Consumers spend 37% more with brands when they are loyalty program members; 70% of members say they are more likely to recommend brands with good loyalty programs, and 77% say loyalty programs make them more likely to continue doing business with a brand.
With the benefits of loyalty programs well known, competition among brands for members and a larger share of their spending is fierce — and consumers know it, so they are expecting more in return for their loyalty.
Simple transactional programs that trade dollars for points are losing ground in the wake of more robust incentives. “Alternative” currencies such as complimentary WiFi access, early boarding on an airplane, late checkout in a hotel or members-only discounts from a retailer are seen as highly valuable by 85% of consumers. For even more benefits, consumers are increasingly willing to pay for enhanced loyalty programs.
“This year, the data shows that loyalty programs continue to heavily influence advocacy, retention and spend,” said Bob Macdonald, President and CEO of Bond Brand Loyalty in a statement. “But the loyalty game is changing, as evidenced by new players, evolving experiences and increased customer expectations. Regardless of sector, brands need to rethink their current loyalty strategy in order to increase customer engagement and build loyalty.”
The report also cautions retailers to avoid the four most common sources of loyalty member frustration:
- Having points expire;
- Not having desired awards available (because of blackouts, catalog changes or out-of-stocks);
- Representatives who aren’t knowledgeable about the program; and
- Receiving an “overwhelming” volume of emails.
Paid Programs Strengthen Their Grip
By bundling a compelling entertainment subscription, a faster “free” shipping program and numerous members-only perks into its Prime program, Amazon has amassed 100 million U.S. members and transformed the way consumers perceive paid loyalty programs. In the Bond loyalty survey, the share of respondents willing to pay for enhanced loyalty programs spiked to 37% in 2018 from 30% in 2017.
Paying for loyalty programs has even greater acceptance with early technology adopters (69%), Gen Z (47%), Millennials (46%) and households with children (44%).
As compared to non-paid programs, paid programs are associated with even higher spending and brand advocacy, as well as greater retention. In addition to Amazon Prime, the report cites two examples of successful paid loyalty initiatives in retailing.
GameStop offers two tiers of paid membership within its PowerUp Rewards program — PowerUp Pro for $14.99 per year and PowerUp Elite Pro for $29.99 per year. GameStop reportedly sees three times higher sales among Power Up Pro members as compared to free members.
Membership to Restoration Hardware’s RH members program costs $100 annually. Since the program was introduced in spring 2016, RH members have become responsible for a whopping 95% of sales, while the retailer boasts reduced return rates and increased inventory accuracy as a result.
Consumers Will Trade Data For Personalized Benefits
The adoption and evolution of technology is having a positive impact on loyalty programs, according to a strong majority of consumers.
In spite of privacy concerns well documented in the press, a vast majority of survey respondents (87%) indicated they are open to having various details of their activity and behavior watched, monitored and tracked by brands in return for access to personalized rewards or engagements. This willingness is even higher among up-and-coming Gen Z consumers at 91%.
Loyalty program members also are eager to engage with brands through new and emerging technologies, with 95% of respondents indicating an interest in such features as augmented reality (AR), virtual reality (VR), chatbots, 360° video and biometrics:
- Among respondents who have redeemed rewards with their mobile phones, 85% said technology enhanced their experience;
- Technology that enabled members to instantly redeem points for purchases improved the experience for 84% of those who had used it;
- Among consumers who had received automatic, location-based offers when inside a store, 83% said technology enhanced the experience; and
- Engaging with a loyalty program using AR improved the experience for 63% of participants who had done so.
Retail’s Top Loyalty Programs
In general, loyalty program members spend 37% more with a brand than non-members, but the impact can be much higher. The five sectors in which loyalty program members outspend other shoppers by the greatest amount are gas/petrol station programs (99%), hotels (82%), drug stores (63%), movie theatres (61%) and grocery stores (57%).
U.S. consumers were asked to identify their favorite loyalty programs within various business verticals and product categories. Here are some of the top picks in retail based on member satisfaction:
- Giant Eagle fuelperks!
- Smith’s (Food & Grocery) Fuel Program
- H-E-B Points Club Rewards
- Drug Store
- Walgreens Balance Rewards
- Rite Aid wellness+ rewards with Plenti*
- CVS ExtraCare
- Health & Beauty
- Sally Beauty Club
- ULTA Ultamate Rewards
- Sephora Beauty Insider
- Department Stores
- Kohl’s Yes2You Rewards
- JCPenney Rewards
- Nordstrom Rewards
- Express NEXT
- American Eagle Outfitters AEO Connected
- Foot Locker VIP Program
- Barnes & Noble Membership
- Cabela’s CLUB REWARDS
- Bed, Bath & Beyond Beyond+
* On July 10, 2018, the American Express-created Plenti, a coalition loyalty program in which members could collect points from several different companies, will cease operation.