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Loyalty Programs - Importance of Points

Delivered August 23, 2019. Contributor: Gail

Goals

To understand the importance of points for loyalty programs, with a focus on Australia. Understanding to what level do consumers actually care about the aspect of earning points.

Early Findings

  • For the purposes of this research, a customer loyalty program is a rewards program offered by a company to customers who frequently make purchases. A loyalty program may give a customer points, free merchandise, rewards, coupons, or even advance released products.
  • According to The Loyalty Report 2017, (free download) the average consumer is involved in 14 loyalty programs, but have the capacity to engage with only seven. Companies lose money on time and effort, and customers get no more value from the businesses to which they are "loyal."
  •  Sephora, a cosmetics brand, is a case study of a company who does the points-based loyalty program well. Customers swipe their stylish Beauty Insider card at every purchase, and the card tracks the amount of money spent. Every dollar spent earns the member one Beauty Insider point, and shoppers can redeem points for beauty supply items at checkout. Sephora speaks the language of its audience by measuring points in dollars, and rewards in cosmetic items. For its more loyal customers, Sephora also offers VIB and VIB Rouge programs that offer customers even more rewards if they spend enough money at Sephora to reach a certain threshold. It scales up the rewards according to how much the customer spends -- which is, of course, a great incentive to keep on shopping.
  • According to a free downloadable study called the 2019 Loyalty Barometer Report, consumers believe a loyalty program should offer personalized rewards: 77%, recognize them when they make a purchase: 72%, partner with brands to increase ways to earn: 70%, have exclusive services: 66%, have unique experiences: 59%, let shoppers combine points with family and friends: 58%, and offer fun games: 29%.
  • A 2016 study found that customers who are members of loyalty programs, such as frequent flier clubs, generate between 12 and 18 percent more revenue than non-members.
  • A 2014 study shows 73 percent of consumers believe loyalty programs should be a way for brands to show loyalty to customers. Interestingly, 66 percent of marketers see the reverse: that loyalty programs offer a way for consumers to show their loyalty to a brand.
  • Despite the apparent saturation of points loyalty programs, a report released by Forrester Research last year indicates consumers still view loyalty programs favorably and are on the lookout for new and innovative programs from which they can benefit. According to the report, 72 percent of adults online belong to at least one loyalty program and those enrolled in loyalty programs report that they belong to nine, on average. Only 24 percent of respondents said they belong to too many loyalty programs. Seventy-eight percent of respondents said loyalty programs save them money, and nearly half of respondents said loyalty programs influence what they buy.
  • Consumers are constantly using their phones and other smart devices, so customer loyalty programs that don’t have a mobile component are not likely to succeed. According to a 2016 report, 57 percent of consumers want to engage with their loyalty programs via mobile devices.
  • In late 2017, MIT Sloan Management Review surveyed more than 9,000 consumers about their experiences with loyalty programs across nine different business sectors, including grocery/drug/mass merchandise, retail, airlines, hotels, car rental organizations, and restaurants. The asked consumers what they value in a program and how they engage with them. There are many infographics in this source that you will find helpful.
  • Being asked for too much information, lengthy enrollment processes and concerns over the investment required to take advantage of a points program all factor into consumer hesitation to join loyalty programs according to a free downloadable report by Kobie Marketing. Of these consumers, 26 percent say that brands ask for too much information or that the enrollment process takes too long, and 22 percent say it takes too long to earn or redeem points.
  • Loyalty program consumers want convenience and flexibility. The main reason they join is to collect and redeem points for rewards (86 percent), while 36 percent join to redeem points for discounts and prizes.
  • As Australian startups and small businesses wonder how to get customers on board, it turns out there is still value in the old loyalty or rewards program: though Aussie consumers believe the value of the benefits garnered from such programs is diminishing, their favorite loyalty program still has an influence on their behavior, a report has found.
  •  Looking at the effect these programs are having on consumer behavior, the report found 62 percent of Australian consumers believe their ‘‘Most Important Program’ (defined as the program they’re most highly engaged in, and where they look to maximize the value obtained) is having lots of influence on their shopping behavior.
  • When it comes to the rewards consumers are after, 79 percent of Australian respondents identified frequent flyer points as the reward they value most, with rewards other than airline miles of use to 68 percent of consumers, and 61 percent highlighting discounts. Rather than immediate reward, 48 percent of respondents stated they’re willing to wait to accumulate points and obtain a reward.
  • Australian brands are wasting billions on customer loyalty programs that don’t work and aren’t keeping up to speed with the demands of modern consumers, a new report by Accenture claims. 
  • According to the report, 56 per cent of Australian consumers feel loyal to brands that present such tokens to them.
  • A recent report released by Nielsen also found consumers are more likely to return to a retailer if they have a strong customer loyalty program in place. More than half the Australian consumers surveyed (57 per cent) are more likely to return to a retailer with a loyalty program, and 48 per cent will spend more if they know they’re going to be rewarded.
  • In addition to this public search, we scanned our proprietary research database of over 1 million sources and were unable to find any specific research reports that address your goals.

Proposed next steps:

You need to be the project owner to select a next step.
After our initial research we are suggesting 2-3 cases studies (with at least one coming from Australia) that shows a brand/company that has listened to their consumers and changed a loyalty program with points to better reflect the feedback from their customers. For each case study found we will include who the company/brand is, what they changed, why they changed it (what did their customers tell them), and any success metrics after the change. For this research, (based on our early findings) we would go back 36 - 48 months. If another time frame is required, that must be told to us.
Additionally, we can provide research that examines what kinds of reward programs consumers really care about. For example, is it cash back? Points? Upgrades? Experiences? This would be a global focus with any insights (as available) for Australia.