Loyalty Programs - US - July 2019

OVERVIEW
What you need to know
Definition
EXECUTIVE SUMMARY 
Overview
Top takeaways
The issues
Participation growing, but saturation a risk
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
Figure 2: Loyalty program dislikes, April 2019
Amazon has changed the playing field
Figure 3: Attitudes toward loyalty programs – Amazon effect, by Amazon Prime members, April 2019
The opportunities
Programs can change behavior
Figure 4: Loyalty program engagement – “Swayable consumers,” by age, April 2019
Personalization motivates key customers
Figure 5: Select participation drivers, by willingness to visit or spend more after joining loyalty program, April 2019
Loyalty programs get social
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
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
Loyalty programs proliferate
Figure 7: US loyalty program membership, 2014 and 2016
Retail represents largest share of memberships
Figure 8: US loyalty program membership, by sector, 2017
MARKET SECTOR TRENDS
Retail outpaces hospitality in participation
Figure 9: Loyalty program use/membership across retail, travel, finance, October 2017-November 2018
Supermarkets lead in active use
Figure 10: Retail loyalty program use in the last 4 weeks, October 2017-November 2018
Reward credit cards natural partners for travel rewards programs
Figure 11: Travel loyalty program redemption, attitudes, credit card ownership, October 2017-November 2018
ANALYST PERSPECTIVE
Apps present opportunities and challenges
Figure 12: User reviews of supermarket apps, 2019
Make it easy without becoming invisible
Communication must be timely, targeted and not too frequent
Figure 13: Discover Card Cashback Match email campaign, January 2019
MARKET FACTORS 
Strong economic trends create prime opportunities for loyalty programs
Figure 14: GDP change from previous period and PCE (personal consumption expenditure), Q1 2007-Q1 2019
Figure 15: Consumer confidence and unemployment, 2000-April 2019
US adding more than a million $100K+ households each year
Figure 16: US distribution of household income, 2013-17
KEY PLAYERS – WHAT YOU NEED TO KNOW 
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?
Amazon Prime passes 100 million US members
The shipping advantage
The entertainment subscription advantage
Figure 17: Amazon Prime email campaign, December 2017
Gamification still effective with consumers
Figure 18: Jewel-Osco Monopoly game Facebook post, 2018
Starbucks bright light in gamification of rewards programs
Beyond standard incentives
Figure 19: Sephora Facebook post, 2019
T-Mobile ditches the points
Figure 20: T-Mobile Tuesdays Facebook post, 2019
WHAT’S STRUGGLING?
Saturation and inactivity
Broad coalition loyalty programs not a good fit for US market
Consumers “Bonvoyed” by mergers and devaluations
Figure 21: Twitter posts with #bonvoyed, June 2019
WHAT’S NEXT?
Loyalty gets (more) social
Figure 22: DSW friends and benefits email campaign, May 2019
Loyalty gets (more) personal
Figure 23: TOMS Facebook post
Figure 24: TOMS “Stand for Tomorrow” ad, 2019
Fighting fatigue
Figure 25: Kingsford Charcoal Facebook post, June 2019
Broader appeal via multi-tier programs
Loyalty apps as entertainment?
Figure 26: Starbucks partnership with Seattle International Film Festival, June 2019
THE CONSUMER – WHAT YOU NEED TO KNOW 
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 
Majority of adults have membership in at least three programs
Value in targeting Asian Americans
Higher-income groups participate in more program categories
Figure 27: Count of loyalty program memberships, by key demographics, April 2019
Supermarkets overtake drugstores for memberships
Prime headed toward overtaking supermarket participation
Figure 28: Loyalty program memberships, April 2019
35-44s anchor many loyalty categories
Figure 29: Loyalty program membership types, by age, April 2019
LOYALTY PROGRAM ENGAGEMENT 
Loyalty programs drive shopping behavior for one third of members
Figure 30: Loyalty program engagement – Revenue and visitation, by age, April 2019
Higher income 18-34s a sweet spot for loyalty programs
Figure 31: Promotion of loyalty programs by members, by age and household income, April 2019
Apps serve high-value customers
Figure 32: Loyalty program engagement – App usage, by gender and age and online shopping frequency, April 2019
PARTICIPATION DRIVERS
Consumers ready for personalized loyalty programs
Figure 33: Participation drivers, April 2019
Ideal program combines discounts with personalized rewards
Figure 34: TURF Analysis – Participation drivers, April 2019
Figure 35: Table – TURF Analysis – Participation drivers, April 2019
Exclusivity, personalization and fun draw 18-34s
Figure 36: Participation drivers most appealing to younger adults, by age, April 2019
Figure 37: Participation driver: discounts on merchandise, by age, April 2019
Personalization draws the best loyalty customers
Figure 38: Select participation drivers, by willingness to visit or spend more after joining loyalty program, April 2019
LOYALTY DRIVERS
Rewards drive loyalty for nearly half of consumers
Figure 39: Loyalty drivers – Ranked, April 2019
Connect with 18-34s through unique brand qualities and values
Figure 40: Selected loyalty drivers, 18-34s vs all, April 2019
LOYALTY PROGRAM DISLIKES
Top complaints relate to value
Figure 41: Loyalty program dislikes, April 2019
Amazon Prime has overcome widespread reluctance to pay membership fees
Figure 42: How loyalty program membership fees impact Amazon Prime membership, April 2019
Reward expiration frustrates best customers
Figure 43: Dislike of reward expiration, by willingness to visit or spend more after joining loyalty program, April 2019
LOYALTY PROGRAM VALUE
Frequent online shoppers see loyalty programs as a necessity
Figure 44: Attitudes toward loyalty programs – Value and necessity, by online shopping frequency, April 2019
Niche category members find greater value in programs
Figure 45: Attitudes toward loyalty programs – Value, by loyalty program memberships, April 2019
Programs can reward even loyalty skeptics
Figure 46: Attitudes toward loyalty programs – Skepticism, April 2019
ATTITUDES TOWARD LOYALTY PROGRAMS
Amazon effect extends beyond Prime members
Figure 47: Attitudes toward loyalty programs – Amazon effect, by Amazon Prime members, April 2019
Flexibility and free stuff are the paths to customer satisfaction
Figure 48: Attitudes toward loyalty programs – Preferences, April 2019
Expiring rewards a key messaging opportunity
Figure 49: Attitudes toward loyalty programs – Communication, April 2019
Figure 50: Sam’s club email campaign, January 2019
Rewards for reviews an effective strategy
Figure 51: Attitudes toward loyalty programs – Influencing, April 2019
Incentivized reviews a good fit with parents, Hispanics
Figure 52: Attitudes toward loyalty programs – Rewards for reviews, by age, Hispanic origin and Parental status, April 2019
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Consumer survey data
Marketing creatives
Abbreviations and terms
Abbreviations
Terms
APPENDIX – THE CONSUMER 
TURF Analysis
Methodology