Consumer price sensitivity is high in Latin America at a time of rising cost of living, which in turn shrinks consumer purchasing power. Increased emphasis on value, which has become more important to consumers amid this economic uncertainty, changing consumer spending patterns and search for growth in new regional markets, has been high on the agenda of Latin American businesses. Loyalty programmes, therefore, must provide the best product selection with instant reward redemption and an improved omnichannel customer journey to maintain relevance and market share. As consumers leverage automated solutions to simplify and streamline day-to-day activities, they also crave more personalised rewards and increased brand engagement.
Latin Americans are impatient for a more seamless digital experience
Latin America is a unique market. It is highly urban and highly digitalised, and around half a billion people in the region owned a mobile phone in 2022. While a quarter of the Latin American population belongs to Generation Z, social media activity transcends generations and the region surpassed both Europe and Asia in terms of social media activity during 2022. Latin America is also one of the most unequal regions in the world and rampaging inflation means that consumers are hungry for a deal. Latino Americans are, therefore, both digitally savvy and willing to share feedback and data with companies if it saves them money.
This frugality means that consumers are looking for innovative payment options and new business models.
58.7% of Latin Americans participate in loyalty programmes to receive discounts or offers, while 46.1% are looking to receive free products
Source: Euromonitor International Voice of the Consumer: Digital Survey, fielded March-April 2023
Increasingly price-sensitive consumers are demanding more value for money options, as soon as possible. If a loyalty programme does not provide immediate rewards, consumers will find little value in it and will look for another one that offers them what they want. In 2023, 45.1% of Latin American respondents to the Euromonitor International Voice of the Consumer Snapshot: Loyalty survey point out that the main barrier to loyalty is that it takes too long to earn a reward. Loyalty programmes will need to meet these consumers online with a value proposition that highlights convenience, innovation, engagement and timely customer service.
Loyalty programmes in Latin America evolve around the retailer, not the brand
Several of the largest retailers in Latin America in 2022, eg Walmart Inc, Cencosud SA, Falabella SACI or Carrefour SA, are present across multiple channels (department stores, grocery retailers, home improvement stores, pharmacies, etc) and are therefore able to satisfy multiple consumer preferences simultaneously. This market concentration is key for generating loyalty as consumers collect points across all channels in exchange for universal benefits. Retailers often utilise the same loyalty programme in multiple countries in the region, and most are basic, transactional and with low emotional connection or real customer engagement.
The rise of third party coalition loyalty programmes that gather multiple smaller players under a wide-ranging umbrella will challenge the existing model. Partnership can help on scalability and bring value to loyalty programmes that focus on one core business area. Small players can gain scalability by creating ecosystems through partnerships as well as by joining third party coalition programmes.
One example is Izit, a Chilean loyalty platform, which provides offers from different brands, georeferenced promotions and personalised rewards through its app. The platform differentiates from established legacy loyalty programmes by offering digital tokens and driving emotional loyalty through gamified perks, which customers can compete for through interactive engagement and competitions.
Be it retailers or third party coalition loyalty programmes, they all tend to offer access to credit, adding value to the unbanked population by linking loyalty programmes and retailer credit cards. The consumer can purchase at a preferential rate with a store card and use the subsequent loyalty benefits across a wide range of options.
Partnerships, business models and new consumer engagement will shape the future of loyalty in Latin America
Loyalty players and consumer brands that keep expanding their digital presence will be able to secure resilience, and maintain growth and commercial viability, which can help improve retention levels. Web 3.0 technologies and their uptake by consumers is still evolving. What is clear, focusing towards 2030, is the interest of consumers in exploring virtual games, investing in more digital assets such as NFTs and engaging more with brands that deliver personalised offers/benefits and drive overall emotional loyalty.
Building strong partnerships cross-industry and embracing new business models that fit the needs and preferences of local consumers will help attract new segments of consumers, support the development of decentralised loyalty ecosystems and drive customer engagement.
Partnership can help on scalability and will bring value to loyalty programmes that focus on one core business area. Smaller players can gain relevance by creating ecosystems through partnerships as well as by joining third party coalition programmes.
Loyalty programmes in the region are primarily transactional and based on discounts and cashback. Emotional engagement and personalisation through consumer profiling and the use of big data analysis, will be key attributes for differentiation as younger, more diverse generations come of age. Social or environmental causes will also allow loyalty programmes to connect with consumer emotions.
Download our most recent briefing, Building Brand Loyalty in Latin America, for more analysis on the drivers of loyalty programmes in Latin America.