Building leading retail loyalty programs

Key drivers of customer loyalty in retail

Prior to the pandemic, loyalty programs were on the rise, with many retailers realizing their potential to drive business and customer value. COVID-19 has dramatically evolved the retail landscape by accelerating pre-pandemic trends, creating new consumer behaviors, and shifting market share—making loyalty programs even more relevant to engaging and retaining today’s consumers.

Retail loyalty programs continue to influence consumer engagement, spend, and advocacy

Our 2021 consumer loyalty survey reveals that consumers continue to frequently engage with retail loyalty programs. More than 35% of respondents indicated they interact with a program weekly, and an additional 35% engage monthly. These programs also influence how much and how often consumers spend and engage with retailers.

  • 70% engage more frequently with retailers whose loyalty program they participate in than those they do not
  • 67% spend more with retailers when they are a member of their loyalty program
  • 51% modify what they buy and how much they spend with these retailers in order to maximize the loyalty program’s benefits
  • 50% are more likely to recommend a retailer if they are a member of its loyalty program

Despite their popularity, consumer expectations for retail loyalty programs are on the rise. While once satisfied with generic schemes, consumers now expect differentiated, personalized loyalty experiences. This trend requires retailers to rethink their loyalty strategies, drive greater differentiation, and intentionally evolve their programs over time—or risk getting lost in the sea of sameness.

Our recent assessment of the consumer loyalty landscape reveals which loyalty program features are competitive table stakes and which are truly leading, yielding insights on the drivers that retail loyalty programs need to be investing in today.

Retail loyalty programs must offer a compelling value proposition that is integrated into the broader customer experience

Creating an enticing portfolio of member benefits is foundational to program success and key to market differentiation. Over 85% of consumers cited financial rewards as the most important retail loyalty program attribute, indicating that monetary benefits such as points or cashback remain critical to compete. Yet the importance of nonfinancial benefits is on the rise. Sixty percent of consumers identified personalized rewards and experiences as important, and more than half deemed experiential rewards as essential to their program engagement.

While select players have responded by extending their loyalty offerings beyond functional elements, most retailers we evaluated still over-index on legacy earn-and-redeem mechanisms. This trend is evidenced by only 30% of consumers agreeing that the retail programs they participate in offer meaningful benefits beyond the transaction.

Moreover, today’s consumers expect their retail loyalty programs to be user-friendly and accessible anytime, anywhere. More than 80% of consumers identified ease of use as a highly desired attribute of a retail loyalty program, and 60% selected an accessible, enjoyable digital experience. This means that retail loyalty programs must be seamlessly, thoughtfully integrated across the customer journey. Yet our assessment of the retail loyalty landscape reveals that only 30% of programs are meaningfully embedded into key moments beyond the point-of-purchase.

To drive desired business and customer impact, retailers should look to create a balanced portfolio of monetary and nonmonetary value in their loyalty offerings that delivers on consumers’ needs and drives both rational and emotional loyalty. In addition, they should seek to develop a deep understanding of the customer journey—from first purchase through to re-engagement—and identify where to extend and build new connections.

Enhanced flexibility, recognition, and exclusivity create a more rewarding member experience

Rewards remain a key piece of the retail loyalty program equation, but can no longer be static. More than 80% of consumers said they desire more flexible or customized ways to earn and redeem benefits. However, less than 30% of the retail loyalty programs we assessed offer dynamic reward structures for members, such as offering accelerated earning opportunities for specific behaviors or allowing members to choose a preferred reward from a set of options.

Consumers also want to feel recognized and have come to expect exclusive member benefits when participating in retail loyalty programs. More than 2 in 3 consumers identified upgraded or premium services, such as expedited shipping, as important to their program satisfaction. In addition, 60% said they desire early or exclusive access to products, services, and experiences not afforded to all consumers. These key drivers of customer loyalty make the experience more compelling, valuable, and convenient for the member, yet of the programs we reviewed, only 40% offer special moments or elevated access for members.

As retailers move beyond loyalty fundamentals, they should consider offering a variety of earn opportunities that extend beyond the transaction and create optionality for members to redeem on their own terms. Embedding elements of exclusivity and access can also drive member stickiness and enhance the emotional value of the loyalty program.

Personal, unexpected connections enhance program influence and foster a sense of belonging

Consumers continue to crave personalization. More than 80% of consumers indicated they would be willing to share their data for a more personalized retail loyalty experience, depending on what data is collected and how it is used. However, less than 25% of the retail programs we evaluated are personalizing their member experience based on previous interactions, purchase history, and stated or inferred preferences. While data privacy concerns continue to rise, our survey reveals that increased transparency, the ability to opt in or out of data collection, and clearly articulated value for sharing information are often a tipping point for consumers to participate.

Members are also seeking opportunities to engage with a retailer’s partners through the loyalty experience. More than 2 in 3 desire the ability to earn and redeem rewards with a retailer’s partners, and 60% want access to partner offerings and experiences. Leaders are responding by introducing partners into their loyalty ecosystems, with 30% of the programs we assessed forging partnerships with complementary brands, service providers, or value stream players. These partnerships allow retail programs to create more member touchpoints, deliver more meaningful member benefits, and unlock new data and revenue streams.

A feeling of connection and purpose is additionally important to today’s consumer. Twenty-five percent of consumers desire a sense of community through their retail loyalty programs, and more than one-third want the ability to participate in or contribute to shared missions. Our research reveals, however, that the majority of retail loyalty programs are not actively addressing the social value they can provide members by fostering community-building or uniting members around shared missions, such as allowing members to donate their rewards to charitable causes. These factors will continue to play an important role as consumers desire more human connection and become more socially and environmentally aware.

Looking ahead

For retailers, evolving consumer expectations and changing market conditions are coinciding to reveal a new loyalty landscape. Our research reveals the current environment is ripe with opportunities for retailers to reimagine their loyalty strategies. To win, retail loyalty programs must meet foundational consumer needs while seeking out ways to put the member at the center of the experience and delivering personal, meaningful connections across the loyalty ecosystem. Retailers that succeed will use their loyalty programs as a competitive differentiator to win share of wallet, mind, and heart.

Special thanks to Brendan Boerbaitz and Jessica Julius for their authorship.

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