What retailers need to know about loyalty programs
Today's shopper is not just evolving when it comes to food preferences and buying preferences, she's also evolving when it comes to loyalty programs.
A new report from card-linked app Dosh sheds light on consumer shopping decisions, and shows that cash back programs might be better positioned to increase in-store traffic and average order spend, compared to traditional loyalty programs.
"With the 'surprise and delight' factor of a cash back strategy, shoppers are more satisfied and inclined to return and spend more knowing they will be rewarded," said Alex Ok, President, Forever 21.
As advancements in retail technology improve the shopping experience, consumers expect loyalty programs to evolve to better meet their needs. Consumers crave direct incentives to shop with specific merchants and be rewarded for loyalty automatically.
Current loyalty program approaches are no longer resonating with consumers: Overall, consumers are struggling to find real value in merchant loyalty programs. Tiered programs, merchant credit cards, and special events lack the concrete value and immediacy that today's consumers crave. Key findings include:
- Currently, 48% of consumers don't feel that major retailers value their loyalty.
- 91% of consumers feel little to no reward from tiered reward systems, and 89% of consumers feel little to no reward from merchant credit cards.
- Only 43% of Gen Z shoppers report signing up for an in-store rewards program (compared to 53% of millennials and 57% of Gen X).
- 83% of consumers say they feel little to no reward from invitations to special events from a brand.
Cash is a core motivator: Although traditional loyalty programs are losing their appeal, consumers still want to feel rewarded for their purchases. Moreover, they want to feel rewarded quickly without requiring any effort to redeem their reward. Key findings include:
- 83% of respondents said cash makes them feel rewarded.
- At least 1 in 3 respondents said that they would switch to a merchant that provides cash back over one that does not.
- 60% of respondents reported they would give up social media for the day in exchange for $20 in cash.
The opportunity for merchants to leverage mobile loyalty programs: Consumers are increasingly using their smartphone at every point in their path to purchase, meaning loyalty rewards must be activated on mobile as well. Key findings include:
- Over two-thirds of respondents have used a coupon in the last year, but only 3 in 10 are using their phone to get cash back on everyday purchases.
- When it comes to purchasing platforms, nearly 50% of respondents on average leverage smartphones to shop. Breaking down this average by generation, we see this trend particularly significant among Gen Z, millennials and moms:
- 68% of Gen Z respondents report they frequently purchase items using their smartphone.
- 69% of millennial respondents report they frequently purchase items using their smartphone.
- 70% of moms report they frequently purchase items using their smartphone.
- Only 31% of baby boomers purchase items using their smartphone.
- More than half of respondents (55%) report having at least one mobile shopping app connected to their bank account, debit or credit card.
The survey was conducted online by YouGov on behalf of Dosh from Aug. 24 to Sept. 6 among 3,350 consumers ages 18 and older in the United States. The first 1,000 responses were balanced to be nationally representative by age, gender, and region.
See the full report here.