Faithful Following
Spending on loyalty programs was forecast to grow to $2.19 billion in 2009 from $2.18 billion in 2008, according to the VSS Communications Industry Forecast.
Loyalty consultant Colloquy found that the number of loyalty programs in 2008 increased to about 1.81 billion, the latest figures available, up from 1.34 billion in 2006.
And despite the recession, or maybe because of it, more consumers across all demographic segments are joining programs. Participation in 2009 by the general population was up 19%. Two key demographic segments jumped significantly, with women up 29% and young adults up 32%. Affluent participation is up 10%, seniors up 12% and Hispanics up 14%. Affluent people and women are the leading participators in the programs.
The average U.S. household belongs to 14.1 programs, but they’re active in only 6.2 of those.
The study also found a significant shift away from travel programs in 2009 and toward retail programs, which are reaping the rewards of a struggling economy. Some 32% of the general population rated retail programs as more important to their household budgets, 46% of young adults, 44% of women and 40% of emerging Hispanics. Travel saw the biggest decline, down 31% from 2007. Participation in financial services programs remained flat, Colloquy found.
Communication is important and most people said they like to receive program information special offers via e-mail (69.7%) and direct mail (65.7%). Web sites are important too, with 63.6% of respondents reporting they go online for information.
Young adults and emerging Hispanics are the most active groups seeking to join loyalty programs, 27.4% and 28.3%, respectively. Seniors appear to consider it low on the list at 6.5%.
In another sign of difficult economic times, 30.3% of respondents said they planned to save their points until they really needed to cash them in. Another 18.5% plan to use the points for necessities like gas or grocery gift cards. Just under 15% plan to go for the luxuries like vacation trips that they can’t currently afford.
Running the Numbers: Loyalty spending
| Year | 2003 | 2005 | 2007 | 2009 |
|---|---|---|---|---|
| Spending (in millions) | $1,902 | $2,010 | $2,134 | $2,191 |
| Growth | — | 0.6% | 0.6% | 0.03% |
Source: VSS Communications Industry Forecast
THE YEAR AHEAD
FINANCIAL SERVICES: Credit and debit issuers will continue to reflect on how to evolve their loyalty program value propositions in a challenging regulatory environment. With high levels of negative public opinions of the banking industry, issuers will have to navigate carefully as they make changes to existing rewards programs. Among forward-thinking banks, we may see a trend toward the simplification of the loyalty options they provide cardholders, rather than the adoption of annual fees for reward cards.
RETAIL: Strong growth will continue in loyalty efforts. For example, the executive teams of two major retailers — Walgreens and Rite Aid — have already said publicly that they will launch customer loyalty programs. Retailers continue to increase efforts to leverage customer insights from loyalty programs in ways that move well past simple marketing applications.
TRAVEL: Some airlines and hotels will start to gather the fruits of their efforts to improve their rewards and benefits. For example, several companies such as Hyatt, Marriott and Delta, have re-engineered many of their elite membership benefits to encourage frequent travelers to consolidate their travel activities with just their brands. As the economy begins to improve in 2010, many of the loyalty leaders in the travel industry will be well positioned to capture an even greater share of the frequent traveler’s business as companies start to loosen travel and entertainment budget restrictions.
— SOURCE: COLLOQUY
