REPORT

A MESSAGE FROM CAROLINE PAPADATOS

LoyaltyOne constantly receives questions from program operators, !

industry analysts and friends in the C-Suite about the size of the loyalty Two questions that should be top of mind:
industry, whether the market is growing, where the money is going • If customers are the ticket to business growth, do you have the
and most importantly, what it all means. In response, we decided to right investments in play to drive sustained customer value?
talk to operators, decision-makers, consumers and industry experts • Do you know – really know – if your investment is attracting and
around the world with the goal of providing a useful perspective on the retaining your best customers, growing loyalty and driving optimal
business of loyalty. return on this critical business and brand objective?
C-Suite & Industry Analysts – We’ve created a topline overview that If you’re ready to see the big picture on loyalty, just keep reading.
captures strategic business findings at a glance. Click here to view You’ll be glad you did.
the Loyalty Big Picture: Executive Summation. You’ll also find section
summaries that speak to the big picture learnings and point you to the
critical strategic and operational insights you need for decision-making.

Loyalty Operators – We hope that this report will finally put to rest the
question of whether customer loyalty is a program or a strategy. It’s
both and the numbers confirm it. In this report, we assess end-to-end
customer management and all the ways to activate customers and
shape shopper behavior.

Caroline Papadatos
SVP, Global Solutions,
LoyaltyOne
Loyalty Big Picture Report | 1
LOYALTY BIG PICTURE
METHODOLOGY

How we got here:

B2B B2C
We’ve gathered data and insights1 from both loyalty program
operators and members. All program member participants
were required to be the primary or shared decision maker
in their membership program. Surveyed loyalty operators
qualified based on their ability to speak to the management
of their company’s loyalty program.
OPERATORS MEMBERS
Our research took place from October 24 - November 2, 2018. 1

1.2K+ 4.5K+
Across five markets
US, UK (Europe), Brazil (South America),
Singapore (Asia) and Canada

Loyalty Big Picture 2019 - LoyaltyOne

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WHAT’S IN STORE

THE LOYALTY INDUSTRY IS BIG.......................................Pg. 4

FOLLOW THE MONEY......................................................Pg. 9
BREAKING DOWN THE BIG PICTURE..............................Pg. 13
-CUSTOMER MANAGEMENT............................................Pg. 14
-LOYALTY DESIGN...........................................................Pg. 19
-INVESTMENT IMPACT....................................................Pg. 26
IN CONCLUSION: DRIVING BIG PICTURE RESULTS..........Pg. 31

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THE LOYALTY
INDUSTRY IS BIG...
The customer ecosystem 2019 2

mer managem
$75B to en $51B
Loyalty management
us t

BC
CRM
All tools that retailers use to create Strategies and execution across

$126
customer loyalty, including rewarding multiple channels to identify, activate

$323B
customers with exclusive discounts, and grow customers at-scale.
merchandise or points that can be
exchanged for rewards.
Customer ecosystem

$46B
Tech and transaction enablers
The ecosystem requires tech developments
$151B
like POS and payment, and e-commerce Customer engagement
in order to enable a seamless, end-to-end, Ad-tech and large social media platforms
unified shopping experience. like Facebook and Google that attract
impressions and generate awareness.

Loyalty Big Picture 2019 - LoyaltyOne

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...AND IT’S ONLY GETTING BIGGER

Not only is the industry big, it’s also growing. There’s growth
in Asia-Pacific, with China, India and southwest Asia dialing up
their digital platforms. There is also growth in existing programs.
In fact, 69% of C-Suite executives in our research reported
that their loyalty investments have grown in the past two
years, and over half (55%) report that their investments will
continue to grow in the next two years. We asked Aaron:

Amazon Prime is already a behemoth at more than 100M Is this consistent with your independent findings?
members, with Citi analysts projecting it to grow to 275M
The studies we see suggest that this market is experiencing low double-digit year-over-
members in the next decade.3 Alibaba’s 88 VIP loyalty program
year growth in the 10-15% range. We believe it will continue at this pace as a greater
is targeting an even larger base in China. But even without
number of less traditional verticals embrace customer engagement and loyalty programs,
considering the scale of a platform play, there are strong retail
such as convenience store retail, government, transportation, e-commerce and co-sharing
programs like DSW Rewards with 28M members that drive 90%
service verticals.
of sales despite heavy competition from online disruptors.4
Aaron Dauphinee, Chief Operating Officer, Wise Marketer Group

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LOYALTY INDUSTRY
THREE KEY GROWTH DRIVERS:

1. ORGANIC GROWTH

1 (42%) Program membership showed growth

2 (36%) In order to make technical improvements

Reasons why companies

3 (35%) Strong program performance supported case for increased investment

increased loyalty investment

in the past two years:
4 (34%) Leadership placing more strategic importance on loyalty programs /
Strong performance from competitors

5 (33%) To increase acquisition efforts through loyalty programs /

New competitors in market

6 (30%) Need to increase value provided to loyalty members

This last stat is the most surprising. Only 30% of companies are increasing
their investment with an eye to create more customer value. The fact is, many
loyalty operators benchmark against the competition and take their lead from market
forces, not realizing that demand is being shaped by their customer. While the tools
for uncovering customer needs and identifying potential exist in the data that loyalty
programs collect, few are digging in and realizing the benefits.

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WHY IS THE LOYALTY INDUSTRY GROWING? (CONT.)

2. DATA VALUE DRIVEN GROWTH

The intrinsic – and often overlooked – value of loyalty data
While there are new and inventive means to identify customers, especially in digital channels, loyalty
programs are still the easiest and most effective system for registering customers, delivering opt-in
communications and tracking behavior across channels in real-time. Across 25 years of running our loyalty
program consulting practice, we see program customer penetration typically exceeding 50% of a
company’s base, and sales penetration rates as high as 70-95%, especially in high-frequency categories
like grocery. With digital customer engagement still catching up, loyalty programs capture the lion’s share
of identified offline and online customer spending. The data from loyalty initiatives is collected and analyzed
by marketing, but increasingly, companies are recognizing the value of using customer data for product
development, customer insight, pricing, promotional optimization, merchandising, store and real-estate
planning, yield management and a host of other operational uses. Jim Donald, former CEO of Albertsons,
recently reported at Shoptalk that they send 20B personalized coupons per week!

Here are key stats we uncovered about loyalty data usage:

Loyalty data is primarily being used to optimize member experience (87%),

87% followed by measurement/forecasting (60%) and marketing (48%).

61% Over half of companies (61%) use loyalty data across at least three different
departments in their organization.

2% Only 2% of practitioners reported that loyalty data is only used by traditional

departments like marketing, PR and communications.

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WHY IS THE LOYALTY INDUSTRY GROWING? (CONT.)

3. NEW PLAYER GROWTH We asked Chris and Aaron:

Who are the new entrants, and why?

There are new kids on the block who see the Loyalty is no longer just frequent flyer programs and hotel rewards programs. Amazon Prime,
value in loyalty and are getting in on the action:
Costco memberships and others have extended customers’ willingness to loyally attach
New entrant examples: themselves to certain brands. Customers will always pay for value. The economics of that
• Internet of Things (IoT), in particular (when customers are willing to do it) are phenomenal, so it is no surprise that other sectors
smart home devices Direct-to-consumer would try to copy this.
• consumer packaged goods (CPG) Chris Walton, Former VP, Target Store of the Future

• health, insurance and government The fundamental principles of loyalty and their importance are experiencing a resurgence
of focus in traditional sectors. This is due in part to the emergence of change agents
Digital disruptor examples:
and disruptors within those industries, but also competitive pressures both from within
• Uber
the industry and from encroaching new sectors. We also see growth emerging from new
• Lyft
engagement models out of the co-sharing services sector, whether it is for automotive,
• Amazon Moments
hospitality, parking, cycling or other. These businesses are shortening the adoption cycle for
introducing customer programs to their communities or they are more often launching their
businesses embedding loyalty as a cornerstone benefit from the onset.
Aaron Dauphinee, Chief Operating Officer, Wise Marketer Group

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 FOLLOW THE MONEY

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FOLLOW THE MONEY

I AND ROI
If you’re thinking about building a loyalty strategy or are
making big investments in your current loyalty program, your 95% 60% report loyalty customers spend

2-3X MORE
top priority is getting return on that investment. The good of companies reported
news? Our research shows, on average, loyalty program members that their loyalty program 23% report loyalty customers are spending
members spend more than
contribute almost half (43%) of companies’ annual sales. And the
spend differential vs. non-program members is significant.
their non-members annually 4X OR MORE
Loyalty program members spend more and therefore support healthy toplines. But increasingly, the
C-Suite is evaluating loyalty through an opportunity cost lens. How can you know (and defend) that
loyalty spends are profitably better than other alternatives, especially when loyalty programs are running
concurrently with customer promotions, digital experiences and such? Increased consumer spend
! doesn’t always mean optimized return on investment – so how can you show that return? The measuring
Retailers worldwide are facing increasing pressure to stick for loyalty should be the same as for other CRM efforts and loyalty operators should be choosing
demonstrate ROI from their marketing investments.
measurement methodologies that allow one to isolate the impact of each motivator.
Given this intense pressure and scrutiny, loyalty
programs are clearly at the top of the list for review, In many companies, loyalty programs are integrated into customer strategies – which make it tough
especially in terms of their prevalence in retail and
to isolate specific loyalty program results for measurement when it’s part of the core value proposition.
their measurement complexity.
It would be hard to carve Amazon Prime out of Amazon, or SkyMiles out of Delta. Yet, when virtually all
other areas of business investment are heavily tracked, measured and optimized, loyalty programs need
the same ROI scrutiny. Retailers worldwide are facing increasing pressure to demonstrate ROI from their
marketing investments. Given this intense pressure and scrutiny, loyalty programs are clearly at the top
of the list for review, especially in terms of their prevalence in retail and their measurement complexity.

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FOLLOW THE MONEY (CONT.)

HOW MUCH ARE YOU IN FOR?

How much are you investing in your loyalty proposition?
Is it enough to keep up with the industry? Here’s the Further
broken
percentage of annual sales that companies in our research 47% are
down
2-3%
are investing back into their loyalty programs.
71% investing

24% are
investing MORE THAN 3%
We asked Mark:

of companies are investing

What’s the grocery perspective, given the
a minimum of 2%
heightened competition and cost pressure
in that sector?
Clearly, loyalty and customer management are a Knowing that companies are spending an average of 7.3% of annual sales on marketing, based
sizable part of the business. It accounts for a significant on the 2018 CMO Survey5 (with a growing proportion going to digital channels and CRM), it’s fair
percentage of company revenue (~2% for rewards and to assume that at least another 2% of annual sales is going to personalized marketing beyond
another 2% for CRM and digital targeting) and is predicted the 2% already allocated to loyalty. That means that most companies are spending upwards of
to grow. If loyalty is part of our currency and equity, then our 4% of total revenues to activate customers and leverage the data asset to create
industry practitioners should be mindful and deliberate with personalized offers and extensions.
respect to those investments. It’s not just operators who see the value in loyalty programs. Executive teams see how programs
Mark Baum, Chief Collaboration Officer, FMI can contribute to company valuation. 88% of practitioners believe their leaders view loyalty
program strategy as an important component of the overall company strategy.

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FOLLOW THE MONEY (CONT.)

We asked Brian:

Why are loyalty programs so difficult to measure?

First, by their nature, loyalty programs are long-term and many have been in place for many years
which makes measuring the current and incremental impact difficult. Further, best-in-class loyalty
programs have many components including a base offer (core value proposition), promotional
mass offers, personalized offers, in-store marketing, advertising and events. In addition, one has to
consider all of the other price and promotional activities underway and the impact (price, temporary
price reduction, promotions, etc.) and what the competition is doing, not to mention the impact
of seasonality and weather.

How is technology helping to fuel loyalty program measurement?

The solution lies in the next generation of marketing mix modeling, with insights from increasing
sophistication in analytical methodologies and more available data and technology. This method can
uncover drivers of sales to all key activities including overall loyalty impact and impact of loyalty
program components – and then an optimization to right-size the investments within overall budget
to maximize growth and true customer loyalty.
Brian Ross, President, Precima

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 BREAKING DOWN THE BIG PICTURE
1. CUSTOMER MANAGEMENT
2. LOYALTY DESIGN
3. INVESTMENT IMPACT

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BREAKING DOWN THE BIG PICTURE

1. CUSTOMER MANAGEMENT
How important is customer experience for loyalty program Where does your company sit? Is it right for your customers?
investment decisions? A recent Forrester report6 states that
94% of retailers agree their firm is customer-obsessed, but only
Cross-channel Enablers Customer Wow
9% actually are. First, let’s be honest – everyone defines customer Focus on unifying CX Aim to delight
Customer Fixers across channels to better Customer-centricity through mind-blowing,
experience differently. Based on a 2017 LoyaltyOne retail study,7 we Companies who are intent manage end-to-end Champions unexpectedly satisfying
identified four differing company mindsets on customer experience: on removing friction, thereby customer communications Focus on customer experiences that serve
focusing on fixing operational and experiences. This is personalization, using as the ultimate brand
processes and pain points. especially true for retailers the data to individualize expression. These are the
where customers cross experiences. folks investing in VR and
channels to buy. AR immersive content.

Functional Emotional

Loyalty Big Picture 2019 - LoyaltyOne

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BREAKING DOWN THE BIG PICTURE – CUSTOMER MANAGEMENT (CONT.)

Not every company can afford to treat their customers to a

perfect experience – but it’s important to note the direct link
between company margin and customer experience funding.
In categories like luxury goods, the high margins and customer
spend allow for more investment in customer experiences for We asked Bruce:
things like personalized services. In a lower spend category like
grocery, retailers need to be more creative to delight customers How can retailers amplify their customer
while driving sales. Take Walmart, for example. The retail giant experience without breaking the bank?
provides a no-frills and dependable in-store customer experience These days, retailers have to think outside the box to elevate their customer experience
that customers value. They don’t promise to satisfy all customer in a cost-efficient manner. Reviving the concept of in-store theatre as a compelling
wants, but they deliver on their promise of low prices and motivator to complement loyalty program investments may be just the kind of
consistent service. differentiator that brick-and-mortar retailers need to consider. As for cost-efficient,
many retailers have enjoyed lasting results by delivering in-store takeovers as part
of their promotional cycle. Partnering with other wow experience brands is another
successful result-amplifying approach.
Bruce Kerr, SVP and Chairman, BrandLoyalty North America

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BREAKING DOWN THE BIG PICTURE – CUSTOMER MANAGEMENT (CONT.)

Digital: Minimum entry requirement

Many companies today are rushing to adapt their
business models for the digital world, driven by
e-commerce, app adoption, Facebook and of course, Amazon
We asked Chris:
and Alibaba. In fact, 79% of top loyalty programs globally
have a digital component. Digitizing customer interactions and
Can you see costs coming down anytime soon?
experiences and adapting people, process and products to
Digital is now the front door of almost every commercial experience, meaning
today’s digital landscape is no easy feat – while also taking
the operating cost to create a ‘loyalty’ interaction is even higher. This likely
into consideration that there are existing customers who prefer
means even more companies will soon up their efforts.
to use a physical card. Digital adoption requires serious tech
investment, change management and transformative thinking Chris Walton, Former VP, Target Store of the Future
to break down silos and legacy processes.

79% of top loyalty programs

globally have a digital component.

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BREAKING DOWN THE BIG PICTURE – CUSTOMER MANAGEMENT (CONT.)

Simply having a digital presence doesn’t

set programs apart
Digital loyalty seems easy enough. Register your customers, Program operator feedback: Member feedback:
invite them to download the app and you’re set and done. Or not.
• 70% of practitioners say members • O
 nly 18% of members say digital experience
We asked program operators and program members about the
interact with their program via a website, plays a role in program preference.
world of digital relating to loyalty:
followed closely by a physical card. • On a regional basis, 78% of members in
• 69% of programs still offer a physical VS Canada prefer to use a physical loyalty card.
card. 31% of programs are digital only. Use of a physical card is significantly lower in
• Most common challenge faced by Singapore, where only 55% still use cards.
operators with digital apps: Keeping • What tops the list for members? Programs
tech up-to-date (62%). that are easy to use (56%) and offer
Only 18% of members say relevant rewards (50%).
digital experience plays a role
in program preference. !
Channel preference by demographic:
• When we look at channel preference for collecting program currency, 45% of 18-34-year-olds
and 35% of 35-54-year-olds prefer using a mobile app, whereas only 16% of 55+ year-olds
state the same.
• 65% of members aged 55+ prefer using a physical card when collecting program currency.

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BREAKING DOWN THE BIG PICTURE – CUSTOMER MANAGEMENT (CONT.)

Customer Management: Summary

Customer experience can be the forever quest and elusive
goal. You’re fixing problems and removing friction while digital
disruptors are re-inventing the experience itself! Take stock of
how much investment you can allocate to customer experience
and concurrently evaluate investment allocation to both fix
We asked Aaron:
customer problems and create wow experiences. Both are
needed to compete right now.
How is digital impacting retail competition?
Having a digital loyalty presence is just good business – Retailers have long held consumer packaged goods (CPG) and original equipment
customers simply expect seamless online experiences and easy manufacturers (OEM) at bay from consumers by controlling access to customers via the
cross-channel navigation. To truly provide an exceptional sliding glass doors of their stores. But now common-day, multi-use technology, such as
customer experience, think about how to make your our smartphone, is enabling CPGs and OEMs to have material, direct connections with
customers happier in a way that suits and reflects your consumers. This is shifting retailers to better manage their merchandising relationships.
brand promise (and don’t fuss over trying to fix all customer Now they must also consider the influence and impact these brand-led relationships have
pain points at once). on their own customer relationships.
Aaron Dauphinee, Chief Operating Officer, Wise Marketer Group

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BREAKING DOWN THE BIG PICTURE

How program design decisions get made

2. LOYALTY DESIGN ustomer

C
Build programs effectively for your business and
customers. With new entrants in the loyalty space and
plenty of exciting ways to build programs with new digital
features, it can be tough to decide where to start – and
what customers actually want.
Mod
els
All customers

atures Best customer

Fe New customer

Points
multi-partner
proprietary
coalition
Fee vs. free
subscription Promotional
Tier vs. non-tier Payment
credit card
Vendor collaboration
Soft benefits
Cash back
Loyalty Big Picture 2019 - LoyaltyOne
Rewards

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BREAKING DOWN THE BIG PICTURE – LOYALTY DESIGN (CONT.)

Ease of use
!
1 One of the top reasons (56%) members prefer one loyalty
program over another is because it is easy to use. Interestingly, only
36% of operators think
The first principles of
loyalty design:
2 Offers rewards that are relevant to me ranks
second at 50%.
making their program
easy to understand

3 Program is trustworthy comes in third at 43%.

makes it appealing.

Real-time experiences
• Our research shows that program members want to see their account activity in real-time –
We asked Tad: specifically, 73% want to see instant currency updates and redemption information.

Should operators strive to deliver real-time? • Yet, only 39% of operators believe their program is differentiated by providing
customers with a real-time experience.
The advent of technical improvements to deliver
real-time messaging, offers and redemption across
multiple customer contact points is proving to be highly 39%
successful in driving revenue growth and increased
customer engagement.
73%
Tad Fordyce, SVP Loyalty, Epsilon

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BREAKING DOWN THE BIG PICTURE – LOYALTY DESIGN (CONT.)

Program model sizing comparison ($USD)

What program models do members prefer? Travel

programs
Proprietary programs are “all about me” in the sense that they
issue their own currency or discounts to their own customers $20B
and rewards are redeemed on their network. Programs like Proprietary
Starbucks Rewards, Safeway’s Just4U and Sephora’s Beauty
Coalition
$12B programs
Insider have a huge following, but there’s another growth story
programs
in multi-partner programs.

Coalitions and frequent flyer programs (where many companies $6.3B $7.2B $17.1B Private label
use a single reward currency), payment co-brands and arguably, credit cards
Amazon Prime and Alibaba’s 88 VIP, serve the needs of multiple
partners by rewarding consolidated spend within a network. For
the customer, this means earning a reward faster and enjoying
more diverse reward options. For the company, it means more Member preferences
access to customers and more data.

Most members
prefer a coalition/
multi-partner
program model 59% 16% Fewer members prefer
a proprietary model

Loyalty Big Picture 2019 - LoyaltyOne

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BREAKING DOWN THE BIG PICTURE – LOYALTY DESIGN (CONT.)

Operators perceived benefits of:

Proprietary program models Coalition program models

(32%) Offers full control over program

implementation 1 (37%) Cross-promotions /
partnerships

2
(31%) Enables full ownership (35%) Better return on investment /
of customer data More affordable than proprietary programs /
Access to more consumer data
(29%) Offers full control of your brand /
(34%) The opportunity to leverage brand associations /

3
Focused on specific industry /
Offers full control over program Cost to manage and market the program is shared
marketing and operations / across multiple parties /
Offers full control on frequency or nature The ability to join an established program
of communications to members

4
(28%) Offers consistent program experience (33%) Access to partners’ customer bases /
across locations More affordable to implement than a
proprietary program

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BREAKING DOWN THE BIG PICTURE – LOYALTY DESIGN (CONT.)

HOT TOPIC: Multi-motivator program models

Different customer segments respond to different stimuli and
engage at different points in the shopping journey. To avoid
treating customers with a one-size-fits-all approach, many
companies are moving to multi-motivator models, which In grocery, points, digital targeting and promotional programs are
essentially means operating multiple loyalty motivators at running concurrently to appeal to different shopper segments.
the same time.
Travel programs for airlines and hotels layer points, credit card
benefits, booking discounts and upgrades into their program tiers.

Other consumer-facing companies who have a lot of data

(like Turkcell, an award-winning telco in Turkey), are running
individualized loyalty programs that are different for each
distinct customer segment in their portfolio.

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BREAKING DOWN THE BIG PICTURE – LOYALTY DESIGN (CONT.)

HOT TOPIC: Fee vs. free program feature

There is misalignment between practitioners who would be DO NOT CURRENTLY PAY A FEE
interested in considering adding a fee component to their
program and the low rate of their existing members who would
76% for the loyalty programs in which they participate.

be likely to pay. Paid programs are not for everyone. Operators

need to use the data tools at hand to find alignment between
what members want and need, and how their program can
address those member needs.
WOULD BE WILLING TO PAY A FEE IF

64% they received additional benefits like discounts,

a better earn rate and expedited free shipping.

Loblaw Companies Limited launched a fee-based subscription program called PC Insiders,8

offering perks and rewards at participating retailers. Recognizing changes in how Canadians
shop, Loblaw bundled the benefits that matter most to busy families: value that saves them
money on items they already buy, convenience that suits their busy lives and the opportunity
to treat themselves from time to time. The important takeaway here is the strong value
proposition, where Loblaw is providing value to customers’ unmet needs.

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BREAKING DOWN THE BIG PICTURE – LOYALTY DESIGN (CONT.)

Loyalty Design: Summary

Overall, our research shows companies are still more
We asked Tad and Shannon:
competitor-centric than customer-centric, despite the
fact that customer preference data is well-reported, and both
diagnostic and predictive data are now readily available. What can retailers do to cater to different customer preferences?
Many retailers are also increasing spend to evolve email “club” programs to more
On a positive note, companies are recognizing that not all
formal, data-driven loyalty or CRM programs resulting in more customer participation.
customers are created equal. Many are adopting a portfolio
approach by layering a paid program or private label credit Tad Fordyce, SVP Loyalty, Epsilon
card for best customers, a free program for less engaged
We’ve seen that customers who have a branded credit card show increased loyalty
customers and promotional reward programs for other
and spend more — an average of 55% of branded credit card sales are incremental
segments. The challenge is to measure results to ensure that
to the brand. But our research also shows that loyalty for today’s consumers is
program operators understand which drivers are delivering
complex and exists on a continuum, as they look for brands to meet their needs
incremental spend and visits.
ranging from the functional to the emotional. Brands that understand their place
on this loyalty continuum will be most successful at engaging their best customers
and earning their loyalty.
Shannon Andrick, Vice President Marketing Advancement, Alliance Data

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BREAKING DOWN THE BIG PICTURE

3. INVESTMENT IMPACT
You’ve invested substantially in your loyalty program and worked tirelessly to design a stellar experience Our recommendation – look to both
for your customers. Now it’s time to look at the results. What kind of impact is your program having? Better yet,
where should you look to measure program impact? business and customer impact.

Loyalty program impact: Showing results

Most loyalty programs get a two- to three-year window to show results before financial results are reviewed.
As a loyalty operator, you want to prove the impact and success of your program and tweak it in real-time to
maximize impact. A few tips:

1. Determine measurable business goals 3. Combine customer data sets

• What does success look like? Acquiring new customers, growing basket sizes • Most companies have customer survey data sitting in Operations, attitudinal data
or retaining your best customers? Every brand is different, with a unique set of in Brand Marketing and digital and platform data in Digital Marketing. By bringing
customers and priorities. that data together (ideally at the customer or segment level), it starts to paint a
• Set clear-cut objectives and quantifiable, strategic metrics for success, and picture of both customer behaviors and unmet needs.
recognize that loyalty is rarely instant. It takes time to build results. 4. Finally, align to your company’s brand essence and ways of working
2. Set your metrics • Your customers see your loyalty program as an extension of the brand. As a result, the
• There are standard metrics that are core to most programs and easily loyalty proposition should amplify the brand essence and experiences, not stand apart.
benchmarked against others (see our list of common industry benchmarks here). • Be realistic about what data you collect. It takes at least a few months of program
• Most companies will have a few additional measures of customer success data to establish baseline measures and even longer to derive predictive insights.
that are unique to their business model. • Corporate goals are not static and can differ by year or season. So, if a program needs
the ability to respond to revenue pressures in real-time, a flexible model will be key.

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BREAKING DOWN THE BIG PICTURE – INVESTMENT IMPACT (CONT.)

Here’s what operators look for The top two KPIs that operators use
in terms of program success: to measure program success

1 (31%) Member growth

(new members)

2 (26%) Active members

(members collecting and using points)

!
Only 13% of operators look at estimated spend lift (increase in amount
spent by customer) when measuring program success.

Only 15% of operators look at estimated attrition (number of customers

who were members this year but won’t be customers next year) when
measuring program success.

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BREAKING DOWN THE BIG PICTURE – INVESTMENT IMPACT (CONT.)

Loyalty program impact:

Give customers what they want
Our research shows program operators are missing the Practitioner perception vs
mark when it comes to keeping their customers satisfied.
Member perception

The real measure of customer engagement is not

customer satisfaction, it’s program activation and these
!
92%
of practitioners believe
numbers continue to lag. We routinely find situations their members are very or
where program memberships are high but activation somewhat satisfied with their
levels are low (at only 29%).9 loyalty program.
YET,
ONLY 79%
of customers feel very
or somewhat satisfied.

Loyalty Big Picture 2019 - LoyaltyOne

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BREAKING DOWN THE BIG PICTURE – INVESTMENT IMPACT (CONT.)

How do programs impact buyer behavior?

What members think What operators think
There is a 21 point gap on average between how much a
customer thinks loyalty programs impact their buying behavior, How much do programs impact
and how much operators believe their programs impact how often you shop with a brand? 57% 76%
customer buying behavior. Here’s how that breaks down:
How much do programs increase
the amount you spend? 54% 76%
How much do programs increase
the number of items you purchase? 50% 77%
! How much do programs impact
The real measure of
your decision to spend with one
brand over another?
58% 75%
customer engagement is
not customer satisfaction,
it’s program activation. The questions of how many cards in a wallet? Or what is the number of loyalty memberships per region?
comes up often. In our 2017 COLLOQUY Census,9 we reported how program memberships grew in the
US from 2.6B in 2012 to 3.8B in 2016. We’ve seen similar numbers from other loyalty studies. Certainly,
program memberships are on the rise, but competition for share of wallet is not the key determinant of
program success. What really drives performance is how membership numbers link to shopping
behaviors (activity). We looked at the top 15-20 programs in each region and found that consumers
are only actively participating in 2.9 programs. The 1/3/12 month member activation rates should be
the focus of loyalty operators going forward.

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BREAKING DOWN THE BIG PICTURE – INVESTMENT IMPACT (CONT.)

Investment Impact: Summary

A successful loyalty program requires a thoughtful approach to
design, investment and allocation of resources across multiple
motivators, rewards, customer experiences and customer segments.
The next step is measurement and the ability to identify a sustainable
ROI for the program as compared to all the other activities to shape We asked Scott:
shopper behavior within the customer ecosphere.
How can retailers use loyalty data to enhance personalized
Marketing mix modeling allows companies to optimize customer experiences?
investments across a broad range of strategies, and customer Activation of loyalty data is a retailer’s opportunity to establish a much higher level of
incremental spend and activation measures define whether the relevance and intimacy with their customer base. Understanding who the customer is,
program is doing its job. and what they buy should be augmented with a deeper understanding of their motivations,
Finally, there’s data and whether it’s being leveraged across sentiments and preferences. For example, knowing a customer is an occasional, but high
the organization to gain strategic insights, design product offerings, potential customer, who is a health-conscious mother with young children defines how
and define price and promotional strategies. Ultimately, these best communication and personalization can inform contact strategies, offers and content that is
practices all serve to get the most out of your loyalty program investment. all highly relevant and able to drive high response rates and ROI. These types of insights can
be leveraged via direct marketing, in-app personal offers and online customization where
those technical capabilities exist.
Scott Yamada, AVP Merchandising, Precima

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 IN CONCLUSION:
DRIVING BIG PICTURE RESULTS

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IN CONCLUSION: DRIVING BIG PICTURE RESULTS

At $126B USD, the business of loyalty and customer

management is sizable, no doubt. If you’re sitting in the
C-Suite with a myriad of strategy, technology, investment and
business decisions facing you every day, why should you care
about loyalty? Loyalty often sits buried in a lower subset of
marketing and points become a pesky thing that puts liability
on the books. Clearly, it’s taking up a significant percentage
of company revenue if you count 2% for rewards, and at least
another 2% for CRM and digital targeting – and that number
We asked Tad:
is predicted to grow. Are you getting the most out of that
investment?
How can companies better manage cost and complexity?
For many companies, the answer would be no, or worse, I don’t Companies face a lot of complexity. Those agencies that can make it simpler for companies
know. Too many loyalty operators struggle to measure the to integrate across strategy, analytics, data, creative and technology hold a competitive edge.
incremental value that loyalty brings to the organization and Further, these areas are becoming more closely intertwined. It is no longer sufficient to develop
to align those metrics to company goals. In fact, in our loyalty creative without the data and analytics underpinning it. Similarly, loyalty technology on its
consulting practice, most of our client work is re-inventing or own is insufficient without the strategy, as well as the people and process changes and other
re-engineering programs so they actually deliver measurable elements required for a successful loyalty program/initiative.
value to companies and customers.
Tad Fordyce, SVP Loyalty, Epsilon

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IN CONCLUSION: DRIVING BIG PICTURE RESULTS (CONT.)

WITHIN EASY REACH

Here are the areas where operators say

loyalty programs can deliver more value
1 (16%) Improving customer engagement through program improvements

to your organization: 2 (15%) Improving customer retention focus

3 (14%) Use data more effectively to drive promotional ROI /

Better marketing of program and benefits to support brand

4 (11%) Use programs as a tool for customer acquisition

5 (10%) Use data more effectively for operational improvements

!
But, if we pull the camera back on loyalty, the real opportunity lies with the data. Even
in North America where data usage has been advancing for decades, only 22% of respondents
believe better use of loyalty data can drive more business value. Loyalty is an effective means
of collecting customer behavioral data with full customer opt-in. That data should be fueling
merchandising, product development, pricing, promotions, product assortment, store planning
and operations, and even media. But all too often, it sits in a marketing silo and the value is
limited to communications and campaigns.

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SUMMING IT ALL UP:
THE ONE-TWO PUNCH

• Use loyalty data to understand your best customers – or risk losing your best customers.
- We looked at reasons why members stopped participating in loyalty programs, 21% of members said

1 Get Personal
they will abandon a loyalty program if it doesn’t provide relevant rewards.
- Use loyalty data to target customer segments to keep them coming back (and spending more).
• Only 30% of companies are using loyalty data to help them develop customer and member segmentations.

• L oyalty behavioral data should be linked to other customer data sets that live in the company today – operational
data (who transacts on which channel), profile data (demographics, psychographics), social data (what your
customers are saying about you) and survey data (NPS or any other customer satisfaction scoring).
• These insights form the basis of better customer knowledge, insights and modeling. The data should flow to

2 Unlock the Power other parts of the organization – namely merchandising, operations, sales and finance – to put the customer
at the center of business planning.
of Loyalty Data
• Loyalty measurement should be enhanced to pinpoint the incremental impact of the program, especially
when a company is running multiple promotional schemes concurrently. This could mean marketing mix
optimization or another method that isolates the impact of the investment.

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SUMMING IT ALL UP: THE ONE-TWO PUNCH (CONT.)

Get Personal
Alibaba 88 VIP membership is based not just on transaction volume, but
also on the level of customer engagement on the company’s e-commerce
platforms. Alibaba uses an algorithm to calculate member points based
on everything from the number and variety of stores visited to the types
of goods they buy, to reviews written, to shares on social media. All of this
can play out on any Alibaba site. Customer points are then translated into
a score, called Taoqizhi. Members then receive benefits based on what tier
they reach with their score (e.g., discounts, extra mobile data allowances,
content access, a personal shopping assistant, etc.).

Unlock the Power of Loyalty Data

Kroger places a huge priority on the data and analytics behind their loyalty
program. Kroger is using data from different platforms to improve promotions
and communications with its shoppers across all touchpoints – including
in-store. It analyzes past purchases to offer one-to-one digital coupons that
customers can load onto their Kroger Plus Card.

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WHAT ARE YOU
WAITING FOR?

WE CAN’T WAIT TO SEE WHAT’S IN STORE FOR LOYALTY

IN THE FUTURE – AND WE’RE HERE TO HELP YOU MAKE
THE MOST OUT OF YOUR PROGRAM INVESTMENTS.

We asked Brian:

In your opinion, what makes loyalty programs so valuable to retailers?

The prevailing view of loyalty programs is that the true value lies not in the program itself,
but in the engagement of customers and a new platform to engage in personalization of
all interactions – powered by customer insights. The proof is in the results. At Precima, we
often see data-driven marketing and merchandising initiatives deliver a sustained benefit of
3-5X the value of the program alone. This requires fundamental executive commitment and
organizational alignment – but the results are worth the effort in driving sustained 2-3%
increases in sales and profits, and a customer-driven competitive advantage.
Brian Ross, President, Precima
!
If you want to get started right away and start
seeing real returns, feel free to reach out to us today.
You also can learn more about LoyaltyOne and its
businesses by visiting loyalty.com.

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CITATIONS
1. To understand attitudes towards loyalty programs, we conducted primary research among both loyalty 3. Franck, Thomas. “Amazon Prime subscribers will more than double to 275 million in the next decade, Citi
program practitioners (n=1,224) and consumers (n=4,721). This research was fielded across the US, UK, says.” CNBC. September 10, 2018. https://www.cnbc.com/2018/09/10/amazon-prime-a-tremendous-
Canada, Brazil and Singapore, between October 24 - November 2, 2018 and December 19-20, 2018 success-shares-to-pop-15percent-says-citi.html?&qsearchterm=thomas%20franck%20amazon%20prime.
(Singapore consumers only). To qualify, consumers must have been at least 18 years of age, participants
4. Lango, Luke. “DSW Inc. Stock Could Turn Into a Well-Heeled Retail Winner.” InvestorPlace. March 15,
in at least one loyalty program, and the primary or shared decision maker when it came to what loyalty
2018. https://investorplace.com/2018/03/dsw-inc-dsw-stock-turn-retail-winner/.
program to participate in. Loyalty practitioners qualified based on being within one of following industries:
High Frequency Retail, Finance, Specialty Retail, Travel/Hospitality, Consumer Packaged Goods or Automotive, 5. “Predicting the future of markets, tracking marketing excellence, and improving the value of
being able to speak to the management of their company’s loyalty program, and reporting a minimum marketing since 2018.” The CMO Survey. August 2018. https://cmosurvey.org/wp-content/uploads/
revenue of $250 million. Significance testing was conducted at the 95% confidence interval level. sites/15/2018/08/The_CMO_Survey-Highlights_and_Insights_Report-Aug-2018.pdf.
Consumer data was weighted on age, gender and region based on census data. No weighting was 6. “Unlock Customer Obsession by Tying Features to Business Outcomes.” Forrester Research. February
applied to the practitioner data. 2019. https://www.listrak.com/docs/default-source/research-docs/unlock_customer_obsession_by_
2. To size the loyalty industry, we also conducted secondary research from July 2018 - January 2019. We tying_features_to_business_outcomes.pdf?Status=Master&sfvrsn=50b21c56_2.
collected annual revenues of companies that manage customer loyalty. In addition, we looked at companies 7. Papadatos, Caroline. “CX Intention vs. Impact: A New Study Helps Retailers.” LoyaltyOne. November 14, 2017.
in CRM and analytics, that create and measure campaigns, and drive segmentations, and the companies https://www.loyalty.com/home/insights/article-details/cx-intention-vs.-impact-a-new-study-helps-retailers.
that enable loyalty and customer management. Programs and companies all around the world were in scope,
with a focus on companies that are more than $10 million in size. For global programs of significant size, a 8. “Loblaw pilots new subscription program that offers more value and convenience to Canadians who

proportionate split of loyalty revenue was made across regions. Where companies fit into multiple categories, shop both its stores and e-commerce brands.” Loblaw Press Release. November 20, 2017. https://

each was placed into the most appropriate one. Several candidates for which a number from a year or longer media.loblaw.ca/English/media-centre/press-releases/press-release-details/2017/Loblaw-pilots-new-

before was identified have resulting estimates obtained by inflating that identified number forward using subscription-program-that-offers-more-value-and-convenience-to-Canadians-who-shop-both-its-stores-

known membership growth rates or vertical/country sales growth rates. Additional secondary research took and-e-commerce-brands/default.aspx.

place from January to March 2019, from sources such as press releases, annual reports, loyalty program 9. “2017 COLLOQUY Loyalty Census Report,” LoyaltyOne.
proprietary websites, research reports, and third-party publications.

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