Loyalty programs drive participation and profit - study

Despite perceptions consumers are battling loyalty program fatigue, a recent study found 59 per cent of members are active in all of their programs, a 31 per cent increase from 2013.

Commissioned by strategic loyalty consultancy Directivity and retention agency Citrus, the study, for love or money 2015 revealed loyalty card members are also spending more, with 82 per cent buying more from brands with a program and 16 per cent purchasing items they didn’t need just to earn rewards.

According to the report, Australians – particularly men - are more active in loyalty programs than ever before, in turn boosting brand bottom lines, benchmark consumer research reveals.

Report co-author and CEO of Directivity, Adam Posner, said while some brands question the value of loyalty programs, the research confirms that successful programs have evolved from cost centres into key profit drivers, and provide a key competitive advantage for brands.

“This research is a good news story for CMOs," he said. "While consumers are telling us they’re more selective with their programs, they’re also more active and engaged."

Posner said loyalty programs are a real business imperative for driving brand loyalty and profitability.

“Programs also drive impulse purchasing as evidenced by 16 per cent of members who buy things they didn’t need just to earn rewards, which jumps to 26 per cent for men under 45,” he added. “If you do the maths, that’s a reasonable additional spend that goes straight to the bottom line,” he said.

The research also revealed 48 per cent of members believe programs have improved, up from 41 per cent in 2013. Additionally, fewer people are dropping out of programs, with member defection falling from 26 per cent in 2013 to 22 per cent this year.

“Reduced defection can be attributed to the fact that brands are keeping their programs simple, with only 12 per cent of people saying programs are too confusing, down from 19 per cent two years ago,” seport co-author and CEO of Citrus, aid Peter Noble, said.

The Coles flybuys program retained first place in the Top 10 unprompted most mentioned programs as ‘doing a very good job’ 33 per cent, increasing its lead over Woolworths everyday rewards 13 per cent. Qantas Frequent Flyer remained in third place since the first study in 2013.

Interestingly, 67 per cent of members said they still prefer a traditional loyalty card while only 10 per cent prefer a mobile app to interact with a program.

“We found this one of the most surprising findings of all,” Noble said. “It goes to show that getting the card into a person’s wallet or purse is a critical piece of brand real estate and connection.”

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