Memberships in loyalty programs are expanding rapidly while active participation in programs is falling. The reason is simple: Although the barriers to joining programs are lower than ever, most programs are undifferentiated and rely largely on discounts, as explored in a new eMarketer report “Loyalty Marketing: Creating Stickiness in a Distracted World.”
Consumer marketing firm Catalina highlighted the importance of retention marketing by analyzing consumer data from its retail partners for the 52 weeks ended June 30, 2015. It found that only 45% of consumers maintained a consistent level of loyalty to the top 100 CPG brands in the US over that time.
Consumers respond well to formal loyalty programs. In a June 2015 survey, marketing services firm Epsilon found that the majority of US loyalty program members polled were more likely to shop at stores that offer loyalty rewards, with a third being much more likely.
According to a September 2015 survey from Support.com, 73% of US respondents named price and value as the leading factor that determined brand loyalty, followed by “features, design and quality of product or service,” at 66%. Price considerations play a key role when US consumers evaluate loyalty programs.
“There are certainly rising expectations today [for] discounting as the cost of entry for loyalty programs,” said Jeff Berry, senior director of research and development at Colloquy, a loyalty marketing research and education practice.
Although marketers can’t ignore consumer price consciousness, the heavy and often exclusive focus on discounts has its downsides. “For far too long, ‘loyalty programs’ have really just been a mechanism for distributing price discounts, which really has virtually nothing to do with loyalty,” said Katie Casavant, CEO of Kantar Shopcom. “It frankly can create precisely the opposite behavior of loyalty. It can create loyalty to the lowest price, wherever that lowest price can be found.”
In order to develop lasting loyalty, marketers need to go beyond the transactional side of the relationship.