Gen Z and Millennial Consumers are Changing Loyalty—Open to Behaviour Tracking, Paid Loyalty, and Deeper Brand Engagement Through Technology

According to a new report, loyalty programs have a higher influence on Gen Z and Millennial consumer spend than on Boomers (65% vs. 56%). However, younger consumers are less satisfied with their programs (30%) compared to their Boomer parents (49%,) creating an opportunity for brands who focus on rewarding members through experiences beyond points.

TORONTO and NEW YORK, March 19, 2018 (GLOBE NEWSWIRE) -- The loyalty landscape is in the midst of significant evolution, driven by new technologies, smarter programs, and changing customer needs and expectations. In a new study released today by Bond Brand Loyalty, a leading global customer engagement agency, consumers say they spend more, advocate for, and remain loyal to brands with loyalty programs that offer innovative personalized experiences in addition to points and discounts. Consumers spend 37% more with brands when 
they are a loyalty program member. The top five sectors in which spend increases when a consumer is a member of the loyalty program are Gas with a +107% spend increase, Hotel +95%, Coffee / QSR +80% and Airline +64%.

In partnership with Visa, The Loyalty Report 2018 is recognized as the industry’s leading report on customer engagement, loyalty attitudes, behaviours, drivers and disruption. Now in its eighth year, the expanded 2018 global report features an unprecedented assessment of more than 800 loyalty programs, in 18 markets, by more than 50,000 consumers across a range of key sectors including payments, retail, grocery, CPG, gas, dining, hotel, airline, entertainment and coalition.

The report has identified the following areas where brands can differentiate and improve the performance of their loyalty programs:

Embracing New Loyalty Currencies and Experiences Beyond Points 

• Loyalty programs can set themselves apart by identifying customer preferences and experiences that can be tracked and then rewarded as alternate “currencies.”
• A growing number of members (81%) say they are open to having various details of their activity and behaviour watched, monitored, and tracked in order to receive access to personalized rewards or engagements.
  • Openness to being tracked is highest among affluent (85%), Gen Z (94%), and households with children (85%).
• 89% of consumers find “alternative” currencies such as Wi-Fi access, an empty seat next to them on an airplane, quicker checkout lines for members only, and others to be highly valuable. Examples include:
  • Amazon Go, available only to Prime members, addresses time-starved urban customers with a faster and easier visit to shop for groceries.
  • CLEAR provides biometric technology powered I.D. checks, and automated screening lines to streamline the security process for airline passengers.
  • Multiple hotel programs offer benefits such as skipping the check-in process, choice of floor and late checkout, which are unlocked through frequency and other customer behaviours.

Adding a Paid Loyalty Program Option Can Drive Higher Spend and Satisfaction 

• A growing number of consumers (26% up from 20% in 2017), are willing to pay a fee for access to enhanced loyalty program benefits.
• Willingness to pay for enhanced benefits is significantly higher among Gen Z (36%) and Younger Millennials (37%), as well as among households with children (31%) and early technology adopters (44%).
• Paid programs and tiers are associated with higher member spend, higher advocacy and longer-term brand loyalty.
• Examples of paid programs driving incremental sales, higher program engagement, reduced returns and other significant operational benefits include:
  • Restoration Hardware: Paid members’ program is responsible for 95% of sales, reduces returns and increases inventory accuracy. Members pay for perks like 25% off all full-priced merchandise, an additional 20% off sale items and complimentary interior design services.
  • Amazon Prime: Estimated to be a $9B per year revenue stream that offers its roughly 90 million members access to benefits that increase use, like free two-day shipping and free same-day deliveries. According to sources, members shop 2X more often and spend 2X more than non-Prime members.

New Technology and Increasing Usage of Existing Technology Leads to Higher Member Satisfaction and Engagement 

• 91% of members want to engage with brands through a mix of new, emerging and growing tech, including augmented reality, virtual reality, card-on-file and more.
• Members who have engaged with loyalty technology say it has substantially improved their member experience.
  • Instantly redeeming points for purchases at other merchants improved the experience for 84% of members who have tried this functionality.
  • Among those using card-on-file—81% say their experience improved.
  • 79% who have redeemed with their mobile phone say their experience was improved by that technology.
  • Automatic, location-based offers when inside a store improved the experience for 71% of members who experienced this functionality.
  • Using Augmented Reality (AR) to engage with a program improved the experience for 54% of members.

Meeting Human Needs is Essential to Improving the Experience 

• While technology offers a path to increased member engagement, human interactions are more critical than ever and offer brands a cost-effective way to foster loyal relationships with members.
• Programs that establish positive emotional connections with members see 80% more of their membership increasing their spend with the brand.
  • Programs scoring high on emotional connection include Amazon Prime, SCENE and Second Cup.
• Effective brand representatives drive 2.8X higher member satisfaction. Yet, brand representatives have an opportunity to improve in three key areas:
  • Only 10% of members are prompted to use the program.
  • Only 9% get help to make the most out of their membership.
  • Just 8% say that brand representatives make them feel special and recognized.
• The new loyalty game means avoiding these top four pitfalls and sources of member frustration:
  • Having points expire;
  • Desired rewards being unavailable (either through blackouts or catalog changes);
  • Dealing with representatives who aren’t knowledgeable about the program; and
  • Being overwhelmed by emails.

2018 Leaders Pushing the Boundaries
Top ranked programs include Hilton Honors, Sephora Beauty Insider, Mountain Equipment Co-Op, SCENE, McDonalds McCafé Rewards, Nestlé Baby Program, Carrot Rewards and Amazon Prime.

Top performing sectors this year include coffee QSR, hotel, grocery/pharma, gas/convenience and credit cards. Lagging sectors include airline and coalition.

“We are honoured to be the aggregators and stewards of the world’s largest source of data on consumer attitudes, behaviours and future desires surrounding loyalty programs. This year the data shows that loyalty programs continue to heavily influence advocacy, retention and spend. But the loyalty game is changing as evidenced by new players, evolving experiences and increased customer expectations. Regardless of sector, brands need to rethink their current loyalty strategy in order to increase customer engagement and build loyalty,” said Bob Macdonald, President and CEO of Bond Brand Loyalty.

With loyalty programs becoming a vital element of customer–brand relationships and an increasing influence on credit card decision-making and usage, this enhanced report will equip brands with the actionable information they need to gain a competitive edge and produce greater business results.

For more information about purchasing The Loyalty Report 2018 and to download a free copy of the Executive Summary, visit www.bondbrandloyalty.com/loyaltyreport.

About Bond Brand Loyalty
Bond Brand Loyalty is a global customer engagement agency that specializes in building brand loyalty for the world’s most influential and valuable brands. Our mission is to make marketing more rewarding for customers, richer and more resilient for brands, and to deliver profitable business outcomes for our clients. We build measurable, authentic, and long-lasting relationships through a combination of services that includes loyalty solutions, customer experience, marketing research, customer analytics, live brand experiences, and proprietary technology platforms. Visit our website, follow us on LinkedIn and Twitter, or contact us at 1-844-277-2663.   

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