Loyalty, Updates

The Loyalty Illusion | A Billion Dollar Problem

Gavin Hayes Head of Strategic Partnerships

Did you know?

  • 77% of all consumers admit they now retract their loyalty, faster than they did three years ago.
  • 61% switched some or all of their business from one brand or provider to another in the last year.
  • 23% of consumers experience a negative or non-existent reaction to companies’ loyalty efforts.

These results are very unsettling, considering the Loyalty Management market was worth $1.4 billion in 2015 and is predicted to grow to $4 billion by 2020. (PRNewswire, 2015)

Traditionally, loyalty marketing ROI has been difficult to measure. According to Accenture Strategy, ‘loyalty programs cost more, and deliver less than many people realize.’

But that doesn’t mean that loyalty programs lack value. Starbucks Rewards had $1.2 billion in customer funds loaded onto plastic and mobile Starbucks cards in Q1 2016. That’s almost double the $621 million it had in 2014. (Business Insider, 2016)

Starbucks Rewards proves loyalty programs can be extremely valuable. Want to boost the value of your own program? All you need to do is innovate and adapt to your customers’ needs and preferences.

The Loyalty Illusion

The negative reactions to loyalty programs can be attributed to The Loyalty Illusion. Here are some more shocking research findings:

  • 71% of consumers claim loyalty programs do not lead to brand loyalty.
  • Consumers who spend more on brands they are loyal to, switched 17% more often, than those who spend less.
  • The number of consumers experiencing a negative/non-responsive reaction to companies’ loyalty efforts is increasing. Particularly among younger consumers – a segment critical to driving future revenue growth.

The sobering truth is that for almost 25% of consumers – all that loyalty spend is actually hurting the relationship.

It’s becoming even more difficult to identify and engage with genuinely loyal customers – a crucial step to strengthening relationships, cementing loyalty and maximizing lifetime value.

The Good News for Loyalty Marketing

Although it may be more challenging to win customer loyalty today – you can still do it! All you need is a deep understanding of what loyalty means to your customers and adapt to that. Doing this will help you get a step ahead of your competitors.

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Consider the following positive behavior changes, and incorporate them into your loyalty strategy:

  • 51% of consumers are loyal to brands that interact with them through their preferred channels of communication, at the right time.
  • 42% of US consumers are loyal to brands that their family and friends do business with.
  • 37% indicated they showed loyalty to brands that actively support shared causes, such as charities or public campaigns.
  • 81% feel loyal to brands that were there when they needed them, but otherwise respected their time and left them alone.
  • 51% said they were loyal to brands that kept them on the cutting edge by consistently offering the latest products and services

From a marketer’s perspective – restaurant industry thought leaders have determined that social media is likely to play an increasingly critical role as a pillar of both guest acquisition and retention. (Winterberry Group, 2016).

How to Protect Your Brand from The Loyalty Illusion

There are vast amounts of research around loyalty and relationship marketing. It’s easy to get lost in it. But the first step to improving your loyalty program is to find out what your customers value, and adapt to that.

For everything else, we have carefully crafted an actionable, 3-pillar strategy to maximize loyalty ROI. You can gain access to this strategy plan for free. Simply request a recording of our Loyalty Marketing Webinar, by completing this form below. It will equip you with skills and knowledge to protect your brand from The Loyalty Illusion and maximize ROI.

Learn How to Maximize Loyalty ROI through Social Engagement

Get the 45 minute recording of the webinar by completing the form below.

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Gavin Hayes Head of Strategic Partnerships
Co-founder and Head of Strategic Partnerships at Popdeem.
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