Closed Loop Rewards Programs are Out of Date: Here’s Why

Closed Loop Rewards Programs are Out of Date: Here’s Why

Closed Loop Rewards Programs are Out of Date: Here’s Why

What is a ‘closed-loop’ rewards program?

To put it simply, it is where you are given a reward, usually spendable points, by a retailer you frequent that you can only redeem with them. You are probably signed up to quite a few: Superdrug, Boots, Tesco, and Waterstones. We could name hundreds, if not thousands, of these types of rewards programs.

They typically work on a points-based system, where you are gifted a certain number of points in exchange for your purchase with the retailer. These points can then be redeemed and used to purchase exclusive products or offset the cost of your next shop with them.

The whole point of the closed-loop system is to encourage you to return to that specific retailer to make use of the rewards they have given you. It might sound like the right method for your business as well, but we think differently. We are here to highlight the main reasons why we think the closed-loop rewards program is outdated.

Impractical for the B2B Sales Model

Implementing a rewards program within a B2B sales and marketing model will seem overly complicated when you consider the traditional closed-loop structure. Businesses are always adjusting their budgets and their suppliers, constantly trying to make the most out of their profits and protect their cash flow. Rewarding them with exchangeable points when they purchase from you is not enough of an incentive to return to your business if they find a competitor with comparably lower prices.

Open Loop vs Closed Loop Rewards

So, how could you improve your B2B customer retention using a rewards program? The Prosper2 Rewards Program is a completely ‘open-loop’ system, allowing businesses to reward their clients with points that can be redeemed to a Prosper2 Mastercard and spent wherever Mastercard is accepted. Let’s say a client repeatedly comes to your business for supplies, materials, or your services: you can reward your client by signing them up to your rewards program, created with Prosper2, and gifting them spendable points to enjoy wherever they want. It becomes a far more practical and personalised system, where your clients can then use their reward in a way that would most benefit them, showing how much you value them as loyal customers.

Clutter, Confusion, and a Lack of Simplicity

Let’s face it: consumers want their shopping experience to be as simple and as easy as possible. Keeping track of all the possible rewards programs they might be signed up for with multiple different retailers is a headache. Especially if all the different reward programs follow completely different rules, tiers, and structures, and each one comes with a separate points card that sits, taking up space in cardholders. As people begin to follow more minimalistic lifestyles, the clutter of multiple points cards in their wallets and purses is going to encourage them to leave those cards in a drawer at home.

How are consumers meant to appreciate and enjoy their rewards when the rewards program is one of many that they have been signed up to? Switching to an open-loop rewards program reduces the clutter and confusion, simplifying the process and letting both the business and the customer make the most out of the program.

Clients Crave Flexibility and Personalisation

The open-loop rewards program allows consumers to use and spend their reward where they choose, rather than being restricted to only redeem the reward with the business that first gifted them. This offers the customer the ultimate level of flexibility in how they use and enjoy their reward – this means your business has contributed to a particular purchase or experience that the customer invests the reward into, making the interaction with your business far more memorable for the customer. The open-loop system is as flexible as possible, offering consumers the opportunity to completely personalise their reward. Personalisation is a key aspect of the customer experience, encouraging the customer to feel truly appreciated. The future of loyalty programs seems to be well-defined. Besides continuous improvement, customer experience will be mostly focused on personalisationPersonalisation is or will be related both to well-known offer targeting as well as the targeting of inspirations. In particular, the second application is expected by customers and, if executed well, will play a major role in driving loyalty and developing customer habits. 

Experiences matter.
Today’s customers turn to brands for experiences and a connection, not just to save money, so ensure your rewards reflect that.

No Innovation Makes Your Brand Forgettable

You could be building a rewards program that is simply one of a million. It won’t set you apart from well-established competitors because they already have one, so what would lead customers away from using theirs? Can you afford bigger discounts, more points, and better products in exchange for customer loyalty?

Rewards programs are not only there to improve sales, but they should also be an intrinsic part of your marketing strategy. Closed-loop rewards programs are not new and exciting enough to draw people into your brand and business. Investing in building an open-loop rewards program offers your market an intriguing new way to shop with you and build a more personal connection to your brand.

If you are interested in building your own open-loop rewards program, check out how we could help at Prosper2 Rewards.


Prosper Squared (UK) Limited is registered in England & Wales, Company Number 09535801. Registered Address 843 Finchley Road, London NW11 8NA.


Prosper² and Prosper Rewards are trademarks of Prosper Limited a company registered in the Isle of Man, Company Number 130772C. Registered Address Ports of Call, Bay View Road, Port St Mary, Isle of Man, IM9 5AE.


The Prosper² Prepaid Mastercard is issued by Moorwand Ltd (FCA reference no. 900709), a principal member of Mastercard International Incorporated. Mastercard is a registered trademark and the design of the circles in the logo is a registered trademark of Mastercard International Incorporated.


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