Table of Contents
Executive Summary
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- Overview
- Top takeaways
- The issues
- Participation growing, but saturation a risk
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- Figure 1: US loyalty program count of memberships (2014, 2016), any membership (April 2019), active use (October 2017-November 2018)
- Ease of use and relevancy key concerns
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- Figure 2: Loyalty program dislikes, April 2019
- Amazon has changed the playing field
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- Figure 3: Attitudes toward loyalty programs – Amazon effect, by Amazon Prime members, April 2019
- The opportunities
- Programs can change behavior
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- Figure 4: Loyalty program engagement – “Swayable consumers,” by age, April 2019
- Personalization motivates key customers
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- Figure 5: Select participation drivers, by willingness to visit or spend more after joining loyalty program, April 2019
- Loyalty programs get social
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- Figure 6: Attitudes toward loyalty programs – Rewards for reviews, by age, Hispanic origin and parental status, April 2019
- What it means
The Market – What You Need to Know
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- Loyalty programs growing, led by retail
- Communication a delicate balance
- A bad app may be worse than no app
- Consumers to cash in
Market Indicators
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- Loyalty programs proliferate
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- Figure 7: US loyalty program membership, 2014 and 2016
- Retail represents largest share of memberships
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- Figure 8: US loyalty program membership, by sector, 2017
Market Sector Trends
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- Retail outpaces hospitality in participation
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- Figure 9: Loyalty program use/membership across retail, travel, finance, October 2017-November 2018
- Supermarkets lead in active use
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- Figure 10: Retail loyalty program use in the last 4 weeks, October 2017-November 2018
- Reward credit cards natural partners for travel rewards programs
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- Figure 11: Travel loyalty program redemption, attitudes, credit card ownership, October 2017-November 2018
Analyst Perspective
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- Apps present opportunities and challenges
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- Figure 12: User reviews of supermarket apps, 2019
- Make it easy without becoming invisible
- Communication must be timely, targeted and not too frequent
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- Figure 13: Discover Card Cashback Match email campaign, January 2019
Market Factors
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- Strong economic trends create prime opportunities for loyalty programs
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- Figure 14: GDP change from previous period and PCE (personal consumption expenditure), Q1 2007-Q1 2019
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- Figure 15: Consumer confidence and unemployment, 2000-April 2019
- US adding more than a million $100K+ households each year
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- Figure 16: US distribution of household income, 2013-17
Key Players – What You Need to Know
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- Prime success
- Gamification working to Starbucks’ advantage
- Broad partnerships carry risks
- Majority of memberships are inactive
- Merging programs proves to be problematic
- Rewards incentivize micro-influencers
- Leveraging multi-tier programs to satisfy disparate desires
What’s Working?
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- Amazon Prime passes 100 million US members
- The shipping advantage
- The entertainment subscription advantage
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- Figure 17: Amazon Prime email campaign, December 2017
- Gamification still effective with consumers
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- Figure 18: Jewel-Osco Monopoly game Facebook post, 2018
- Starbucks bright light in gamification of rewards programs
- Beyond standard incentives
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- Figure 19: Sephora Facebook post, 2019
- T-Mobile ditches the points
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- Figure 20: T-Mobile Tuesdays Facebook post, 2019
What’s Struggling?
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- Saturation and inactivity
- Broad coalition loyalty programs not a good fit for US market
- Consumers “Bonvoyed” by mergers and devaluations
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- Figure 21: Twitter posts with #bonvoyed, June 2019
What’s Next?
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- Loyalty gets (more) social
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- Figure 22: DSW friends and benefits email campaign, May 2019
- Loyalty gets (more) personal
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- Figure 23: TOMS Facebook post
- Figure 24: TOMS “Stand for Tomorrow” ad, 2019
- Fighting fatigue
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- Figure 25: Kingsford Charcoal Facebook post, June 2019
- Broader appeal via multi-tier programs
- Loyalty apps as entertainment?
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- Figure 26: Starbucks partnership with Seattle International Film Festival, June 2019
The Consumer – What You Need to Know
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- Supermarkets narrowly best Amazon, drugstores
- One in four members make additional purchases to reap rewards
- Personalization, exclusivity drivers for high-value customers
- Rewards effective, brand values important for building loyalty
- Timing and value top complaints; Amazon bucks anti-fee sentiment
- Majority of consumers see loyalty programs as valuable
- Consumers want flexibility, freebies and rewards for reviews
Loyalty Program Membership
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- Majority of adults have membership in at least three programs
- Value in targeting Asian Americans
- Higher-income groups participate in more program categories
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- Figure 27: Count of loyalty program memberships, by key demographics, April 2019
- Supermarkets overtake drugstores for memberships
- Prime headed toward overtaking supermarket participation
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- Figure 28: Loyalty program memberships, April 2019
- 35-44s anchor many loyalty categories
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- Figure 29: Loyalty program membership types, by age, April 2019
Loyalty Program Engagement
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- Loyalty programs drive shopping behavior for one third of members
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- Figure 30: Loyalty program engagement – Revenue and visitation, by age, April 2019
- Higher income 18-34s a sweet spot for loyalty programs
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- Figure 31: Promotion of loyalty programs by members, by age and household income, April 2019
- Apps serve high-value customers
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- Figure 32: Loyalty program engagement – App usage, by gender and age and online shopping frequency, April 2019
Participation Drivers
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- Consumers ready for personalized loyalty programs
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- Figure 33: Participation drivers, April 2019
- Ideal program combines discounts with personalized rewards
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- Figure 34: TURF Analysis – Participation drivers, April 2019
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- Figure 35: Table – TURF Analysis – Participation drivers, April 2019
- Exclusivity, personalization and fun draw 18-34s
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- Figure 36: Participation drivers most appealing to younger adults, by age, April 2019
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- Figure 37: Participation driver: discounts on merchandise, by age, April 2019
- Personalization draws the best loyalty customers
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- Figure 38: Select participation drivers, by willingness to visit or spend more after joining loyalty program, April 2019
Loyalty Drivers
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- Rewards drive loyalty for nearly half of consumers
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- Figure 39: Loyalty drivers – Ranked, April 2019
- Connect with 18-34s through unique brand qualities and values
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- Figure 40: Selected loyalty drivers, 18-34s vs all, April 2019
Loyalty Program Dislikes
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- Top complaints relate to value
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- Figure 41: Loyalty program dislikes, April 2019
- Amazon Prime has overcome widespread reluctance to pay membership fees
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- Figure 42: How loyalty program membership fees impact Amazon Prime membership, April 2019
- Reward expiration frustrates best customers
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- Figure 43: Dislike of reward expiration, by willingness to visit or spend more after joining loyalty program, April 2019
Loyalty Program Value
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- Frequent online shoppers see loyalty programs as a necessity
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- Figure 44: Attitudes toward loyalty programs – Value and necessity, by online shopping frequency, April 2019
- Niche category members find greater value in programs
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- Figure 45: Attitudes toward loyalty programs – Value, by loyalty program memberships, April 2019
- Programs can reward even loyalty skeptics
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- Figure 46: Attitudes toward loyalty programs – Skepticism, April 2019
Attitudes toward Loyalty Programs
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- Amazon effect extends beyond Prime members
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- Figure 47: Attitudes toward loyalty programs – Amazon effect, by Amazon Prime members, April 2019
- Flexibility and free stuff are the paths to customer satisfaction
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- Figure 48: Attitudes toward loyalty programs – Preferences, April 2019
- Expiring rewards a key messaging opportunity
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- Figure 49: Attitudes toward loyalty programs – Communication, April 2019
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- Figure 50: Sam’s club email campaign, January 2019
- Rewards for reviews an effective strategy
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- Figure 51: Attitudes toward loyalty programs – Influencing, April 2019
- Incentivized reviews a good fit with parents, Hispanics
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- Figure 52: Attitudes toward loyalty programs – Rewards for reviews, by age, Hispanic origin and Parental status, April 2019
Appendix – Data Sources and Abbreviations
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- Data sources
- Consumer survey data
- Marketing creatives
- Abbreviations and terms
- Abbreviations
- Terms
Appendix – The Consumer
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- TURF Analysis
- Methodology
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