Loyalty Programs Must Differentiate to Sustain Member Engagement

Customer loyalty is alive and well, according to the sixth annual Bond Loyalty Report, but marketers must differentiate their loyalty programs to sustain member engagement.

“Program operators and marketers will be pleased to affirm their investment in loyalty yields the right outcomes, yet should also take note that they must ensure their programs cut through and differentiate to sustain member engagement and activity,” Scott Robinson, VP, Loyalty Design & Strategy, Bond Brand Loyalty, told Loyalty360.

According to the report, nearly 70% of consumers modify brands they engage with to earn points, but most loyalty programs fall short when it comes to personalization and customer experience.

Here are some key findings from the comprehensive report:
-81% of consumers are more likely to continue doing business with brands that offer loyalty program
-Only 22% of respondents are very satisfied with the level of personalization they’re getting from brands, yet, satisfaction is eight times higher when programs are highly personalized
-When it comes to customer experience, only 20% strongly agree that a brand or program representative makes them feel special and only a quarter of respondents feel that the program experience is consistent across varied touch points (such as online, by email, by phone and in person)
-Year-over-year program satisfaction is steady at 44% even as loyalty solutions continue to innovate, indicating that member expectations are increasing just as quickly as programs are evolving
-Developing meaningful loyalty programs that meet customers’ needs while deepening their relationship with brands is a difficult challenge, but when designed and operated effectively, can reduce program costs and strongly influence consumer behavior.

Loyalty impact

-Consumers belong to an average of 13.4 loyalty programs, but are active in only 6.7 programs
-The number of consumers who say they modify the brands/companies they purchase from in order to maximize points continues to increase (67%, up from 64% in 2015 and 55% in 2014) 
-73% of members are more likely to recommend brands with good loyalty programs, which equates to a boost in member acquisition and reduced marketing spend. Top programs that members are very likely to recommend include Sally Beauty Club, My Sheetz, Amazon Prime, and Giant Eagle fuelperks!
-66% of consumers modify amounts spent to maximize points

Program Satisfaction, Brand Alignment and Rewards Redemption

Program satisfaction holds steady from last year—less than half (44%) of program members are very satisfied with their loyalty programs, which points to a need for continued focus on program enhancements and improvements to keep up with consumer expectations

39% of members feel that their program fits very well with what they expect from a brand. Top ranked brand-aligned programs include Carter’s Rewarding Moments, Amazon Prime, Kroger Fuel Points, and Nordstrom Rewards.

The rewards and redemption experience is key to member satisfaction, yet more than a fifth of members have never made a redemption. Rewards play an important role in retention, as non-redeemers are 2.3 times more likely to defect than recent redeemers, suggesting brands would be well served to focus on the redemption experience, not (just) the reward itself

Credit card loyalty programs can benefit by offering instant retail and online points redemption both to lower the cost per point but also to improve the program experience, as 70% of consumers find this redemption option appealing, and 43% are willing to pay a points premium for this convenience

Demographic differences

-68% of female vs. 60% of male members are interested in earning rewards for non-purchase activities (updates to profile, refer-a-friend, social activity, etc.)
-Millennials have unique and increasing demands and require further program differentiation
-Millennials are 2.2 times more willing than boomers to pay a premium for products and services if they can also earn loyalty and reward points.
-Six out of 10 millennials are comfortable receiving product recommendations based on their purchase history, compared to only 4 out of 10 boomers.
-Substantially more millennials value programs that offer special services like concierge (59% of millennials vs. 38% of boomers).

Mobile is a strategic advantage (but missed opportunity)

-Demand increases to 57% of members who want to engage with programs on a mobile device.
62% of women vs. 52% of men would like to engage with programs on a mobile device
-Nearly 50% of program members don’t know if there is a mobile app to complement their loyalty program.
-Outside of a program app, consumers are most interested in using their mobile device to check their points balances (57%), redeem reward points (55%), find a location/store (54%), and browse reward options (54%)

The report, conducted in collaboration with Visa, is the largest study of its kind. The report captured responses from roughly 12,000 U.S. and 7,000 Canadian consumers. It covers 58 dimensions of loyalty program performance including program mechanics, communications, rewards, needs fulfillment, loyalty emotional and behavioral outcomes, and brand alignment.

“Our study affirms that loyalty continues to be a very worthwhile pursuit for brands, and that programs are yielding a positive impact in terms of achieving intended brand loyalty outcomes,” Robinson explained. “Meanwhile, despite the year-over-year increase in enrollments per member, the number of programs in which members are active declined slightly, suggesting that consumers have an appetite for loyalty programs, yet are increasingly discerning in where they shop.”

Robinson pointed to the study gap between member expectations and member experience related to personalization as a surprising revelation.

“One in two members agrees personalization is important, yet only 22% are very satisfied with the level of personalization they are experiencing,” Robinson said. “This suggests that brands must focus on delivering a level of personalization that better mends this gap. We sought to understand what personalization means to members and were surprised by some of the results. In particular, that the things members deem most personalized are familiar and not-so-complicated, dispelling a myth that personalization needs to be complicated to be effective. With that said, and perhaps also surprisingly, the approaches to personalization that yield for brands the most positive impact on member satisfaction are the things with which members are the least comfortable, which indicates that permission is the gateway to personalization done well.”

The convergence of customer experience and loyalty is yielding satisfaction dividends for brands, Robinson noted.

“Brands that, through their program representatives, are effectively making members feel special and recognized are achieving 2.7X higher member satisfaction,” he added. “Consistency of experience across channels is also paramount. Brands that are achieving a program experience that is consistent across channels are also realizing member satisfaction gains, up to 2.9X higher. The challenge that brands must address, given that today only 20% of members feel recognized and made to feel special, and given that today only 25% of members cite a consistent program experience across channels, is to enable, engage, and empower their frontline staff to delight the brands’ most important customers, their program members.”

For more information about purchasing the complete 2016 Bond Loyalty Report and to download a free copy of the Executive Summary, visit http://info.bondbrandloyalty.com/2016-loyalty-report.    

Click here to download the 2016 Bond Loyalty Report infographic.

Bond Brand Loyalty will present a webinar on June 21, 2016, at 1 p.m. EDT titled, “Leaving Loyalty on the Table: Key Opportunities from the 2016 Bond Loyalty Report,” which will be hosted by Loyalty360 – The Association for Customer Loyalty.

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