The strategic decision to partner with third-party redemption partners is still a critical consideration for loyalty programs today. However, this strategy also brings its own set of challenges.

In this article, I talk about the benefits, challenges, and some real-world examples of how third-party redemption is driving customer engagement and loyalty.

Benefits of Third-Party Redemption

1. Attracting “Burn Chasers”

Third-party redemptions can be highly appealing to “Burn Chasers”, customers who accumulate points with the sole intention of redeeming them with specific partners. Frequent flyer programs offer great examples of this phenomenon, as seen with the Airmiles and Tesco partnership, which drew in highly engaged members actively seeking to earn Clubcard points so they could convert them into Airmiles.

2. Everyday Engagement

Offering third-party redemption options in everyday categories keeps members engaged, especially for programs where redemptions might otherwise be infrequent. Members are more likely to stay active in programs that offer flexibility to redeem points for practical, everyday purchases.

3. Increased Brand Exposure

Partnering with third-party businesses expands your brand’s reach by introducing it to new customer segments. This shared exposure enhances customer loyalty while providing opportunities for both brands to acquire new members—a mutually beneficial relationship.

Challenges of Third-Party Redemption

1. Increased Costs

While third-party redemptions can drive engagement, they often come with additional financial costs. Loyalty program operators typically need to reimburse partners for redemptions at agreed-upon rates, which are often higher than the costs of fulfilling in-house rewards. This can strain margins, particularly if high-value partners dominate the redemption choices.

2. Operational Complexity

Managing third-party partnerships requires significant effort. Tracking redemptions, integrating systems, and ensuring smooth customer experiences across platforms can be complex, especially when real-time processing is needed to prevent fraud and ensure seamless transactions.

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Real-World Examples of Successful Third-Party Redemptions

Woolworths and Qantas

Woolworths’ partnership with flagship Australian airline Qantas allows customers to earn Qantas points through the retailer’s Everyday Rewards program. Shoppers collect points on grocery shopping which can be converted to a bounty of Qantas points once a certain target is reached.

Virgin Red & Greggs

Virgin Red’s partnership with UK convenience retailer Greggs allows members to redeem points for everyday items such as coffee, pastries, and Greggs’ iconic sausage roll. This partnership keeps members engaged even when they aren’t planning to redeem points for a flight anytime soon.

Loblaw’s PC Optimum & Esso

In Canada, the PC Optimum program allows members to redeem points for fuel and car washes at Esso stations. This adds practical value for members while increasing footfall at Esso locations, showcasing the benefits of third-party redemption even in functional sectors like fuel.

Asda Cashpot for Schools

A recent innovative third-party partnership model has been grocery retailer Asda’s “Cashpot for Schools”, a fundraising platform designed to support local schools. Local schools can register as partners to receive donations based on customer spending at Asda. Although other retailers have run programs allowing customers to raise funds for schools, Asda’s version is a modern and fully digital approach.

Tesco Clubcard & Restaurant Rewards

Tesco Clubcard enables members to double the value of their points when redeeming them at partner restaurants like PizzaExpress and Ask Italian. This strategy delivers value to Tesco customers while driving foot traffic to partner restaurants. The restaurants can maintain profitability by setting conditions, for example excluding alcohol from the deal.

Is Third-Party Redemption Right for You?

Allowing members to redeem rewards with third-party partners can enhance customer engagement and increase your brand’s reach.

Imagine a future where loyalty programs transcend industry boundaries. Picture this:

• JB Hi-Fi partnering with Booking.com to allow customers to redeem points on travel tech accessories, cameras, music and more.
• Bunnings’ OnePass teaming up with AGL Energy, allowing DIY enthusiasts to redeem points on solar panels or smart home tech—turning loyalty into sustainability action.
• Afterpay integrating third-party redemptions, enabling shoppers to offset purchases with points from fashion, travel, or dining partners, blending BNPL with loyalty in real time.

These scenarios are logical extensions of what’s already working globally—and what’s beginning to take shape here. The key lies in balancing innovation with operational pragmatism.

At Eagle Eye, we’re already empowering brands to navigate this shift.

As the tech and retail sectors converge, third-party redemption isn’t just a tactic—it’s a strategic imperative. The question isn’t if your brand should explore it, but how quickly you can integrate it into your loyalty roadmap.

However, financial and operational complexities need careful consideration. A balanced approach can improve the value of your program for both your business and your members.

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