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The 6 Biggest Trends to Watch in Loyalty Marketing

Author: Caroline Schmid | Categories: Customer Experience, Demand Generation, Marketing Automation

It’s no secret that for companies in a variety of industries, loyalty marketing is one of the pillars of continued brand growth and customer engagement.

As competition continues to rise in nearly every consumer industry, loyalty becomes ever more important. Cost per acquisition in most industries is simply too high to ignore the importance of retaining existing customers and generating repeat business. It’s almost likely to generate more profit per customer over the long run.

According to a study by Bain & Company, apparel customers spend 67% more in months 31-36 of their relationship with a particular brand than customers at the beginning of their relationship. That’s a huge increase that goes straight to the bottom line.

But as technology changes, so too do the expectations and experiences of consumers and the architecture of a successful loyalty programs changes with these shifting paradigms. It's important for marketers and executives at all levels to remain aware of changing behaviors and how their loyalty marketing efforts can change to be most effective.

Here are the six trends that are currently shaping loyalty marketing:

1. Loyalty program membership is growing

There’s no doubt about it. U.S. customers are enrolled in more loyalty programs than ever. According to the Loyalty Census from COLLOQUY, Americans now have 3.3 billion loyalty program memberships, up 26% over a similar report published in 2013.

2. Participation is declining

Although memberships are increasing, participation is down. American households, on average, actively participate in fewer than half of the loyalty programs in which they are enrolled. This trend first emerged in 2013 and has continued into the latest report from 2015.

“Think of the U.S. loyalty market in terms of a crowded party where half of the party-goers are standing in the corner without mingling.”
Jeff Berry, COLLOQUY

Part of this decline likely stems from saturation of loyalty programs, although another big factor is likely to slow adoption of newer technology across loyalty programs. Consumers are favoring simpler reward programs and likely carrying fewer physical cards as they are replaced by technology like Apple Pay.

3. Customers are looking for simpler programs

The COLLOQUY study also found that 81% of customers say they participate in a particular program simply because it’s easy to understand. This trumps respondents who say they value reward offers that are relevant to them, which was cited by only 75% of customers.

This seems to indicate that loyalty programs must be streamlined--made easier for the consumer--to maximize use and participation.

4. Coalition programs are driving increased spending

One emerging trend in the U.S. is the introduction of coalition loyalty programs, which involves shared rewards and data across multiple partner companies.

For these kinds of programs, members are likely to spend more money with the originating sponsor firm for each additional participant which they have shopped. It’s as if the added benefits for the consumer spur additional dollars being spent at the company that introduced them to those benefits.

5. Better use of mobile loyalty marketing on the rise (but slowly)

A Salesforce Marketing Cloud study found that 37% of marketers are using mobile campaigns as part of their loyalty programs. But it also ranked number one in effectiveness, with 98% of respondents calling it a very effective, effective, or somewhat effective channel for driving customer loyalty.

This shines light on a clear gap, as marketers see the effectiveness of mobile but relatively few are able to take advantage of the platform.

Standout include the Starbucks and 7-Eleven rewards apps, which have led the category in adoption and effectiveness.

6. Individualized customer experience is being driven by better use of data

Loyalty programs are rapidly evolving from simple, transaction-based rewards to more sophisticated and data-driven customer experiences.

These programs can now factor in specific customer details to deliver relevant and timely messages, offers, and rewards for customers--even when they aren’t making a purchase. This can drive customer activation, increase referrals, and, of course, improve customer retention and loyalty.

“Today, more than anything else, marketers want access to trustworthy, individualized insights based on credible data, so the expectations of every customer can be known, respected and met on a personal level.”
Darryl McDonald, Teradata Marketing Applications

Although a study from Teradata found that only half of marketers say they are routinely applying data to engage their customers, the same study found that a full 90% say individualized marketing is the future.

Couple this with the rising use of mobile technology and loyalty programs are poised to become much smarter and more effective in the years to come.