MercadoLibre Renews Its Loyalty Program as ‘Meli+’, Explores Ad-Backed Content

In an interview with Bloomberg Línea, CMO Sean Summers explains the rationale behind the program along with the vision for the ad-supported streaming platform

MercadoLibre
August 30, 2023 | 09:00 PM

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Bloomberg Línea — MercadoLibre (MELI) announced on Wednesday the relaunch of its loyalty program under a new name: Meli+, and which it is rolling out in Brazil and Mexico.

In an interview with Bloomberg Línea, the company’s Chief Marketing Officer (CMO) Sean Summers explained that with the launch of Meli+ the goal is to offer a more comprehensive value proposition with a name that reflects this change, replacing the previous “level 6″ system.

The previous program had six different levels, each representing an increase in the number of benefits.

Meli+ (pronounced “Meli Mais” to differentiate it from foreign counterparts that use “plus” in English) is seen as an evolution of the loyalty program initiated in 2017, which began with free shipping benefits and evolved to include partnerships with content providers such as Disney in 2019.

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Now, it has transformed into a subscription program that offers a package of benefits focused on content and some advantages from the fintech branch Mercado Pago, like discounts on products.

The company plans to continue adding benefits to the program, according to Summers.

Meli+ can be accessed not only through point accumulation but also by paying a monthly fee of 17.99 reais, similar to other subscription programs, including Amazon Prime from competitor Amazon, which costs 14.90 reais per month in Brazil.

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“We looked a lot at what they [Amazon] do. Clearly, the concept of free delivery and content was something they developed many years ago and it has been demonstrated to work. So, it was about looking at it, seeing that it works, and finding a way to make it more efficient for MercadoLibre,” Summers said.

Currently, Meli+ benefits include free shipping, scheduled delivery at no cost, access to streaming services Disney+ and Star+, 12 months of free music streaming through Deezer, and 30% discounts on HBO Max and Paramount+, as well as benefits for Mercado Pago users.

In a report, Goldman Sachs analysts Irma Sgarz, Felipe Rached, and Gustavo Fratini state that this change was “widely expected” and should further increase user engagement on the platform and narrow the gap with competitor programs.

“Based on our preliminary analysis, we consider that the actual benefits of the two programs are not very different,” the Goldman Sachs analysts said.

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“However, we note that MercadoLibre is using this opportunity to simplify communication about the program’s benefits, a necessary step in our view, to provide greater clarity around the value proposition and ultimately drive broader adoption.”

They added that this relaunch should be accompanied by increased marketing spending. Still, they expect this change to be economically/marginally neutral and believe that the program also marks an important step in the MercadoLibre customer journey, indicating that the company “has gained confidence that a relevant segment of users has become sufficiently loyal to make a deeper commitment to the platform”.

For Goldman Sachs, subscription models can significantly increase engagement and spending on a given platform.

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Complementary to the Meli+ strategy, MercadoLibre launched a free content streaming format with advertisers called Mercado Play four weeks ago, as anticipated by Bloomberg Línea.

But, according to Summers, that project began two and a half years ago.

“We saw an opportunity in how the industry was developing. The combination of platforms is a hypothesis we are testing here and haven’t seen in other parts of the world. In the same app, everything helps each other: MercadoLibre’s natural traffic helps Mercado Play, and those who eventually enter the platform to view content will also consider MercadoLibre [for purchases],” he explained to Bloomberg Línea.

It’s not content exclusively owned by MercadoLibre, but rather licensed films and series to make Mercado Play a “showcase.”

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“It’s not competing with Disney; it’s an opportunity for consumers to discover content as well,” he said, explaining that Mercado Play competes more with social networks displaying video content than with other streaming platforms.

The challenge, he explained, is managing and developing the technology to make all the hours of signed content available.

“The tool’s process is not fully developed yet. It’s still not possible to watch almost 70% of the content that’s already contracted,” Summers said. According to the executive, the goal is to have more than 10,000 hours of content by the end of the year.

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When asked if Mercado Play would have any restrictions on showing original Amazon programs, for example, Summers said no, although he hasn’t discussed that with the competitor. “We still have many conversations with other partners.”

According to Summers, MercadoLibre sees the entertainment and content industry as a growth opportunity, especially in Latin America, where there’s a large audience interested in consuming varied content.

AI and the advance of retail media that MercadoLibre has been working are aimed at improving the user experience in content search and recommendations through the use of artificial intelligence, according to Summers. This way, when a user types “White Lotus,” for example, in the search bar, the app recommends the content – the HBO series – rather than a product.

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There are no specific plans yet for integrating content with products, but the company said it’s constantly exploring innovations in that direction. MercadoLibre is already in talks with companies interested in advertising on Mercado Play but hasn’t disclosed any names or contract details.

According to a report by Insider Intelligence/eMarketer, so-called retail media is rapidly becoming an integral part of the digital advertising strategies of ad buyers in Latin America.

The consulting firm notes that retail media is now competing with search engines, social media, and traditional media for advertisers’ attention. Over half (54%) of respondents plan to buy retail media ads in the next year, compared to 80.3% for social media, 70.2% for search engines, and 55.9% for programmatic platforms.

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According to the research, MercadoLibre and Amazon are the companies benefiting the most from digital advertising attention in retail, due to their robust advertising solutions and greater brand recognition among regional ad buyers.

“In our research, Amazon had the highest brand recognition, but MercadoLibre was favored by the ad buyers,” said eMarketer, comparing the advertising business units of the two companies.

Summers sees the video format of Mercado Play as a “great lever” for both MercadoLibre and its advertising division, Mercado Ads.

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“I am particularly excited about the number of people returning to the platform every week and the minutes spent on the platform,” he said, without disclosing preliminary numbers for the new strategy.

The Insider Intelligence/eMarketer report observes that ad buyers in Latin America value the quality of traffic over quantity. Return on advertising spend (ROAS) is closely monitored, something prioritized by advertisers in times of economic uncertainty.