What’s the Strongest Retail Loyalty Program Look Like, and How Does Differentiation Happen?
“Consumers today are redefining what ‘value’ means, and brands are feeling the pressure. Deloitte’s research on the value-seeking consumer shows that 4 in 10 Americans now exhibit deal-driven, cost-conscious, or trade-down behaviors across industries, from groceries to travel. Even high-income households are reassessing what value means and are seeking brands that feel fair in price and generous in return,” the report began.
“This shift is prompting brands to intensify price-based competition, and many find themselves in a race to the bottom. Yet there is a more strategic way to deliver value than perpetual price cuts. Our research finds that up to 40% of a brand’s perceived value is driven by factors other than price. Depending on the industry, factors such as customer service, quality, ease of checkout, and loyalty programs can help attract consumers versus price alone,” it added.
The fact is that loyalty matters, per the data. Of all consumers polled, nearly three-quarters (72%) said loyalty programs improved the likelihood of them spending with the affiliated brand. An even greater proportion (80%) say they squeeze even more value from the brand they prefer via the loyalty program, and a majority (56%) spend more money there.
Data Suggests There’s a Lot of Opportunity on the Table for Retailers on Loyalty
Some other notable data points pulled from the Deloitte report:
Enrollment doesn’t mean engagement: Perhaps the most important thing to note about the data is that 93% or more of U.S. consumers belong to one or more loyalty program… but 51% of all consumers only engage with a single one of these. Further, only about 1% of all shoppers actively engage with five or more loyalty programs on an annual basis.
Novelty and community matter more to younger members: Gen Z and millennial loyalty members were much more likely than Gen X or baby boomer counterparts to place an importance on purpose, community, digital experiences, instant notifications, and personalized offers versus older cohorts.
Loyalty can actually compete with pure price action, generationally speaking: While overall value remained the top motivator, more than half of both Gen Z (51%) and millennial (53%) consumers stated a leaning toward spending more with a brand for a personalized experience, as contrasted with only a bit more than one-third (38%) of Gen Xers, and a mere 19% of baby boomers.
Effortless redemption without penalty could be a serious white space: According to the data, a full 40% of loyalty members forget to redeem their earned rewards. This could represent a serious opportunity to create a stronger sense of value – both by reminding members of the potential to redeem, and by eliminating the concept of lost points.
“Loyalty programs are becoming a defining lever for brands competing for value-seeking consumers who are more discerning about where they spend and what they receive in return. The data shows that while enrollment is high, the real opportunity lies in designing programs that inspire consumers to participate more often and more deeply,” the study authors wrote.
“When loyalty programs make it easy to redeem rewards, are personalized in meaningful ways, and are supported by intuitive digital features, they drive stronger perceptions of value and measurable behavior change that price cuts alone cannot achieve. In an environment where consumers expect every interaction to feel worthwhile, brands that focus on elevating engagement will likely be best positioned to deliver sustained, differentiated value,” they concluded.