New program rewards multiple-brand shopping

Drop's rewards program encourages consumers to shop with multiple brands.

Drop, a new rewards program geared toward the millennial shopper, launched in the U.S. last month. The free app, which already has hundreds of thousands of users in Canada, allows users to earn cash rewards for the accounts used when shopping for everyday items. 

Basically, the program allows customers to redeem rewards for multiple brands without having to commit to shopping at just one retailer. The platform takes the burden off the merchants, who traditionally have to take on extra charges to supply their customers with rewards credit cards. 

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"The goal is to build a highly engaging and fun rewards program, focused around the millennial demographic," Derrick Fung, CEO of Drop, told FierceRetail. "We've created a product that is truly frictionless for the consumer, making it easy to earn and redeem points by spending with their favorite brands."

With the high expectations of today's consumer, shoppers expect to be rewarded for spending. Consumers learned this habit from traditional credit card points programs and now, younger generations expect those programs to be seamless and go beyond just one brand. 

So why create a program geared especially toward millennials?

"Millennials are the most important demographic for retailers to target," Fung said. "Not only have they become the largest consumer cohort by population size, but their ability to spend is only increasing. Within the next few years, their spending propensity will be beyond the baby boomers. It's also important for retailers to speak to them now to capture their attention—they are very different in the way that they engage with brands. If retailers fail to remain relevant to them now, they may lose them forever."

Fung says that the average U.S. household has membership in more than 30 loyalty programs, overloading a consumer's ability to be active in more than just a few programs at a time. By creating a multimerchant rewards program, customers can consolidate their programs and ultimately become engaged in one program, which provides value across all their spend.

"A cross-merchant program allows for better targeting and engagement by bringing together both low- and high-frequency purchases," he added.

The service is convenient for consumers, but Drop is beneficial to the merchants because it gives brands a better view of the shopper and their spending behaviors. 

In addition, Drop gives low-frequency merchants, like sports apparel retailers, a way to reward their consumers with high-frequency rewards, like coffee. 

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Finally, Drop's construction provides what Fung calls the "brand halo" effect, ultimately leading to spend consolidation as consumers start shifting their spend to Drop's brand partners.  

Moving forward, Fung says the rewards programs of the future will be both frictionless and intelligent. 

"As companies like Drop continue to aggregate consumer spending data, once they reach a user base of statistical significance, they will be able to use spend data to build a truly personalized and intelligent program built around machine learning and artificial intelligence," he said.