Why Customers Participate in Loyalty Programs

Customer loyalty programs have been a staple of coffee shops, airlines, and grocery stores for years, typically in the form of credit cards or special punch cards. Recently, as consumers have begun to move towards digital and mobile-first payments, the nature and scope of loyalty programs has been shifting.

Industry are taking the principles of traditional loyalty programs and incorporating new technology. These new services are expanding the reach of loyalty programs to small and medium businesses that have previously lacked the resources and capabilities to implement cohesive rewards programs. The solutions even allow users to collect points at any business in their network, and redeem them at any other business – forming a type of loyalty point exchange, or market.

Key Survey Results:

Saving Money is the Primary Reason for Participation

Consumers Want Loyalty Programs tied to Smartphone Apps

We see a strong preference for loyalty apps, and by extension digital-enhanced programs. This is particularly interesting for companies looking to expand the effectiveness of their card-based systems, or increase adoption of their physical rewards programs.

Consumers Are Undecided about What Type of Loyalty Program They Prefer

Given the continuing shift to mobile devices for everything from web-browsing to shopping, we expect that preference for fully-digital programs will only increase in coming years.

Consumers Desire Perks, such as VIP Status

Consumers show a strong desire for these type of rewards, especially when contrasted against their preference for social-based rewards. Such preferences are encouraging for businesses and vendors whose loyalty programs are based around rewards, or exclusivity-based perks. While consumers prefer saving money overall, they also show a strong preference for VIP-style incentives.

Consumers Are More Likely to Shop at Stores That Offer Loyalty Programs

The results show an overwhelming consumer preference for stores that offer loyalty programs, and suggest that once consumers “buy-in” to a loyalty system, they are highly likely to reward the company with repeat business. This also indicates that customers who participate in loyalty programs at one store are likely to seek out other stores with loyalty programs.

Conclusions

Card-based loyalty programs are a tried-and-true marketing tactic, that have been in use for years. The industry to date has undergone some transformation. However, with the recent rise of smartphones, omnichannel marketing, and gamification.

A fully-digital program could appeal to more connected-consumers, and the loyalty industry is likely moving in this direction.