Two-Thirds of C-Suite Execs Increasing Loyalty Spending

Two-Thirds of C-Suite Execs Increasing Loyalty Spending
LoyaltyOne's recent report offers insights regarding retailers' loyalty programs

A new report from LoyaltyOne, “Loyalty Big Picture,” found that the total 2019 customer ecosystem is $323 billion, including $126 billion in direct loyalty and customer relationship management. This includes significant investment in technology and transaction enablers and customer engagement platforms. More than two-thirds (69 percent) of c-suite executives have increased spending on loyalty programs in the past two years, and 55 percent plan to continue to increase their spend on loyalty management.

Consumers' use of loyalty programs is also increasing, and companies are recognizing the value of using customer data for everything from product development and pricing optimization to real estate planning and even media.

“Executive teams see how programs can contribute to company valuation,” said Caroline Papadatos, SVP, global solutions for Toronto-based LoyaltyOne. “In fact, 88 percent of loyalty practitioners said their company leaders view loyalty program strategy as an important component of the overall company strategy.”

With the increase of competition and smaller budgets, companies are investing in loyalty programs, with more than 71 percent indicating they’re investing a minimum of 2 percent of total revenues, with most spending upward of 4 percent, for loyalty and CRM to activate customers and leverage data assets to create personalized offers and extensions, according to “Loyalty Big Picture.”

The research also found that loyalty program members contribute to 43 percent of companies’ annual sales. A full 95 percent of companies reported that members spend more than nonmembers annually, with 60 percent reporting that members spend two to three times more than nonmembers. As evidence of just how valuable the ROI can be, a significant number of vendors and other third parties are willing to pay for participation in programs. Indeed, more than half (53 percent) of loyalty practitioners surveyed for “Loyalty Big Picture” reported that vendors or other third parties fund offers for their loyalty programs.

Fee-based Option

More than three-fourths of consumers (76 percent) reported that they don't pay a fee for the loyalty programs in which they participate, but 64 percent would be willing to do so in exchange for additional benefits including discounts, expedited free shipping and better earn rates. To that end, more than half of companies surveyed reported that they're considering implementing fee-based programs.

Another area of opportunity: Only 30 percent of companies cited “increase the value provided to loyalty members” as a reason that they increased their loyalty investment in the past two years. Many loyalty operators fail to fully dig into the data that loyalty programs collect. and to realize all of the benefits.

“The fact is, many loyalty operators benchmark against the competition and take their lead from market forces, not realizing that demand is being shaped by their customer,” said Papadatos.

Other key takeaways from the report include:

  • 21 percent of members said that they'll abandon a loyalty program if it doesn’t provide relevant rewards.
  • 79 percent of the top loyalty programs have a digital component. However, while a digital presence might be a minimal entry requirement, it doesn’t set programs apart – only 18 percent of members said that digital experience plays a role in program preference.
  • Loyalty operators look for member growth (31 percent) and active membership (26 percent) to determine success, but only 13 percent look to estimated lift, or increase in the amount spent by a customer.

For the Loyalty Big Picture” report,LoyaltyOne talked to global decision-makers, industry experts and consumers, gathering data and insights from 1,224 loyalty operators and 4,721 members across five markets – the United States, Europe (the United Kingdom), South America (Brazil), Asia (Singapore) and Canada.

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