Loyalty programs are an interesting marketing tactic. On the one hand, they have the potential to encourage consumers to stick with a provider. On the other hand, they can end up rewarding those who would have purchased anyway. At their worst one might say that the programs don’t so much create loyalty as feed consumers rewards. The consumers aren’t loyal as such. Instead, customers learn to expect rewards for “loyal” behavior. Clearly, understanding loyalty is a big topic, one that I’ll return to. For now, it is helpful to try and establish the basic facts about loyalty programs.
A Survey Of Loyalty Program Users
Colloquy, which is associated with the AirMiles program and produces resources related to loyalty programs, conducts a regular survey in respect of loyalty programs. The results are interesting.
“American households average 29 programs each” (Berry, 2015, page 2).
This is an incredible number. Furthermore, the number of members continues to grow at a rapid pace, a 26% increase between 2012 and 2014 to 3.3 billion members in the U.S.
This is impressive for the industry but it isn’t all great news. Perhaps to be expected given the number of memberships per family many programs are joined but little activity takes place. On average 58% of a program’s members don’t actively participate in the program. This is a waste of time and potential rewards for the consumer. It is also a waste of money for the provider. (They have to administer the program for the inactive members).
Retail Is King
One of the most interesting features is the breakdown by sector. Not all sectors are progressing at the same pace. Retail is the biggest sector for loyalty programs with drugstores being a growth highpoint. These programs are expected to continue being very important given the ageing population and heavy drug spending in the U.S. Of course, airlines and travel remain critical sectors but financial services loyalty programs seem to have some challenges.
Turning to Canada, the key feature is the central role of the coalitional programs, AirMiles and Aeroplan. The alliance between Aeroplan and TD bank is an important source of growth for that coalition program.
The Facts About Loyalty Programs
Overall loyalty programs are interesting marketing activities. It is helpful to be able to get useful benchmark data.
For more on loyalty programs see here.
Read: Jeff Berry (2015) The 2015 Colloquy Loyalty Census: Big Numbers, Big Hurdles, Colloquy Research