Loyalty programs are in the spotlight thanks in no small part to mobile. Brand loyalty is on the decline for a variety of reasons, but retailers are rediscovering the power of a good loyalty program, now paired with a mobile application.
When Apple first introduced Apple Pay, the platform lacked the ability to integrate store loyalty programs, which was cited as one of its largest drawbacks. The speed at which Apple fixed this—retailers can now integrate loyalty into the platform—says a lot about the kind of feedback it received from large retailers, i.e. potential Apple Pay partners.
Kohl's boasts one of the most robust loyalty programs in retail, with nearly 30 million members. It was one of the first to integrate its private label credit card into Apple Pay, a coup for both entities.
Even Walmart, which once eschewed loyalty programs as costly with little measurable ROI, has changed its tune now that mobile technology can offer a low-cost platform on which to operate it. The retailer's Savings Catcher program has given Walmart its first loyalty program, and helped popularize Walmart's app. At the company's annual shareholder meeting last month, executives were singing its praises.
I recently attended a conference at Northwestern University. It was an intimate group of retailers, technology experts, marketers, data analysts and academics, sponsored by the Retail Analytics Council. The subject of loyalty, labeled as a problem, came up in discussion and was left to be mulled over.
It's especially a problem when it comes to luring younger shoppers, but it may also be one of the best solutions in solving the riddle of how to win with millennials.
Brand loyalty is lower for millennials and higher with older demographics, according to one RAC presenter, who noted a strong long-term effect of point accumulation on mobile devices and purchase behavior. He found a direct correlation between app use, loyalty rewards and spending patterns.
The longer a consumer uses the app, the more they spend. The longer they go without using the app, the less they spend.
There are different kinds of benefits offering different results. Soft benefits—such as earned status—can influence a measurable number of shoppers to change behavior and increase spend. Elite status members can actually help in customer acquisition, leading analysts to estimate that loyalty status can be more powerful than social media referrals.
This is true of millennials, that hard-to-market-to group. Earning points and rewards and advocating for a favorite brand is something this group will participate in, especially when able to do so on a smartphone.
Millennials are even willing to pay for a membership to a fee-based loyalty program. This stunning fact is from LoyaltyOne, which surveyed more than 1,000 U.S. consumers between ages 18 and 34. This from a group that won't pay for music.
Loyalty may be an ambiguous thing, but it's also a great opportunity for retailers and brands. The technology (mobile) has finally caught up to the audience. -Laura