Retailers See Lift With Loyalty Program Customers

NEW YORK — Gaining customers' loyalty is more important than ever, as members of retailers' customer loyalty programs generate between 12 percent and 18 percent more revenue for retailers than non-member customers, according to new research from Accenture Interactive.

This key finding was based on a survey of specialty, big-box, department, drug and convenience retailers in the United States through which Accenture sought to identify key trends and challenges of retail loyalty programs.

"Today's customer loyalty programs are an increasingly expensive, complex and expansive business that extend beyond the marketing team into the entire organization," said Farrell Hudzik, managing director of Accenture Interactive's global loyalty and rewards practice. "Given that loyalty program members generate significant incremental revenue compared with non-members, retail loyalty program leaders must anticipate future growth trends and capture the opportunity to differentiate in an increasingly fragmented marketplace."

The survey also found that fewer than one in five, or 19 percent, retailers focus on return on investment (ROI) as a key metric of the success of their loyalty program. Instead, they focus most on program growth and revenue production metrics such as membership growth rates (45 percent of respondents), share of transactions by members (42 percent) and number of transactions per year (36 percent), as well as member value metrics such as retention rate (40 percent) and customer long-term value (37 percent).

"Given the maturity and sophistication of loyalty programs today, it's surprising how little scrutiny retailers place on program ROI rather than just growing membership," Hudzik said.

The biggest challenges that retailers face regarding their loyalty programs relate to technology, strategy, financial management and people/talent. Survey respondents most often cited:

• Keeping up with the underlying technology (mobile and digital capabilities) or investing enough in technology (40 percent);
• Keeping up with competing loyalty programs (33 percent);
• Managing the liability and financial complexity of the program (33 percent); and
• Having enough people and the right kind of talent required for today's loyalty programs (30 percent).

Although retailers believe their loyalty and rewards programs are differentiated from their competitors' customers do not share this belief. More than two-thirds (71 percent) of retailers said their program was "differentiated" or "significantly differentiated," but approximately one-third of each retailer's loyalty members cross-shop at another key competitor within the same channel, and 44 percent of customers believe that it would be easy to replace a retailer's loyalty program with a competitor's program.

A whopping 97 percent of survey respondents said that their loyalty programs receive C-suite support, but only 43 percent report receiving "strong" C-suite support, and 54 percent say their programs receive "moderate" C-suite support.

"As with nearly every other industry, digital technology is transforming how retailers are interacting with their customers, suppliers and other partners," Hudzik said. "The success of any good loyalty program hinges on the ability to identify and understand one's customers and then provide them with a seamless experience through multiple touchpoints."

He added, "For a retailer to set itself apart with a compelling and accessible loyalty/rewards program, its marketing department must have the total commitment of the C-suite to ensure that it gets the resources necessary to develop leading-edge analytics, digital and other technological capabilities."