Apparel Retailers Lag in Loyalty

Bond Brand Loyalty, a brand loyalty agency, released its seventh annual consumer loyalty report. The Loyalty Report 2017 finds that loyalty programs remain one of the biggest drivers of brand choice and loyalty. Brands continue to invest more in loyalty programs, and enrollment has grown by 31 percent over the last four years. Despite success, opportunities to drive business results are still being missed.

"Consumers love loyalty programs and continue to join more every year, but active engagement rates have remained flat in the past four years, indicating that there's a tremendous opportunity to evolve 'same-old' programs to ensure members' expectations and needs are being met," said Bob Macdonald, president and CEO of Bond Brand Loyalty.

"Today's hyper-informed consumers expect personalized and shared interactions delivered through a combination of human and digital experiences," Macdonald continued. "By engineering the program with every asset of a brand's loyalty ecosystem and making adjustments to differentiate the member experience, brands can improve engagement and substantially increase program performance for gains in lift, retention and lowered marketing costs."

As customer experience increases in importance for consumers, evidence shows that Loyalty Program operators will be able to buy down the points or cashback dividend associated with their Program by providing better and more tailored member experiences. Based on data from the 2017 Loyalty Report, Bond has machine-learned and developed a proprietary tool to understand how certain member experiences and softer benefits can be introduced to offset the need to offer ever-richer dividends. This is key for program operators, especially in payments, who need to reduce their program's cost per point.

The Loyalty Report 2017, conducted in collaboration with Visa, is the largest study of its kind. The report captures responses from more than 28,000 consumers in the United States and Canada, collecting feedback on more than 400 programs on 50+ attributes of loyalty programs, including rewards and redemptions, program and earn mechanics, brand alignment and emotional and behavioral loyalty outcomes, as well as human-to-human and digital experiences.

Key findings:

Marketers are spending more to keep customers satisfied, yet there's more to the story than satisfaction

Program enrollment continues to rise, with the average number of programs a consumer belongs to growing to more than 14 from 10.9 memberships from just 3 years ago, yet members actively engage with only half of those memberships. These findings also reveal the Golden Rule of 7 — this is the number of active program memberships that consumers have the appetite and capacity to handle. Brands have work to do to ensure that they are one of the chosen programs.

Investments in loyalty programs continue to increase, but program Member satisfaction remains steady year over year at about 46 percent. If spend is increasing, but satisfaction is staying the same, changes must be made to the overall experience of the program. Program satisfaction is highest in payment cards and retail such as gas/convenience, grocery and warehouse. It is lowest in telco services, apparel, automotive OEM and services and consumer packaged goods — though they hold great potential, except for coalition.

Marketers are spending more to maintain program member satisfaction, and programs are highly effective with 81 percent of consumers agreeing that loyalty programs make them more likely to continue doing business with a brand. Holding steady from last year, 76 percent of members say that programs are part of their relationship with brands, and 67 percent of consumers modify the brands they purchase to maximize the benefits they earn.

The study found that 73 percent of members are more likely to recommend and say good things about brands with good loyalty programs (making loyalty programs great tools to improve NPS (Net Promoter Score), advocacy, and referral), while 66 percent report modifying spending to maximize point accumulation.

The top 10 drivers of program satisfaction across all industries* are:
  • Program meets needs
  • Program rewards/benefits appealing
  • Enjoy participating in program
  • Level of effort needed to earn redemption
  • Program makes brand experience better
  • Time to earn desired rewards/benefits
  • Ease of redemption
  • Amount accumulated per $1 spent
  • Program consistent with brand expectations
  • Ways rewards/benefits can be earned
*Note that there are important distinctions and changes in drivers, sector by sector.

Creating an enjoyable customer experience is critical to program success
Most brands are not treating their best customers best. Only 22 percent of members say they are treated better than customers not enrolled in the program. Within this 22 percent, overall program satisfaction is 3.4 times higher than those who do not sense that they are treated better as a program member.

Members who agree that a program is enjoyable are 10 times more likely to be satisfied. There's lots of room to do better as just 29 percent of members agree that the program improves their experience with the brand.

More than one quarter (27 percent) of program members say they have a consistent experience across each point of interaction with the brand (e.g., online, by email, by phone, in person), and only 3 in 10 members strongly agree the loyalty program experience is consistent with what they have come to expect from the brand.

The human touch is a critical component of a successful loyalty program experience, yet only 22 percent of program members strongly agree that program representatives consistently make them feel positive emotions, and only 21 percent strongly agree that these same people improve their understanding of the program, including how it works and the benefits.

More members than ever are enrolling digitally, with online enrollment accounting for more than one-half of new memberships. 57 percent of members want to interact with loyalty programs via mobile device; however, 52 percent of members don't know if an app exists for their programs.

The redemption experience is as important as the reward itself
Redeemers are twice as satisfied with loyalty programs as non-redeemers; yet more than one-fifth of program members have never redeemed. Results show that the redemption experience — the anticipation of reward, as well as ease of redemption — is more important than the actual reward.

Of the 66 percent of members who have set a redemption goal, overall program satisfaction is 11 percent higher compared to members with no redemption goal. Marketers can increase member satisfaction by helping them set targets and track progress, including points total and value.

Surprisingly, 57 percent of members do not know their points balance, and 38 percent are unaware of their points value. Satisfaction peaks as participants become eligible for rewards and drops off following redemption, making it important for operators to minimize time between redemption periods and progress towards the next redemption quickly.

Redemptions have the most pronounced impact on satisfaction in drug store retail, where 41 percent more redeemers than non-redeemers are satisfied. Conversely, redemption is driving the lowest difference in satisfaction between redeemers and non-redeemers in consumer packaged goods, co-brand airline, private-label credit cards and bank branded points programs.

Leaders in loyalty
The Loyalty Report 2017 performs in-depth profiling of more than 400 loyalty programs across key sectors including retail, payments, grocery, gas, dining hotel, airline, entertainment and coalition. Some of the top loyalty programs based on overall member satisfaction include: Amazon Prime, Southwest Airlines Rapids Rewards, Hilton HHonors, Costco Executive Gold Star Membership, Kohl's Yes2YouRewards, Kroger Fuel Rewards, Walgreens Balance Rewards, Cabella's CLUB Rewards, Carters Rewards, Sheetz My Sheetz Card, Papa John's Papa Rewards and Panera MyPanera.