kind of [00:03:30] Venn diagram.
[00:03:31] It is voluntarily provided by the customer. It is transaction-linked. It is persistent across channels, so it can be done in the store or online, and it's cli- tied back to a clear value [00:03:45] exchange that the consumer chooses to engage in. And that is why loyalty programs are such an important element for retail media.
[00:03:56] On the panel at Loyalty Connect, Chris Norton, who built [00:04:00] Marriott's Riot Media Network, said that measurement is the single most important capability for any loyalty-based media business. He said, "You won't scale without measurement." And Marriott [00:04:15] has a hundred and fifty million members in its Bonvoy membership and uses that to triple down on proof to convince advertisers of its USP.
[00:04:26] And if you're a longtime listener to this show, you probably have heard me [00:04:30] banging on for months now about how AI-enabled shopping journeys threaten retail media's foundation of on-site retail media and a little bit of off-site retail media too.
[00:04:42] Because when consumers do their [00:04:45] product research inside an AI answer engine and arrive at a retailer's website already knowing what they want, they skip the ad surfaces that generate most of retail media's current revenue. So that is the [00:05:00] threat. But here's what doesn't change, the loyalty program. A shopper's status, accrued benefits and points, the emotional connection to a retailer persist even when the [00:05:15] discovery journey changes locations.
[00:05:18] Charlie Casey, who is the co-founder and CEO of a loyalty platform solution called LoyaltyLion, said that technology will change how we buy, [00:05:30] but not why we buy. And he splits consumer motivation into rational aspects, so things like convenience, price, quality, and also emotional aspects, identity, [00:05:45] status, belonging.
[00:05:46] AI agents handle the rational side brilliantly, but the emotional side is where loyalty programs operate, the identity, the status, the belonging. But not every [00:06:00] program is really built for this yet. A lot of programs that retailers offer sit in stuff, the points, the discounts, the cashback, and that is the layer that a lot of AI agents are [00:06:15] going to be able to ruthlessly optimize.
[00:06:18] They can game dormant accounts for win-back offers. They can compare point values across programs. They can exploit every promotional loophole. [00:06:30] But things like status and access are harder to copy.
[00:06:35] As Taryn Domoney, the senior director and head of industry at Home Depot's RNJ ProMedia, said on that panel, "You can't just buy the loyalty. [00:06:45] You need to have that love of the brand too." Did you know that leading retail media networks drive 85% of their ads [00:07:00] through mid and long tail advertisers?
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[00:07:26] Learn more@miracle.com. That's [00:07:30] M-I-R-A-K l.com.
[00:07:33] Salesforce published a Connected Shoppers report recently and found that 70% of consumers would like to use an AI agent to manage their loyalty points. That was [00:07:45] actually the number one use case that people wanted well ahead of other annoying things like managing returns and tracking price drops.
[00:07:55] But Stephanie Meltzer-Paul, who is a loyalty veteran with senior roles at [00:08:00] MasterCard, Dunkin', BJ's Wholesale Club, and, and now at Skyzone, she drew a really interesting distinction, which is that the earn side of loyalty is easier to game via an agent than the [00:08:15] burn side. ~So what that means is that agents can quite easily...~
[00:08:16] ~And so what that means is that agents c- And ~And so what that means is that agents quite easily can route purchases to maximize point accrual, to pick the right credit card, to enroll us in new points programs. But the [00:08:30] redemption piece with its tier-based logic, promotional multipliers, experiential rewards, that can stay tethered and native to the retailer's environment.
[00:08:44] If you're [00:08:45] sitting on a thousand Ulta points, you still need to go to Ulta to spend them. So the earning part can get disintermediated, but the burning happens inside the retailer's ecosystem, which [00:09:00] means the retailer can keep a captive high-intent audience at the moment of redemption. So for retail media network leaders trying to figure out where the next advertising surfaces can live [00:09:15] as on-site browsing and search results pages decline, that redemption experience deserves some serious attention.
[00:09:26] So where, where do we land with all of this? The [00:09:30] programs that will struggle are the ones that are still concentrated in points and discounts and earning, the things that agents will be able to arbitrage away. The ones that will hold their ground are investing in [00:09:45] status, access, And the kind of incentives for consistent, even daily engagement that creates genuine preference rather than a transactional convenience.
[00:09:56] Loyalty as an industry, it was [00:10:00] fascinating for me to see all these loyalty professionals in one place. It has really survived every major commerce shift by adapting. You think about we used to carry these cards around with us, and now we just use our mobile app.
[00:10:14] Back in [00:10:15] the nineteen thirties, consumers collected stamps for purchases and cashed them in for free products. So loyalty programs, just like the broader retail space they concentrate in, keep evolving, and this time won't be [00:10:30] different if the adaptation starts now. Thanks for listening.
[00:10:34] This was actually an abridged version of a longer piece that I published for my column at The Drum, which we'll link up to in the show notes.
[00:10:41]