Do loyalty programs work? Do they drive incremental value?

So what value are these efforts delivering to brands today? What type of program works and what do consumers remember in the end?

  • McKinsey found in 2020 that customers are 62% more likely to increase spending on a brand once they’re in a paid loyalty program.
  • Customers were 43% more likely to buy weekly since joining, and 59% more likely to choose that brand over competitors. 63% of consumers surveyed were paying for at least one loyalty program, but 24% of respondents were just subscribed to Amazon Prime.
  • One study found that, in general, a loyalty program drove no spending increase from customers who were already spending regularly.
  • Two segments which did start spending up to 50% more: “consolidators” who started buying more SKUs from the retailer, and “upgraders” who bought more expensive versions of the same products. The differentiating factor wasn’t spending history, but the location of the customer relative to the brand and its competitors.
  • A survey by marketing agency Bond heard that 73% of consumers are more likely to recommend brands with good loyalty programs.
  • They also found that only 2 in 10 loyalty program members are satisfied with the level of personalization in their loyalty programs. When personalization is done well, there’s a 6.4x increase in satisfaction. In turn, this makes members 6x more likely to “say good things about the brand”, 5.2x more likely to “stay longer”, and 3.5x more likely to “spend more with the brand”.
  • Members enjoy loyalty programs with gamification 1.7x as much as those without. (e.g. Starbucks Rewards offering bonuses for certain activities, spend thresholds in one week, etc.)
  • According to findings collected by Shopify:
  • Only 39% of consumers cited discounts as their top reason loyalty programs are successful
  • 54% of loyalty program members drop off. Of those, 57% think that it takes too long to earn points or rewards, and 53% think the rewards aren’t interesting to them, personally.
  • Integrating rewards during checkout, using LoyaltyLion, one store increased reward redemption by 300%, AOV by 36%, and purchase frequency by 100%
  • One ecommerce brand found that AOV from referral sales is 11% higher than normal orders
  • Accenture found that 91% of customers are more likely to shop with brands who “recognize, remember, and provide relevant offers and recommendations”… and 83% of them are willing to give up personal data to make that possible.

The common theme here is that experience and personalization are much more important to customers than discounts. The benefits of a discount-based loyalty program are real but marginal, and brand evangelism is perhaps the end to which repeat spending is just the means.

At the end of it all, due to the level of detail required to deliver the most personalized experiences, which yield the most loyal customers - brands end up building relationships; while a brand may not feel/think it has a relationship with a loyal customer - the loyal customer feels otherwise.