When it comes to attracting and engaging customers, retailers are looking for innovative ways to expand their customer loyalty programs. Yet, as consumers are opting for more convenient shopping options, loyalty programs may be taking a back seat. Leaving the question, “Are loyalty programs worth the investment?” The research offers mixed results.

The answer will depend on who you ask.

Three small chalkboard signs that spell out "loyalty program"

For retailers, loyalty programs are a way to boost customer engagement to drive higher sales and brand awareness. When customers are more engaged, they are less likely to shop at your competitors. And, with new customer acquisition being five to twenty-five times more expensive1 than keeping an existing customer, boosting customer retention can be a great way to increase sales revenue. In addition, marketing experts have found that engaged customers are five times more likely2 to become a repeat customer. So, in this sense, investing in loyalty programs that reward customers for purchasing or engaging with your brand is an effective way to expand your brand’s reach.

But, when you examine the role that loyalty programs play for the consumer, it becomes clear that they may be missing the mark.

While 57% of marketers expect to increase their loyalty programs3 to better engage their customers, participation among consumers has actually been decreasing significantly over the past few years. In 2015, 71.6% of consumers acknowledged a company’s loyalty program as being an important factor in their purchasing decision.4 However, now, less than 50% of consumers participate in a company’s loyalty program or consider it before making a purchase.5 Instead, recent research has found that when asked what aspect of retail shopping they value the most, 83% of consumers chose quick and easy checkout over earning rewards.6

But, the appeal of loyalty programs seems to differ greatly across age demographics. For example, while 71% of Baby Boomers actively participate in rewards programs, 57% of Millennials and only 43% of Generation Z’ers do. This disparity in participation highlights the growing need for marketers to find better ways to appeal to younger consumers, considering these Millennials and Generation Z represent the largest retail base.

Are some loyalty programs more effective than others?

The answer is yes! Retail, supermarkets, and pharmacies are the three most popular loyalty program categories among all age groups.7 But, marketer beware… loyalty perks are not all created equal. In fact, consumers, especially those under the age of 34, prefer to receive rewards that are associated with lower shipping or delivery costs, exclusive offers, and members-only benefits. The value of loyalty programs may also come from their ability to personalize the shopping experience. By saving customer purchase history and preferences, retailers can better position product recommendations and offers to those customers that may be the most interested.

 

 

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