Loyalty programs are hot—3 ways brands can grow customers and their bottom line

If you’re like most Americans, you belong to a brand loyalty program in which companies reward repeat customers with discounts and other perks. In fact, you probably belong to several of them. Loyalty programs have become big business, with the market valued at more than $5.5 billion and expected to hit $24 billion by the end of 2028. A staple of the U.S. commercial scene since at least the late 18th century, these programs’ popularity took off in the 1990s with the advent of the digital age and the trove of data customers are willing to exchange for their perks. Now 90% of brands have loyalty programs, according to Queue-It, and the best-performing ones increase revenue from the most loyal customers by 15% to 25%. Little wonder: Nearly 4 in 5 Americans (79%) belong to such programs, with two-thirds of Americans (67%) participating in more than one, according to a recent Harris Poll survey. And more than 4 in 5 loyalty program members (83%) told us that they are more likely to shop at stores that have loyalty memberships. Similarly, a majority (56%) said that they have spent more than they normally would at a store to earn loyalty benefits. Nearly as many (49%) said that they’ve spent up in order to reach a higher loyalty tier. Our polling also illuminated important ways marketers can grow their brand loyalty programs, boosting their companies’ bottom lines in the process: Lead with value and exclusivity First off, discounts are near-mandatory: Nearly 7 in 10 current loyalty program members (69%) agreed that they would not sign up for a program that did not involve markdowns. Similarly, the discount quality was one of the most important factors consumers consider when deciding whether to join a program—it was one factor a majority of people (53%) cited, along with the ability to accumulate points and/or rewards (54%). Overall, 68% considered discount details—such as quality, frequency and diversity of available products—when deciding whether to enroll. Sixty-three percent reported considering whether loyal customers get exclusive perks, offers or products. Americans are not monolithic, of course. If you’re targeting women, understand that they’re much more likely than men to focus on the ability to accumulate points and rewards (61% of women identified it as a priority versus 47% of men) and access to exclusive perks (48% versus 38%). Compiling points is also more often an appealing factor for American adults aged 55 and over (60% cited it) than for those 34 and under (47%). Those younger Americans, on the other hand, twice as often cited early access to products as a consideration (34% versus 17%). Target your audience Those aren’t the only key generational and gender differences. Three-quarters of older Americans who belong to at least one loyalty program also belong to grocery loyalty clubs and more than two-thirds (68%) belong to pharmacy programs. For those under 35, 49% also belong to grocery loyalty clubs and 35% to pharmacy programs. This is logical: Age drives us all to the pharmacy sooner or later. The younger cohort reported twice as often belonging to clothing and apparel clubs (40% versus 14% of 55+) and makeup and skin care programs (30% versus 14%), however. Older Americans tend to be the least enthusiastic age group regarding rewards programs: Only 72% belong to one, versus 81% of those under 35. While 58% of those under 55 have spent up to access a higher reward tier only 31% of those older have done so. And 64% have spent more than they ordinarily would in order to earn rewards, only 40% of the older generation have done so. Men and women also have at times sharply differing interests. While similar shares of men and women report belonging to a rewards club, women are much more often than men to belong to those associated with grocery stores (67% versus 55%), pharmacies (56%-46%) and department stores (38%-24%). Men—keeping to stereotype—more often belong to hardware and tools-focused programs (28%-21%). Women, for what it’s worth, also much more often than men express willingness to exchange their personal information to be in such a club (75% were versus 63% of men). Reach them where they’re at Most Americans engage with their programs during the checkout process, whether online or in-person (62%) or over email (57%). The future, however, involves text messaging. While only 35% engage via that medium, 50% of adults aged 34 and younger do so versus 21% of the 55+ crowd. We’re in a golden age of loyalty programs—now is the time to maximize yours. Ad Age World’s Largest Advertisers 2023 Ad spending, rankings and analysis for the top 100 advertisers Click here

Loyalty programs are hot—3 ways brands can grow customers and their bottom line

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