Customer loyalty schemes that simply allow consumers to accumulate points without offering a clear value exchange are less likely to retain and engage them effectively than those that offer tailored services.
According to the latest insights from the Data & Marketing Association (DMA), a third of customers (34%), especially millennials and younger consumers, demand more bespoke and alternative benefits for their loyalty instead of points.
“For customers to stay loyal, brands are challenged to rethink their reward strategies as consumers expect their loyalty to be recognised across more metrics than just spend alone,” the DMA advised in its research paper, entitled Future Trends: Paid-for Loyalty.
Put simply, consumers need to understand the point of a points-based loyalty scheme and to be reassured that their engagement with brands is worth it.
According to the research, which was conducted in collaboration with loyalty specialist firm Collinson, among others, fewer consumers value loyalty cards then even just a few years ago.
In 2013, 73% of women and 55% of men said they really valued the benefits they got from loyalty cards, but this sentiment fell to 63% of women and 45% of men by 2019.
Instead, the evidence suggests that paid-for loyalty schemes are becoming increasingly popular and this is where the DMA expects growth as consumers give up collecting points that have no clear benefit for them.
Amazon Prime, for example, has built up a UK subscriber base numbering in the millions partly because of its clear package of benefits, such as its next-day delivery service.
“Harnessing consumer data to make programmes more engaging, personalised and effective is the key to success. People are willing to pay a premium for things that make their shopping, and their life in general, easier,” said Tim Bond, head of insight at the DMA.
“Paid-for loyalty programmes are gaining considerable traction among consumers and is an area where we expect to see more innovation and growth,” he added.
Brands also should consider turning loyalty points into rewards for ethical or environmentally friendly projects, the research suggests, because 60% of consumers who say their loyalty to their favourite brand is genuine go on to name brand social responsibility as a reason for their loyalty.
“Having a ‘shared social responsibility’ could appeal to those who wouldn’t normally think to donate to such activities and will strengthen the emotional connection between the consumer and the brand,” Bond explained.
Sourced from DMA; additional content by WARC staff