Skin in the game: Rewarding customer loyalty with fractional shares

As first-party data becomes increasingly valuable, companies are looking for new creative ways to learn more about their customers and reward loyalty. We chat to Incentive Solutions, New Zealand’s oldest loyalty marketing and data-driven marketing agency, about an alternative way to harness customer loyalty that results in a win-win situation for all.

With brands always seeking to make solid and emotional connections with customers, the trend of giving customers the ability to earn fractional shares in a company when buying their products is taking off overseas.

Colin Samson, Chief Executive of Incentive Solutions, says giving customers a stake in the brands they love is a creative way companies can reward loyalty. 

“The solution is a twist on older loyalty programmes such as cash-back, discounts, coupons or ‘rewards’ points that can be traded for goods and services,” he says.

“Generally, reward programmes become devalued over time, so hoarding them is not good. Not so for fractional shares. These rewards can grow in value over time, strengthening the bond between customers and brands.”

The idea behind fractional shares relies on customers using a mobile app that tracks each time they make a purchase with participating brands. The software then rewards the customer with a partial share (fraction) of that company’s stock. 

This means customers earn a portion, or a fraction, of a share rather than one or more full shares of the stock and this accumulates over time the more loyal the customer is to that company.

Samson says this type of initiative is a “potent marketing reward” which is part of the emerging ‘ownership economy’. 

“If a person is offered bite-sized pieces of a company as a reward, that person is likelier to be loyal to the brand. After all, the better the brand does in the market, the greater the value of that person’s rewards,” he adds. 

Bumped, a US start up, is already using fractional shares and launched its app in 2020. It now has over 20,000 users who earn fractional shares in 50 companies when they shop at more than 1,000 different retailers. The app allows consumers to turn their everyday spending into stock ownership. 

Calebe Perazza, Data and Strategy Director at Incentive Solutions, says Bumped represents a new way for brands to build relationships with consumers by making them brand ambassadors and part of the company’s story. 

While there’s no New Zealand-based platform specifically designed to offer fractional shares via Loyalty Programmes, it is a case of watch this space for Incentive solutions.

“The closest example of a platform offering fractional shares is Upstreet – an Australian-based company founded in 2019,” Perazza says.

Calebe Perazza.

“Loyalty programme members constantly seek to maximise the benefits from their loyalty to different brands. Rewards are at the core of the value proposition of a loyalty programme and keeping it relevant is a challenge that every business faces. For the members, earning fractions of shares from the brands they love and consume is a great option as a reward. It has all the elements that help to drive purchasing behaviour, such as novelty, ownership, and a sense of belonging.”

Fractional share programmes offer businesses the chance to increase brand awareness and stimulate true loyalty both in attitude (customers genuinely liking a brand) and behavioural loyalty (customers coming back to support that company).

Another added benefit of offering fractional shares is that the model also allows for data collection by encouraging customers to use an app to track their spending.

He says one of the primary reasons companies are enhancing their existing loyalty programmes or launching new ones is because access to first-party data (or even zero-party data) is crucial to driving strategy.

“A loyalty programme is an excellent medium for that process. In a loyalty programme, members feel confident about sharing their data when the programme meets their needs and expectations and is relevant to them.”

Perazza says with customer needs constantly changing, fractional shares are an option to add in the mix to help drive more transactions and mitigate the risk of sales migration to competitiors.

And with many Kiwis already understanding the concept of shares due to investment platforms such as Sharesies and Stake, New Zealand is well positioned to introduce this option into the market.

“Incentive Solutions is exploring and evaluating options for introducing fractional shares into New Zealand and looking for ways to bring brands on board with this model,” Samson says. 

For companies interested in thinking outside the box, Perazza offered some tips. 

1. Listen to the data 

Customers can generate a lot of data when shopping. Businesses must take every opportunity to capture and use that data to enhance customer experience and drive brand loyalty. 

“Data is critical to customer loyalty. You can’t achieve loyalty without a deep understanding of your customer. Customers expect to be acknowledged and for companies to know their needs. People respond well if you give them a sense of belonging. 

“Loyalty programmes that don’t use data will quickly find themselves in decline and failing,” Perazza says. 

2. Be flexible 

Issuing loyalty rewards has historically been a slow process. But the technology behind fractional shares mean that by the time a customer has finished a can of Coke, they might own a slice of the Coca Cola company. 

“The power of fractional shares as a loyalty reward is in its momentum. People want to feel connected to a brand, and these rewards help achieve that connection. 

“Fractional shares as loyalty rewards adds a whole new layer of sustainability for any business that can quickly adapt to the world’s most interesting marketing trend,” Perazza says. 

3. Be creative 

Companies looking for creative ways to connect with customers now have access to a technology that improves both people’s lives and the bottom-line. Fractional shares are a great way for brands to stay relevant with people’s changing preferences by offering them more of what they want. 

“People’s tastes, preferences and expectations can change quickly. Customers want to be valued, and that comes from understanding them. 

“Since technology prices are reducing yearly, technology outside your budget five years ago is probably affordable today. Don’t be afraid of playing with new technologies; you never know if you’ll find a hidden solution,” Perazza says.

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About Bernadette Basagre

Bernadette is a content writer across SCG Business titles, The Register and Idealog. To get in touch with her, email [email protected].

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