Consumers appear to be unsure of fully-digital rewards programs, are decidedly averse to social rewards, and desire both smartphone apps and exclusivity-based incentives in a loyalty program, according to a new study from TechnologyAdvice titled, “Why Customers Participate in Loyalty Programs.”
Companies that seek to implement loyalty programs should first consider vendors that offer a hybrid system of physical cards tied to a digital network, the study says.
“This allows consumers to enjoy the benefits of both systems, such as smartphone access to coupons or location-based discounts, along with the convenience of a keying swipe-card,” the study says. “A fully-digital program could appeal to more connected-consumers, and the loyalty industry is likely moving in this direction (based on overall mobile adoption rates). However, given consumer’s remaining loyalty to traditional card-based programs, we recommend that businesses’ gauge interest with their immediate customer base before launching a full scale, digital-only program.”
TechnologyAdvice surveyed 3,162 loyalty program users across the U.S. Each of the six questions was answered by at least 387 people.
Here are some key takeaways from the compelling study:
- 59% of people would be more likely to join a loyalty program that offered a smartphone app
- The majority of consumers aren’t yet ready for digital-only loyalty programs
- Respondents reported being over 80% more likely to shop at stores that offered some type of loyalty program
- Saving money is the primary reason for participation
- 57.4% cited saving money as the main reason to participate in a loyalty program
- 37.5% cited receiving rewards
- 3.6% cited earning rewards
- 1.5% cited other reasons
“Most consumers join programs hoping to save money, or receive discounted products,” the study says. “This is in line with grocery store rewards cards, which offer small discounts on numerous in-store products. This also offers a straightforward model for businesses that wish to tap into this market–offer a loyalty program, either card-based or digital, that provides discounts on a select (and ideally, changing) set of items or services.”
The second most cited reason for participation was receiving rewards. This is the strategy employed by companies such as Starbucks with its My Starbucks Rewards system.
“Instead of offering consistent discounts, consumers can build up points, which can then be redeemed for rewards or free products,” the study says. “This is a strong choice for companies that feel a discount system is at odds with their business model.”
Consumers want loyalty programs tied to smartphone apps evidenced by 59% who said they were more likely to join a program with apps included; 41% said they were less likely to join if smartphone apps were included.
“Based on the responses, we see a strong preference for loyalty apps, and by extension digital-enhanced programs,” the study says.
Consumers are unsure about what type of loyalty program they prefer, according to the study.
Customer preferences for digital and card-based programs:
- Card-based: 36.8%
- Digital: 33.3%
- Not sure: 29.9%
“Consumer preference is roughly split between fully-digital programs (that exist only as apps or web programs) and card-based programs,” the study says. “An equal amount of consumers are undecided, or have no preference. Consumers’ continued preference for card-based programs may be surprising, given their overwhelming preference for loyalty programs that offered smartphone apps. This indicates that most consumers want smartphone apps as a feature of loyalty programs, but may not want to use an app exclusively, or completely forgo the convenience of a physical card.”
According to the study, social rewards are not an incentive to participate as more than 83% said they were less likely or much less likely to join a program with social rewards.
The study shows that consumers want perks, such as VIP status. More than 56% said they were more likely to join a program that offer VIP status.
“Such preferences are encouraging for businesses and vendors whose loyalty programs are based around rewards, or exclusivity-based perks,” the study says. “While consumers prefer saving money overall, they also show a strong preference for VIP-style incentives. Given this data, businesses implementing loyalty programs should consider a “tiered” or level-based system, in line with typical airline programs or Starbuck’s My Starbucks Rewards.”