Dive Brief:
- The vast majority — 86% — of consumers say loyalty rewards matter to them, but far fewer say they use a loyalty program regularly, according to a survey of 3,400 consumers released Monday by Upside.
- Only 59% of shoppers say they use a grocery loyalty program regularly. That falls to 49% for fuel and convenience store programs and 38% for restaurant programs.
- A majority of consumers across grocery, fuel and convenience store, and restaurant programs are “preference-first” shoppers who show high-brand affinity and high-price sensitivity, according to Upside. These customers are quick to join loyalty programs at places they like — and they tend to like a lot of places.
Dive Insight:
The loyalty program landscape is crowded, and it’s becoming harder for individual programs to stand out. A successful program will want to go beyond growing enrollment to actually influencing customers’ shopping behavior.
Part of the challenge is that there is a disconnect between the consumers that loyalty programs target and the shoppers that are most likely to be influenced by rewards programs.
“For many years programs were designed almost entirely around the heaviest users,” Patricia Camden, loyalty leader for EY Americas, said in an email. “The thinking was if you reward the people already spending the most, you'll get more of that behavior. That can work, but it also leaves a lot of value on the table.”
EY research has found that loyalty enrollment is at or near all-time highs, but nearly half of consumers say they’re willing to shop outside of a program if they find a better deal elsewhere, according to Camden. As a result, there is a large group of customers who are technically loyalty members, but aren’t fully committed to the brand.
Top-tier loyalty programs nurture the customer behavior they desire over time, Camden said. “If the program isn't actively nurturing the next cohort coming up behind them, the top of the pyramid eventually starts to thin out.”
One example is the casual dining sector, where the biggest untapped value isn’t necessarily from regulars — it’s people who used to visit every couple of months but slowly drifted away, according to Camden. Many programs put the biggest investment in courting weekly diners instead.
One company built a plan to win that middle segment with small welcome back offers and a bit of personalization, Camden said. A “meaningful share” of the drifting cohort began visiting once or twice extra per quarter, and some began engaging in higher-value behavior over time.
“The program wasn't just protecting the top of the pyramid, it was building the next version of it,” Camden said.
Preference-first customers value staying within their budgets as much as they like shopping at their favorite stores, according to Upside. Winning their business requires differentiation, such as through exclusive experiences that make loyalty membership feel meaningful.
Immediacy is another key to winning over customers, according to Camden. Programs that ask customers to spend a couple hundred dollars before they see a benefit are less likely to win over fence-sitters than those that reward smaller behaviors early on and then build up to greater loyalty from there.
