Is the loyalty industry in crisis? A new survey from Collinson Group blames "generic" loyalty programmes on a reported 20% drop in membership of loyalty programmes among the global affluent middle class since 2014. Collinson Group surveyed attitudes to programmes run by supermarket and grocery stores, airlines, credit card providers, retailers, hotels, telecom and media companies, coffee shops, and banking. Membership was down across all industries in all countries surveyed. What does this news mean for the future of loyalty programmes?
The Collinson numbers are dire, make no mistake. According to the survey, programme membership numbers have declined as follows:
- 64% are members of supermarket loyalty programmes, down from 70%
- 55% hold frequent flyer memberships, down from 65%
- 48% participate in credit card programmes, down from 63%
- Banks fared the worst with their programmes now used by only 30% of respondents, down from 47%
According to Collinson, the affluent middle class is also now less likely to repeat purchase, recommend a brand to friends or refrain from switching to a competitor as a result of loyalty programmes that are too generic. Money quote from Christopher Evans, Director, Collinson Group.
�This is a critical wake-up call to brands using points-based programmes offering only generic rewards. Given the importance of affluent middle class consumers on the fortunes of companies, brands must lift their game and rethink how they recognise, engage and reward customers. Despite lower membership numbers, the results show that personalised and relevant loyalty initiatives do positively influence consumer behaviour. Three quarters of respondents who are actively engaged in a loyalty programme said it encouraged them to spend more.�
India bucks the global trend and is one of the most engaged countries when it comes to loyalty. 81% state that strong programmes would make them purchase more from a brand, and 82% would recommend a brand that offered a loyalty programme. These figures were similar in Brazil and China (72% and 78%; 75% and 75%), suggesting these societies are yet to experience the frustration of uninspiring programmes seen in mature Western markets.
In the 2014 version of this study, Collinson Group identified four global tribes, or groups of people, who share common traits that cut across age, gender and international boundaries. These tribes have proved very useful in gleaning a deeper context of the affluent middle class, who prioritise family, altruism and enriching experiences. Each has its own nuances, whether it is a desire to save for the future or see the world, but one common thread among all tribes in the 2016 research is a high expectation of brands. 69% expect high quality, consistent customer service however they interact with a brand. The same percentage expect brands to be easy to do business with, and 67% value the flexibility to choose the rewards and benefits they are offered.
When asked what would encourage higher and more frequent spending on their preferred brands, half of respondents requested a loyalty programme where it is easy to earn, redeem and adapt to their personal preferences.
Customer expectation is highest in financial services, with almost two-thirds (65%) of affluent middle class customers expecting their bank to reward them for their loyalty. Retail banks and credit card providers can meet this demand by developing innovative loyalty programmes that draw on the wealth of customer data held on record.
Of all the industries surveyed, the financial services sector is best placed to succeed, as globally 49% of respondents agree that their bank knows and understands their needs. This 13% increase since 2014 suggests the sector is learning the value of a relevant and personal customer experience, although just not at the pace that consumers expect.
Further, banking loyalty programmes specifically were found to encourage 82% of members to spend more, while credit card initiatives positively influenced 79% of respondents. The research also uncovered increases in the levels of trust in financial services� ability to manage personal data, and faith in institutions to act in their customers� best interests.
Collinson Group polled 6,125 of the top 10-15% of earners from Australia, Brazil, China, France, Hong Kong, India, Singapore, the United Kingdom, the United States of America and the United Arab Emirates.
The Bullet Point: A global decline in loyalty programme memberships among the affluent middlle class may seem like bad news for the industry. However, the Collinson survey continues to show, as so many proof points have done before, that loyalty programmes do deliver more durable, more profitable customer relationshps to the sponsoring brands. If programmes work, however, then why is membership declining?
There are several possible reasons for this decline. One reason is most certainly the reason cited by Collinson in their report: that too many programmes are too generic, offer too little, and do little to nothing with the data collected through these programmes to deliver more targeted, relevent, and personalised offers to members. These survey numbers certainly are a clarion call for programme operaters to redouble their efforts to deliver value to members.
However, there are also systemic market forces at work. In mature markets such as the UK and US, Baby Boomers are beginning to age out of programmes as they move en masse into retirement. Meanwhile, the larger Millennial generation is only now reaching thier peak earning years, when programme participation is historically the highest. In addition, many programmes- particularly those in the travel industry- are moving from frequency-based to revenue-based earning models, which means that low-value members are more likely to churn from these programmes.
Finally, remember that big is often the enemy of great. What use is a loyalty programme with millions of members if a significant portion of those members are low-value customers who are naturally disloyal or whose level of spend prevents them from earning meaningful programme rewards? It does no good to trumpet the shear size of your programme if most of your members are low-value or disengaged. Better to operate a smaller, more focused programme that delivers meaningful rewards and recognition to those customers of high current or potential value who matter most to your bottom line.
In short, smaller programmes aren't a bad thing if those smaller programmes deliver better results. And the Collinson survey reveals as much: those members who are engaged with loyalty programmes spend more, stay longer, and tell their friends. That's the real story.
- Rick Ferguson