Lots of consumers belong to loyalty programs. That may make it seem like there are a lot of loyal customers out there, but these 17 customer loyalty stats say otherwise.
Just about every retailer has a loyalty program and chances are, you’re a member of at least a few of them.
Purchase a bunch of stuff over time. Rack up points. Redeem points for a coupon or a discount on future stuff. Or get a free tchotchke.
Customer loyalty seems straightforward.
But if you start to think about it, does the above scenario make someone brand loyal? Are points and discounts creating an emotional connection between a brand and a consumer?
Well that seems great, right?
The truth is, free loyalty programs are good at one thing: Getting people to sign up.
There are no barriers to entry for the customer, so they can be useful when you want to collect basic info on a lot of consumers.
By nature, the benefits of a free program must apply to as many consumers as possible. That’s why most traditional customer loyalty programs are identical.
There’s little room to differentiate or personalize. Since they don’t add a lot of value to their members’ lives, there’s not a huge reason to engage with the programs.
Maybe that’s why… ::drumroll::
Okay. That’s a little scary. Out of all the consumers in loyalty programs, only half of them do anything with them.
How many loyalty programs do you belong to?
I belong to at least a dozen programs, but I don’t engage with them on a regular basis.
When my hunger rears its head around high noon, I don’t go to a specific sub shop to earn and redeem points.
I go to whichever shop is decent and close. If I happen to have enough points to get a free sandwich at the one I go to, it’s a great surprise (that I soon forget about).
This stat supports the one above, but it’s quite impactful when spelled out this way. Don’t you agree?
Companies spend billions of dollars on loyalty programs every year, but if most members aren’t engaging, that seems wasteful.
Yikes! It makes sense if you think about it, though.
With so many similar offerings to choose from, who can blame them? Your customers are evaluating your brand all of the time and shopping the competition for the best prices and offers. The only real differentiator in that scenario is timing. It’s fleeting.
A customer may shop at your store one week, but then switch to a competitor the following week because they got a coupon.
They’re simply going wherever the price is the lowest at a specific point in time. There’s not a lot keeping consumers loyal.
Loyal customers are getting rare, but it’s not their faults. It’s because retailers aren’t giving them any reasons to be loyal.
Although many people are in loyalty programs, they’re not loyal. Can you think of a brand that you stick with no matter what even if a competitor has a better price? Are there any retailers that offer something valuable enough to keep you from perusing the competition?
If there’s nothing about your loyalty program, or brand in general, that improves the lives of your customers, or builds an emotional connection, then they simply shop around.
The customers that do stick around tend to be your best customers that get the most value out of your loyalty program. Amazon Prime is a fitting example of this.
Prime members don’t abandon their carts for this reason because there are no points to expire. Members get their rewards on every purchase. There’s nothing to keep track of, either.
That’s why Prime members spend almost five times as much as non-members every year.
Give your customers 24/7/365 benefits and they’ll have a reason to engage all the time.
That’s why it’s important to make it as easy as possible for someone to access their benefits all the time.
Now that consumers have become trained to wait for discounts, they’re likely to hold off shopping until they receive some sort of coupon or offer. It’s annoying, but they want to feel like they’re getting a good deal.
However, if customers could access and use their benefits whenever they wanted to, especially on their mobile devices with no need for a physical coupon, they would engage much more.
Instant gratification is a powerful thing.
People like free stuff and they like to save money.
Restoration Hardware ditched promotions and coupons completely when they launched the RH Grey card. It gives members 25% of all purchases at any time in addition to things like free interior design services. Learn even more about it here.
In a letter to shareholders, their CEO Gary Freidman said, “We want to shop for what we want, when we want and receive the greatest value. None of us has the time or the patience to figure out who is having a sale, or to enter endless promo codes at checkout to find the price.”
With over 380,000 members, the program is helping to turn things around. There’s no reason to hold off shopping to wait for coupons because members get their benefits every time they shop.
There’s nothing worse than trying to use a loyalty card and realizing you left it in a different wallet or pocketbook. The same also goes for coupons.
Not getting the discount or rewards that you earned can turn an exciting experience into a bad one.
Kohl’s has done a fantastic job by integrating their loyalty program rewards into an app. They still mail printed coupons, but all your rewards can be available right in your phone.
If Kohl’s offered a loyalty program where customers didn’t need coupons at all to get discounts and benefits, they would likely increase engagement even more.
It’s why personalization is so important.
Retailers inundate people with email and direct mail. They do it because they get responses, but the most response comes from personalized messages. Whenever I get an email that has nothing to do with my interests, I immediately delete it.
It’s why I throw away most mass distributed direct mail pieces. I’ve gotten to the point where I don’t even open that stuff anymore. I see it come in, and I immediately chuck it in the digital or physical garbage.
On the other hand, when I get something that has products or offers that I am interested in, I am much more likely to engage. This is an example of how a loyalty program can be used to collect data on your customers and only show them offers that add value to their lives.
Show me products that are irrelevant to my lifestyle and I will get annoyed. But show me something that I love based on my past behavior or purchases and I am much more likely to respond.
Many brands think of loyalty as a tactic, rather than a strategy.
Loyalty is not earned with the program, it’s about something much greater. It’s about that emotional connection.
You could have the best loyalty program in the world with all the bells and whistles. But if the experience isn’t awesome, it doesn’t matter.
This is common sense, but it’s powerful.
Word of mouth has always been important, but in a time when influencer opinions drive consumer behavior, it’s never been more critical.
Consumers value the opinions of friends, families, and influencers way more than that of traditional marketing. It’s just another reason loyalty goes beyond the program itself.
Amazingly, many companies still do not reward for recommendations and other types of engagement outside of transactions.
Consumers need incentives to go out of their way for your brand.
An avid Mario enthusiast, I was delighted when Best Buy awarded me for leaving a review of Mario Kart 8 on their website. It’s an excellent example of thinking beyond the transaction. It made me feel like a part of a community. Reviews also weigh heavily on the decision to purchase something from a particular retailer. In that example, everyone wins.
In a time when data is so critical for personalization and learning about shopping habits, it’s amazing that more companies don’t reward for this.
Consumers accept data collection to a degree. Profile information such as age, location, and preferences can be used to tailor a loyalty program and make it valuable.
The good news is that loyalty programs do work.
The customers that do engage tend to shop around less and stick with a brand more. The key word, however, is participate. Loyalty program members are more loyal, but it’s the retailer’s job to get members participating by offering terrific value.
If your loyalty program is successful, then you’ll enjoy increased order frequency.
Amazon Prime members shop on average twice as much as non-members, and for good reason. Amazon removes friction from shopping online and gives benefits all the time.
Premium loyalty programs like Prime enhance the lives of members so much that they don’t mind paying $99 per year for membership.
Think like Amazon.
This is the last stat for a reason, so take it to heart.
The data doesn’t lie. Even after so much customer loyalty research has been done, so many retailers still fool themselves into thinking they have loyalty “covered”. They implement and maintain standard, transaction-based loyalty programs and consider their loyalty tactics checked off. Therein lies the problem.
Loyalty is not a tactic, but a long-term strategy to build your brand around. Consumers are looking for a change that brands have not committed to yet.
The customer loyalty stats have spoken. Are you listening?
It’s clear that loyalty is broken, but it can be fixed.
Luckily, these customer loyalty stats have laid out the road map to building real customer loyalty.
- Listen to what your customers want. Give them easy access to benefits they can use all the time.
- Give them a reason to advocate for your brand and reward them for it.
- Don’t harass them. Be there for them when they need you, but don’t be spammy. Make it personal!
Remember that loyalty is not just some points programs. It’s not a tactic, but rather a living, breathing strategy to connect with your best customers on a deeper level and keep them around.