Power of consumer loyalty

Perspectives

The power of consumer loyalty: Tactics for success

Maximizing loyalty program spend amid uncertainty

What can the right consumer loyalty tactics do for companies in today’s uncertain economic environment? Discover the many ways to keep and grow share of wallet with both new and existing customers through the power of loyalty.

Across the United States, forces impacting consumer spend are at play, ranging from pent-up demand stemming from COVID-19 to pressures from inflation. These forces present consumer-facing companies with a challenge and opportunity—how can companies maintain current share of wallet but also capture more during these uncertain economic times? Loyalty programs offer businesses a mechanism to address these scenarios head on.

Coming out of COVID-19, consumer spending patterns in the United States have continued to evolve in the wake of inflationary pressures, rising interest rates, supply chain disruption, and slowing economic growth.1 However, the signals we see today do not mirror the pre-recessionary signals of the past. Coming into 2022, consumers had more cash on hand, $4.2 trillion in total, than at the start of the pandemic.2 Extra savings, combined with pent-up demand and inflation, continue to impact consumer spending patterns, although not all sectors are feeling the same impact. While inflation is causing some sectors to compete more for price-sensitive consumers, others are continuing to benefit from the post-COVID boom.

As the impact of these forces on consumer demand continues to take shape, current conditions may prompt consumers to reexamine their spending habits and brand loyalty. Such changes in spending habits put share of wallet up for grabs—presenting companies with the risk of losing share from existing consumers, as well as the opportunity to capture share of wallet from new consumers. Implementing the right tactics in consumer loyalty programs can be an effective mechanism to address these scenarios by increasing consumer loyalty program spend: 69% of consumers spend more with retailers and brands when they are a member of their loyalty program.3 So, what tactics can consumer-facing companies employ through their loyalty programs to maintain and capture new share of wallet in the current economic environment?

Maintaining and growing share of wallet with existing consumers through loyalty programs

As consumers carefully consider where and how much to spend on their next purchase, retaining valuable loyalty members should remain a top priority for consumer-facing companies. Two tactics in particular stand out, given the current economic environment:

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At a time when inflation continues to burden consumers, pricing of products and services is paramount,4 especially in the context of consumer loyalty program spend. Based on a recent Gallup survey, those experiencing financial hardships are also most focused on reducing spending, spending on essentials only, or buying less in response to higher prices.5 To capitalize on the importance of pricing, member-based pricing for loyalty program members serves as an effective way to reinforce the value proposition of a loyalty program—while also providing members with a tangible benefit that is increasingly important given economic pressures they may be facing. This can take various forms—as we have seen numerous companies introduce new programs or modify existing ones, to grant members this benefit. In one example, a grocer introduced an anti-inflation shield that enabled members of its loyalty program to receive credit in the amount of any price differences due to inflation for a list of the most purchased products when shopping with their loyalty card.6 Another mass retailer introduced a rewards feature to its program—allowing loyalty members to earn additional savings toward future purchases while they shop.7

In addition to member-based pricing, companies should look to leverage member-level data to send highly targeted offers to specific member segments. Personalization can be a powerful tactic,8 yet 22% of programs we analyzed have offers tailored to specific individuals based on engagement history and preferences.9 Achieving full personalization can take time, but it can start by micro-segmenting consumers into different groups and targeting those groups with unique offers. For instance, this could mean providing consumer segments most likely to be affected by inflationary pressures with special coupons for specific items or pushing financial incentives to consumers with high spending rates at specific times to encourage target behaviors. For example, a movie theater loyalty program provides members with flat-rate tickets for showtimes on Tuesdays, encouraging off-peak attendance and increasing the chances for spending in areas other than tickets, such as concessions.10 Pushing more relevant offers to consumers leveraging loyalty data can serve as a powerful tactic to maintain, or even increase, consumer loyalty program spend.

Leveraging loyalty to capture share of wallet with new consumers

While some consumers are shopping around for better value propositions due to tightened spending, or looking to splurge for their next big purchase, consumer-facing companies can leverage their loyalty programs to capture potential spend from new consumers.

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Loyalty programs can be an effective way to attract new consumers by enabling new members to realize benefits quickly with rich initial offers. Our research supports that benefits matter, as 60% of consumers modify what they buy and how much they spend to maximize loyalty program benefits.11 By allowing new members to accrue points, earn status, or redeem benefits in an accelerated manner, companies provide these members with a taste of membership benefits early on and begin to build a bond between these members and their brand. Several loyalty program tactics can be employed to achieve this, including loyalty-aligned credit card offerings that provide higher earning rates, new member status challenges, immediately accessible benefits that come with membership (such as free shipping) or subscription models that unlock benefits immediately for a regular fee. The need to offer immediate financial benefits versus non-financial benefits should ultimately appeal to whatever may be top of mind for consumers, whether that’s finding the best deal or enjoying a higher level of service.

Underpinning all of this is a program’s ability to maximize its simplicity and ease of use, an attribute of loyalty programs consumers consistently rate as being important.12 Programs need to not only be easy to understand for the average consumer, but also ensure their value proposition is clear based on the consumer segment being targeted. Varied options for earning and redeeming points must be balanced with the need to have a program that clearly conveys what behaviors are needed to be rewarded. This means it must also be easy for consumers to enroll and begin redeeming benefits, supported by a digital-first experience that seamlessly highlights the value delivered by the program across in-person and online channels. Airline loyalty programs are a great example of a clear value proposition—as members increase their spending on qualifying flights, they can earn points to be used on future travel and unlock rewards with each member tier.

While the tactics outlined above can be especially powerful given the shifting patterns of consumer spending, every company must determine the right features to offer based on its loyalty ambition and the desired behaviors it wishes to drive. Interested in exploring which of these consumer loyalty tactics could be right for your program? Let’s connect.

Endnotes

1 Stephen Rogers, Leon Pieters, and Anthony Waelter, “The shape of consumer spending,” Deloitte Insights, August 8, 2022.
2 Alexandre Tanzi, “Americans added $4.2 trillion in pandemic savings skewed to rich,” Bloomberg, March 30, 2022.
3 Deloitte Consumer Loyalty Survey, 2022.
4 In a recent Deloitte survey of loyalty consumers, we found price and value to the be the No. 1 factor in determining consumer loyalty (Deloitte Consumer Loyalty Survey, 2022).
5 Jeffrey M. Jones, “Inflation now causing hardship for majority in US,” Gallup, September 7, 2022
6 European Supermarket Magazine, “E.Leclerc launches ‘anti-inflation shield’,” May 6, 2022.
7 Chris Cracchiolo, “Walmart+ members can now save more with Walmart Rewards,” Walmart, August 24, 2022.
8 Personalization leaders see a 1.5X greater increase in revenue per customer and loyalty metrics compared to brands with low personalization maturity (Embrace Meaningful Personalization to Maximize Growth | Deloitte Digital, July 2022).
9 Deloitte Consumer Loyalty Program Assessment, 2021.
10 AMC Stubs, Discount Tuesdays, accessed January 11, 2023.
11 Deloitte Consumer Loyalty Survey, 2022.
12 “Program simplicity and ease of use” was rated as the second most important loyalty program attribute in a recent Deloitte survey, with 84% of consumers rating the attribute important (Deloitte Consumer Loyalty Survey, 2022).

Get in touch

   

Ramya Murali
Principal
Consumer Loyalty Offering
Deloitte Consulting LLP
rmurali@deloitte.com
+1 347 225 4476

   

David Macey
Senior Manager
Consumer Loyalty Offering
Deloitte Consulting LLP
dmacey@deloitte.com
+1 312 618 6254

   

Kevin Tobin
Manager
Consumer Loyalty Offering
Deloitte Consulting LLP
ktobin@deloitte.com
+1 215 380 5745

The authors would like to thank Ali Daily and Lauren Stefenson for their collaboration on this piece.

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