Companies spend about 4% of revenue to activate customers, leverage the
TORONTO–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/LoyaltyisBIG?src=hash” target=”_blank”gt;#LoyaltyisBIGlt;/agt;–Customer loyalty is big business and getting bigger. The new research
Big Picture,” from global loyalty expert LoyaltyOne, found that the
total 2019 customer ecosystem is a whopping $323 billion. That loyalty
landscape includes $126 billion in direct loyalty and customer
relationship management, along with significant investment in technology
and transaction enablers and customer engagement platforms.
And the loyalty industry is growing: 69 percent of C-suite executives
reported that they’ve increased loyalty investment in the past two
years, with more than half (55 percent) saying their investments will
continue to grow over the next two years.
Increasingly, the value of loyalty and the insights garnered from
customer loyalty strategy are influencing decisions across
organizations, said Caroline Papadatos, Senior Vice President, Global
Solutions for LoyaltyOne. In fact, while there might be a public
perception that loyalty cards’ usage is waning, the opposite is true –
their popularity is exploding, she said.
Companies are recognizing the value of using customer data for
everything from product development and pricing optimization to real
estate planning and even media. More than half of companies (61 percent)
said they use loyalty data across at least three different departments,
and a mere 2 percent of industry practitioners surveyed reported that
loyalty data is used strictly by traditional departments like marketing
and public relations.
“Executive teams see how programs can contribute to company valuation,”
said Papadatos. “In fact, 88 percent of loyalty practitioners said their
company leaders view loyalty program strategy as an important component
of the overall company strategy.”
Companies Invest Upwards of 4 Percent of Total Revenue
In short: Loyalty matters more than ever to companies across industries,
especially in highly consumer-driven areas such as retail, financial
services and hospitality. Facing increasing competition and shrinking
budgets, they’re relying on loyalty’s data collection, insights and
rewards to unify end-to-end customer management and all the ways to
activate customers and shape their behavior.
To that end, companies are putting significant money behind their
loyalty efforts: More than 71 percent said they’re investing a minimum
of 2 percent of total revenues, with most spending upward of 4 percent,
for loyalty and CRM to activate customers and leverage the data asset to
create personalized offers and extensions, according to “Loyalty Big
What are they getting for that investment? There’s good news on that
front: The research found that loyalty program members contribute to
almost half (43 percent) of companies’ annual sales. A full 95 percent
of companies reported that members spend more than non-members annually,
with 60 percent reporting that members spend two to three times more
than non-members. As evidence of just how valuable the ROI can be, a
significant number of vendors and other third parties are willing to pay
for participation in programs. Indeed, more than half (53 percent) of
loyalty practitioners surveyed for “Loyalty Big Picture” reported that
vendors or other third parties fund offers for their loyalty programs.
Plenty of Opportunity for Change
“Loyalty Big Picture” unveils plenty of opportunities for retailers and
other program operators to better capitalize on their investment. One
such area: consideration of fee-based programs.
More than three-fourths of consumers (76 percent) reported that they do
not pay a fee for the loyalty programs in which they participate, but 64
percent would be willing to do so in exchange for additional benefits
including discounts, expedited free shipping and better earn rates. To
that end, more than half of companies surveyed reported that they are
considering implementing fee-based programs.
Another area of opportunity: Only 30 percent of companies cited
“increase the value provided to loyalty members” as a reason they
increased their loyalty investment in the past two years. Many loyalty
operators fail to fully dig into the data that loyalty programs collect
and realize all the benefits.
“The fact is, many loyalty operators benchmark against the competition
and take their lead from market forces, not realizing that demand is
being shaped by their customer,” said Papadatos.
Dig Deeper into ‘Big Picture’
Decision-makers, loyalty program operators, C-suite executives, industry
analysts and others can download
“Loyalty Big Picture” for a deeper look at the insights above as
well as other key findings, including:
Make it matter: 21 percent of members said they will abandon a
loyalty program if it doesn’t provide relevant rewards.
Digital gap: 79 percent of the top loyalty programs have a
digital component. However, while a digital presence might be a
minimal entry requirement, it doesn’t set programs apart – only 18
percent of members say digital experience plays a role in program
KPI opportunity: Loyalty operators look for member growth (31
percent) and active membership (26 percent) to determine success, but
only 13 percent look to estimated lift – or increase in the amount
spent by a customer.
To create the global benchmarking “Loyalty Big Picture” report,
LoyaltyOne talked to decision-makers, industry experts and consumers,
gathering data and insights from 1,224 loyalty operators and 4,721
members across five markets – the U.S., Europe (U.K.), South America
(Brazil), Asia (Singapore) and Canada. Loyalty practitioners interviewed
were from industries including high-frequency retail, finance, specialty
retail, travel/hospitality, consumer packaged goods or automotive – from
companies reporting a minimum annual revenue of $250 million.
Significance testing was conducted at the 95 percent confidence level.
LoyaltyOne also conducted robust secondary research.
LoyaltyOne is a global leader in shopper analytics and loyalty
program strategy, solutions and services, for Fortune 1000 clients
around the world. With over 25 years of history leveraging data-driven
insights, LoyaltyOne helps shape shopper behavior and designs and
delivers some of the world’s most effective loyalty programs and
customer-centric solutions. LoyaltyOne invests deeply in the tools and
capabilities required for end-to-end retail customer management,
including digital and mobile enablement through IceMobile, promotional
loyalty through BrandLoyalty, coalition loyalty through AIR MILES,
Canada’s most recognized loyalty program, loyalty and customer
experience design through Global Solutions, and merchandising analytics
using customer data that includes price, promotion, assortment
optimization and vendor collaboration through Precima.
LoyaltyOne is an Alliance Data company. For more information, visit www.loyalty.com.
Jill Z. McBride