October 14, 2014
Americans are unhappy with loyalty program rewards
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty marketing publishing, education and research since 1990.
More than half of American loyalty program members (54 percent) are unhappy with the reward options offered by their favorite brands and 48 percent have experienced frustration during the reward redemption process, according to the 2014 Colloquy/FanXchange Customer Engagement Survey.
In another revealing finding, 93 percent of U.S. consumers said the type of reward offered is a "very important" or "somewhat important" factor in their decisions to join a loyalty program and to remain engaged with a brand.
Also from the research: American consumers rate live event tickets — concerts, sports or theater — as more appealing (56 percent) than airline tickets (44 percent).
"The competitive marketplace can leave programs scrambling for the best ways to entice members to join and stay engaged," Colloquy research director Jeff Berry said in a press release. "To combat this, savvy brands should consider offering experiential rewards, especially to live events that provide an opportunity to connect with members on a more emotional level."
"Americans are thrilled to see their favorite teams or bands perform live," FanXchange President Morley Ivers said. "It’s a motivating and memorable experience that increases engagement with the rewards program making it possible."
Consumers said that in addition to unappealing rewards, the reasons for their frustration with the redemption process were expired points (43 percent), not enough points to redeem (39 percent) and the reward item not being available (37 percent).
Some other key survey findings:
- Once enrolled, 43 percent of American consumers have purchased more frequently because of reward offerings or customer loyalty program membership;
- Within the live-event ticket category, consumers ranked concerts (44 percent) and theater experiences (44 percent) highest, with sporting events being the top choice of 37 percent of respondents.
The findings were based on a June online survey of 1,003 American consumers.
BrainTrust
Recent Discussions
Discussion Questions
Should reward options be reinvented as part of retailer loyalty programs to include more experiential options? How would they have to work differently than those offered by airlines and hotels?
Poll
Experiential rewards are great to offer but usually are geographically based (concert, sporting event, etc.) which adds to fulfillment complexity. It may be easier for some of the national brands with large partner programs with the NFL, MLB, etc., to offer local ticket redemption as part of their program.
It may be helpful to partner with ticket brokers or dealers to provide redemption options off the point program.
So I ask myself what provides me greater satisfaction: To have instant (or near-future) simple gratification like going to a concert or deal with the time and trouble of uncovering qualified dates that fit my personal schedule and making additional investments like airfare, taxes, foods and/or hotels.
According to the research: American consumers rate live event tickets to concerts, sports or theater as more appealing (56 percent) than airline tickets (44 percent). An old saying sums it up. “A bird in the hand is worth two in the bush”.
I’m happy knowing I am getting something I want and can enjoy without complications. I am not as happy knowing I will get something that sounds attractive but that I may never actually get to use, and if I do it will be a chore and require me spending more money to use it.
So I understand the statistics.
Here’s a simple (but perhaps not easy) way to improve rewards redemptions: At the check-out, offer the option to pay in rewards points.
Shoppers have already seen this option on Amazon and American Express online. Offering this at a brick-and-mortar cash wrap would be a huge plus-up for shoppers and would keep them engaged.
As I have noted on previous posts I am not a fan of the customer loyalty concept as it relates to retail. Customers can be loyal to a number of entities—family, church, school, etc. Retailers need to be loyal to their customers. How? By consistently delivering on their promises.
Having restated this, the key to retaining customers is to provide rewards that they value. While experiential events are attractive, retailers should consider all options to maintain the continuity of purchase by shoppers. For example, grocery shoppers find checkout still to be an onerous task. How about a dedicated check out line with reserved times for high volume repeat shoppers? This would certainly have more potential than a frozen holiday turkey.
Use rewards programs to solve customers’ problems as well as delight them.
Rewards programs only work when the shopper shops frequently. That means at least once a week. The only place we shop weekly is at the grocery store. Grocery store rewards programs seem to be just getting the sale price. Not a reward at all in my book. Lately the stores having been offering lower gas prices for loyal shopping—truly a reward. Airlines and hotel rewards are for the most part for business folks and do reward correctly with upgrades and free stuff such as flights and free nights. The rest of retail needs to rethink their rewards programs so that they offer the reward sooner, or link up with an airline, hotel or grocery store. The Canadians have Air Miles that they can get at any number of stores, and U.S. retailers need to do something similar.
Realizing that Colloquy’s survey was not specific to retail, I’m taking creative liberty with this response.
First, I do believe that retailers need to reinvent their loyalty programs. The question remains, are they relevant to shoppers? If not, they need to be changed. Loyalty remains fickle at best, anything that can regain shopper commitments is recommended.
Second, I like the idea of “experiential rewards” for retailers. Imagine offering loyal shoppers truly memorable experiences rather than simply reducing prices or offering additional savings. Shoppers need something to talk about with their friends and families—and temporary savings are not the answer.
Loyalty programs in retail are designed to fool consumers into believing they are getting something extra for nothing. The most successful and highest sales per square foot retailers don’t use them. Normally loyalty program are used by retailers to mask the fact they simply have higher prices and can’t compete on price. Consumers are getting smarter and rewards programs are not directed at smart consumers. Smart consumers only use loyalty programs when they discover loopholes in the programs and take advantage until the retailer closes the loopholes. Those experiential rewards sound to me like just another mediocre reward.
Airlines and hotels, and to some extent restaurants, are completely different since most of the spending is reimbursed by employers. I estimate that about 8 percent of my business travel expenses are kicked back in some sort of reward. That’s real value in something that didn’t cost me anything but my loyalty. When you get to the top-tier platinum/diamond levels that’s when you see your rewards being worth thousands of dollars. You really don’t get that opportunity in retail as an average consumer.
This is one of those questions that confounds me.
Customers walked away from J.C. Penney AFTER stores were renovated and prices were reduced, when merchandise looked truly special and clutter was banished. Apparently they preferred the old days of tired-looking merchandise, calculating price reductions and holding paper coupons.
So what can retailers do to generate true loyalty? I have no idea.
Most frequent shopper program should have been revised years ago. Most supermarket programs have become nothing more than tiered pricing. Most consumers have no idea what they are receiving or even how they qualify. Airline programs have a history of not delivering when the consumer wants to travel. This reduces, rather than builds, loyalty. Some hotel programs publish an annual awards catalogue. These programs should be reinvented to include obtainable rewards and should have a quarterly offering to better serve the customer base.
What I hate most about rewards programs is having to bring a receipt with you on the next purchase which might be a month later. I’m looking at you, CVS!
If I’ve spent the time to sign up for a retailers rewards program, and I have to dig around to find my card to be scanned each time I purchase, the least the retailer could do is make my rewards easily available to me when I’m checking out.
Loyalty program rewards have to be just that: Rewards. They should not entail a bunch of obstacles in order to achieve the desired outcome that the consumer expects. I actually think the retail industry could learn a thing or two from other industries, like airlines and hospitality. Even though the survey mentioned in this article stated that event rewards scored higher than airline tickets, I don’t think the difference in scoring (44 percent vs. 56 percent) is significant enough to warrant rethinking a program.
The airline and hospitality industries have done a good job of generating compelling reasons for consumers to stay with one brand versus hopping from one to another. Most frequent travelers will try to fly one airline and stay at one hotel chain. I think there are aspects of those businesses that could translate to retail. We definitely have “frequent shoppers” in retail. Why can a merchant brand develop a compelling program that rewards their shoppers for their loyalty? Isn’t that the basic premise of all of this work? I don’t think very many retail brands have hit the mark in this regard.
Experiential rewards are appealing only if you have an interest in that particular experience. Choosing to use them demands a very high level of understanding of your shopper/member/user base. Of the experiential rewards my Marriott VISA card offers, I have found exactly one that I was even interested in attending.
On the other hand, free stuff that I use and need is always appealing. Free tickets and free nights have kept me in the AAdvantage Program and Marriott Rewards for over 20 years. They work.
When it comes to shopping—cash back is king. Cash is cash. Nothing better, even when I have to wait a year for it and can only spend it at Costco.
Regarding “pay with your points”—try out Outdoor World Bass Pro—they have offered this at the register for years.
I think retailers are coming up empty with rewards programs, and as Frank said they really only work with weekly purchase businesses and other than gas discounts they have more or less gone to, “if you don’t want to pay the stupid list price, join the program and get a deal.”
Air Miles or Nectar programs possibly work better because you can earn and spend across a variety of retailers. The bank cards are getting more tangible with cash back, or points, again earn anywhere, spend anywhere.
I think sooner than later the “points” systems will all go to Apple, who (if they) become the mobile payment solution of choice, will be in a position to offer a wide variety of earn and spend options. For an individual retailer to set up and have a successful program of their own—give up now. Focus on the other things that earn customer loyalty, like assortment, in stock and those non-monetary reward based alternatives.
The focus here seems to be “fixing” loyalty programs. In reality, we should be re-evaluating whether they are good marketing.
Byron Sharp’s excellent research into these kinds of programs indicates that for retailers, they tend not to pay out for marketers (much less consumers).
And other recent research found that a store’s highest spenders are also the ones most like to be spending high amounts at competitor stores.
We’ve let loyalty programs become an article of faith in marketing. But the evidence indicates we should question that faith and look elsewhere for better growth.
Another school of thought: Sainsburys to halve Nectar reward points for shoppers.
This research brings into sharp contrast a reality regarding rewards programs that marketers have known for a long time: Consumers are savvy themselves and fatigued with the rewards experience that is pervasive in retail today—programs offering rewards that don’t live up to expectations, and are often only received after spending significant dollars with the brand.
What is perhaps more interesting about this data is the implicit question: So what will retailers do about it? Tickets to live events may be an incremental improvement over less appealing rewards, but does that fit for all business models and customer bases? No. The challenge retailers face is generating a holistic customer experience that stitches together value for the customer in a genuine, brand-aligned manner this is inclusive of, but not limited to, rewards offerings. Leading retailers find a way to create experiences and offer value (including rewards & benefits) across channels and platforms, and do so to personify their brand and address customer needs. Through a more holistic approach to loyalty, rewards become one tactic in the quiver and are integrated in a way that supports larger customer experience goals.
Each retailer should address customer strategy at this altitude before deciding how a rewards program, and the tactical rewards offered therein, should be optimized to fit within a broader vision for their desired customer experience.
I think this involves knowing more about your specific customers who value and use the loyalty programs. Without understanding their personas, you can offer a lot of rewards they do not value.
Successful and useful reward programs, be they for internal purposes with associates, or external for customers, follow a simple 5-step process. If you can’t answer in the affirmative to these points, step back, and re-calibrate.
1. Is the reward consistent with the company’s objectives?
2. Is the reward program easy to understand?
3. Is the reward program easy to administer?
4. Does the reward program get the recipient excited – is their “blood” in their mouth?
5. Can the reward program be implemented in a timely fashion? If not, and added purchases are necessary, keep the customer posted as to how they can stay in the game
Reward programs are lagniappe—Cajun for “something extra.” Consumers’ primary reasons to fly, dine out, buy new fashions, etc. are not to gain a reward, it is to satisfy a larger need first. Follow the steps above, and the consumer will build up points for you with their loyalty.
Experiential should be included for rounded program, but more important is
to have a large choice and the ease as to where one can redeem their benefits. Collective schemes with a one-card solution would be ideal! if you want “real” loyalty, give better benefits and always be up front with total info!
Absolutely. If there is an opportunity to better serve the customer, do it. Each and every retailer should be surveying their own loyalty program customers on a regular basis to determine what they most value, which will differ based on the type of shopper that retailer attracts. For example, a Toms Shoes customer will value different things than a Target customer.
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Experiential rewards are great to offer but usually are geographically based (concert, sporting event, etc.) which adds to fulfillment complexity. It may be easier for some of the national brands with large partner programs with the NFL, MLB, etc., to offer local ticket redemption as part of their program.
It may be helpful to partner with ticket brokers or dealers to provide redemption options off the point program.
So I ask myself what provides me greater satisfaction: To have instant (or near-future) simple gratification like going to a concert or deal with the time and trouble of uncovering qualified dates that fit my personal schedule and making additional investments like airfare, taxes, foods and/or hotels.
According to the research: American consumers rate live event tickets to concerts, sports or theater as more appealing (56 percent) than airline tickets (44 percent). An old saying sums it up. “A bird in the hand is worth two in the bush”.
I’m happy knowing I am getting something I want and can enjoy without complications. I am not as happy knowing I will get something that sounds attractive but that I may never actually get to use, and if I do it will be a chore and require me spending more money to use it.
So I understand the statistics.
Here’s a simple (but perhaps not easy) way to improve rewards redemptions: At the check-out, offer the option to pay in rewards points.
Shoppers have already seen this option on Amazon and American Express online. Offering this at a brick-and-mortar cash wrap would be a huge plus-up for shoppers and would keep them engaged.
As I have noted on previous posts I am not a fan of the customer loyalty concept as it relates to retail. Customers can be loyal to a number of entities—family, church, school, etc. Retailers need to be loyal to their customers. How? By consistently delivering on their promises.
Having restated this, the key to retaining customers is to provide rewards that they value. While experiential events are attractive, retailers should consider all options to maintain the continuity of purchase by shoppers. For example, grocery shoppers find checkout still to be an onerous task. How about a dedicated check out line with reserved times for high volume repeat shoppers? This would certainly have more potential than a frozen holiday turkey.
Use rewards programs to solve customers’ problems as well as delight them.
Rewards programs only work when the shopper shops frequently. That means at least once a week. The only place we shop weekly is at the grocery store. Grocery store rewards programs seem to be just getting the sale price. Not a reward at all in my book. Lately the stores having been offering lower gas prices for loyal shopping—truly a reward. Airlines and hotel rewards are for the most part for business folks and do reward correctly with upgrades and free stuff such as flights and free nights. The rest of retail needs to rethink their rewards programs so that they offer the reward sooner, or link up with an airline, hotel or grocery store. The Canadians have Air Miles that they can get at any number of stores, and U.S. retailers need to do something similar.
Realizing that Colloquy’s survey was not specific to retail, I’m taking creative liberty with this response.
First, I do believe that retailers need to reinvent their loyalty programs. The question remains, are they relevant to shoppers? If not, they need to be changed. Loyalty remains fickle at best, anything that can regain shopper commitments is recommended.
Second, I like the idea of “experiential rewards” for retailers. Imagine offering loyal shoppers truly memorable experiences rather than simply reducing prices or offering additional savings. Shoppers need something to talk about with their friends and families—and temporary savings are not the answer.
Loyalty programs in retail are designed to fool consumers into believing they are getting something extra for nothing. The most successful and highest sales per square foot retailers don’t use them. Normally loyalty program are used by retailers to mask the fact they simply have higher prices and can’t compete on price. Consumers are getting smarter and rewards programs are not directed at smart consumers. Smart consumers only use loyalty programs when they discover loopholes in the programs and take advantage until the retailer closes the loopholes. Those experiential rewards sound to me like just another mediocre reward.
Airlines and hotels, and to some extent restaurants, are completely different since most of the spending is reimbursed by employers. I estimate that about 8 percent of my business travel expenses are kicked back in some sort of reward. That’s real value in something that didn’t cost me anything but my loyalty. When you get to the top-tier platinum/diamond levels that’s when you see your rewards being worth thousands of dollars. You really don’t get that opportunity in retail as an average consumer.
This is one of those questions that confounds me.
Customers walked away from J.C. Penney AFTER stores were renovated and prices were reduced, when merchandise looked truly special and clutter was banished. Apparently they preferred the old days of tired-looking merchandise, calculating price reductions and holding paper coupons.
So what can retailers do to generate true loyalty? I have no idea.
Most frequent shopper program should have been revised years ago. Most supermarket programs have become nothing more than tiered pricing. Most consumers have no idea what they are receiving or even how they qualify. Airline programs have a history of not delivering when the consumer wants to travel. This reduces, rather than builds, loyalty. Some hotel programs publish an annual awards catalogue. These programs should be reinvented to include obtainable rewards and should have a quarterly offering to better serve the customer base.
What I hate most about rewards programs is having to bring a receipt with you on the next purchase which might be a month later. I’m looking at you, CVS!
If I’ve spent the time to sign up for a retailers rewards program, and I have to dig around to find my card to be scanned each time I purchase, the least the retailer could do is make my rewards easily available to me when I’m checking out.
Loyalty program rewards have to be just that: Rewards. They should not entail a bunch of obstacles in order to achieve the desired outcome that the consumer expects. I actually think the retail industry could learn a thing or two from other industries, like airlines and hospitality. Even though the survey mentioned in this article stated that event rewards scored higher than airline tickets, I don’t think the difference in scoring (44 percent vs. 56 percent) is significant enough to warrant rethinking a program.
The airline and hospitality industries have done a good job of generating compelling reasons for consumers to stay with one brand versus hopping from one to another. Most frequent travelers will try to fly one airline and stay at one hotel chain. I think there are aspects of those businesses that could translate to retail. We definitely have “frequent shoppers” in retail. Why can a merchant brand develop a compelling program that rewards their shoppers for their loyalty? Isn’t that the basic premise of all of this work? I don’t think very many retail brands have hit the mark in this regard.
Experiential rewards are appealing only if you have an interest in that particular experience. Choosing to use them demands a very high level of understanding of your shopper/member/user base. Of the experiential rewards my Marriott VISA card offers, I have found exactly one that I was even interested in attending.
On the other hand, free stuff that I use and need is always appealing. Free tickets and free nights have kept me in the AAdvantage Program and Marriott Rewards for over 20 years. They work.
When it comes to shopping—cash back is king. Cash is cash. Nothing better, even when I have to wait a year for it and can only spend it at Costco.
Regarding “pay with your points”—try out Outdoor World Bass Pro—they have offered this at the register for years.
I think retailers are coming up empty with rewards programs, and as Frank said they really only work with weekly purchase businesses and other than gas discounts they have more or less gone to, “if you don’t want to pay the stupid list price, join the program and get a deal.”
Air Miles or Nectar programs possibly work better because you can earn and spend across a variety of retailers. The bank cards are getting more tangible with cash back, or points, again earn anywhere, spend anywhere.
I think sooner than later the “points” systems will all go to Apple, who (if they) become the mobile payment solution of choice, will be in a position to offer a wide variety of earn and spend options. For an individual retailer to set up and have a successful program of their own—give up now. Focus on the other things that earn customer loyalty, like assortment, in stock and those non-monetary reward based alternatives.
The focus here seems to be “fixing” loyalty programs. In reality, we should be re-evaluating whether they are good marketing.
Byron Sharp’s excellent research into these kinds of programs indicates that for retailers, they tend not to pay out for marketers (much less consumers).
And other recent research found that a store’s highest spenders are also the ones most like to be spending high amounts at competitor stores.
We’ve let loyalty programs become an article of faith in marketing. But the evidence indicates we should question that faith and look elsewhere for better growth.
Another school of thought: Sainsburys to halve Nectar reward points for shoppers.
This research brings into sharp contrast a reality regarding rewards programs that marketers have known for a long time: Consumers are savvy themselves and fatigued with the rewards experience that is pervasive in retail today—programs offering rewards that don’t live up to expectations, and are often only received after spending significant dollars with the brand.
What is perhaps more interesting about this data is the implicit question: So what will retailers do about it? Tickets to live events may be an incremental improvement over less appealing rewards, but does that fit for all business models and customer bases? No. The challenge retailers face is generating a holistic customer experience that stitches together value for the customer in a genuine, brand-aligned manner this is inclusive of, but not limited to, rewards offerings. Leading retailers find a way to create experiences and offer value (including rewards & benefits) across channels and platforms, and do so to personify their brand and address customer needs. Through a more holistic approach to loyalty, rewards become one tactic in the quiver and are integrated in a way that supports larger customer experience goals.
Each retailer should address customer strategy at this altitude before deciding how a rewards program, and the tactical rewards offered therein, should be optimized to fit within a broader vision for their desired customer experience.
I think this involves knowing more about your specific customers who value and use the loyalty programs. Without understanding their personas, you can offer a lot of rewards they do not value.
Successful and useful reward programs, be they for internal purposes with associates, or external for customers, follow a simple 5-step process. If you can’t answer in the affirmative to these points, step back, and re-calibrate.
1. Is the reward consistent with the company’s objectives?
2. Is the reward program easy to understand?
3. Is the reward program easy to administer?
4. Does the reward program get the recipient excited – is their “blood” in their mouth?
5. Can the reward program be implemented in a timely fashion? If not, and added purchases are necessary, keep the customer posted as to how they can stay in the game
Reward programs are lagniappe—Cajun for “something extra.” Consumers’ primary reasons to fly, dine out, buy new fashions, etc. are not to gain a reward, it is to satisfy a larger need first. Follow the steps above, and the consumer will build up points for you with their loyalty.
Experiential should be included for rounded program, but more important is
to have a large choice and the ease as to where one can redeem their benefits. Collective schemes with a one-card solution would be ideal! if you want “real” loyalty, give better benefits and always be up front with total info!
Absolutely. If there is an opportunity to better serve the customer, do it. Each and every retailer should be surveying their own loyalty program customers on a regular basis to determine what they most value, which will differ based on the type of shopper that retailer attracts. For example, a Toms Shoes customer will value different things than a Target customer.