The Next Evolution of Card-Linked Offers

Using SKU data to improve offers and payouts. Nice!

Photo by Avery Evans on Unsplash

Card-Linked Offer Intro, Framework, and Limitations

Card-linked offers (CLOs) have come a long way since their inception. What was once territory for banks and banks alone has grown and spread to fintech giants like Venmo and Credit Karma and reward- and loyalty-centric players like Pogo and Drop Rewards.

Conceptually, card-linked offers are simple. Link a card, activate offers from brands, spend with the linked card, get cashback. Consumers get rewarded for their shopping habits, brands can reach those consumers with a form of advertisement that is well-received and non-invasive, and companies that create the infrastructure to make the transactions possible settle into a potentially lucrative business model.

However, with any product, there is almost always room for improvement. The card-linked offer as it currently stands has some clear limitations. For one, a standard offer a consumer would normally see takes up a small piece of digital real estate. As many offers are usually shown side by side in a grid or infinite scroll, there is usually only room for a brand logo and a simple, easy-to-understand cashback offer (ex. 3% cashback at McDonald’s).

There’s also difficulty in creating offers more targeted than just at the merchant level. Let’s take the 3% cashback at McDonald’s example to highlight this point. For those familiar with CLOs, this offer (barring the details of the terms of service agreement) is straightforward. Spend money at McDonald’s with a linked card, get 3% of the purchase sent as a cashback reward back to your card. You’ll notice that this isn’t an offer for Big Macs, Grimace Shakes, or breakfast items. It’s just straight-up cashback for shopping at McDonald’s.

Why?

Data Dilemma: The Role of Bank-Level Data in CLOs

Data, of course. Or in this instance, the lack thereof. Most businesses creating and deploying CLOs are dependent on bank-level data. For banks that are offering CLOs, there’s a vested interest in sharing purchase data with their partners, and that information results in the creation of the majority of CLOs.

While this data does paint a valuable picture, it’s more like the SparkNotes version than the knowledge gained from reading the whole book. That’s because bank level data tells the story of where and not what. This data can confirm that someone spent $100 at Walmart, but it won’t reveal what items were specifically purchased. Item-specific information is revealed with SKU-level data, and that’s information banks don’t have.

This makes merchant-level offers the name of the game, though category- and item-level offers are a coveted endgame. Capturing SKU-level data and matching it with user IDs is the next level of card-linked offers, and it is already underway. Not only will this help brands with a pre-existing CLO presence make better, more specific offers, it also opens the door for grocery stores, big box, convenience, and other retail segments with heterogenous inventories to increase their CLO presence.

Activation Conundrum: Automatic vs. Manual Activation

Another potential downfall to CLOs as they stand is the existing activation conundrum. Is it better to have offers automatically activate when a consumer shops with their linked card at an eligible merchant, or should a consumer need to manually activate an existing offer prior to making their purchase?

The no-activation method is surely beneficial for the user in terms of convenience. If a card-linked offer program isn’t set up intuitively, consumers need to sift through mountains of offers in order to find the ones they would actually use. If the merchants, CLO service providers, or the hosting application do not have the UI/UX configuration or appropriate data, consumers could be dealing with loads of irrelevant offers that are a hassle to navigate. Automatically activated offers offer a different solution in which consumers receive cashback simply by spending at an eligible merchant with their linked card.

For merchants, automatic activation means that consumers will earn cashback without any definitive proof that they ever saw the offer. On top of this, if brands are targeting new customers, offers could be made to consumers who were going to shop there anyway.

Manual activation would make the paper trail more clear, but brings us back to the point about data and UI/UX…if it’s non-existent, it’s going to be a crappy experience for the user, and the chances of them revisiting their offers decreases.

Future Solutions: Optimizing Card-Linked Offers with SKU-Level Data

At the crux of the future of card-linked offers is data. In order for CLOs to meet their maximum potential, the depth and quality of data must go beyond bank-level data. SKU-level data is the key to optimizing offers to meet existing customers where they are and entice prospective customers with relevant offers.

SKU-level data also makes entry and sustainability in card-linked marketing much easier for merchants with heterogenous inventories. Offers can be made on item and category levels, an especially enticing selling point for grocery stores with low margins and limited marketing budget. Merchants such as Walmart and manufacturers like Procter and Gamble can work in unison to create personalized campaigns for specific items and item categories that are easier to measure.

SKU-level transaction data combined with zero-party user ID data helps the activation conundrum as well. The ability to match receipt data with existing offers negates the need for activation. As offers evolve to the item and category level, even campaigns without activation can be measured better than before. If activation is requested, SKU data makes targeting and personalization more accurate, bolstering the confidence of marketing teams.

Monetizing Data: Combining SKU Data Licensing with CLO Cashback

Lastly, combining revenue generated from the licensing of SKU data with the existing cashback of CLOs can bring more money to users. At the end of the day, whether it is retaining a customer or winning over a new one, loyalty is the name of the game. With inflation becoming a major concern for many consumers, the best offers and loyalty programs could be the differentiating factors in where a consumer spends their money, regardless of pre-inflation spending habits.

Data as an Asset: Trends in Turning Data into Value

The movement to turn data into an asset class is still developing. Those who understand its potential are already enabling users to receive actual value for their data, including Pogo, a rewards and savings app that raised a $12.3 million seed round in 2022.

This is the part of the blog where I plug TIKI. We’ve built a similar rewards and loyalty product and are offering it for free to businesses. If your app has card-linking capabilities but does not yet have a rewards program, TIKI could be a great fit.

Learn more here!