Looking at Loyalty through the Demographics Prism
In an era of loyalty program saturation, one size no longer fits all. And no stereotype fits anyone.
Fairly broad observations? Perhaps. But a recently completed study by Colloquy of loyalty marketing demographics indicates that different demographic segments respond quite differently when it comes to their loyalty program behavior.
In the study, loyalty program perception and use were analyzed for six consumer segments: General Adult (the control group); Affluent – heads of households with annual incomes of $125,000 or greater; Young Adults – any respondent 18 to 25 years of age; Seniors – any respondent age 60 or older; Core Women – any female respondent age 25 to 59 with an annual income between $50,000 and $125,000; and Emerging Hispanic – any respondent age 21 or older of Hispanic origin with an annual household income of $40,000 or less.
A surprisingly high percentage of Young Adults and middle-income Hispanics identify themselves as loyalty program participants. At over 40% participation for each segment, these groups are aware of the loyalty game and are looking for value. Growth in both segments is predicted, as retailers, e-commerce web sites and telecom programs drive participation.
The research shows that despite the media hype about loyalty programs featuring charity rewards, such as gifting to pro-environment causes, consumers across all demographic groups are “me” oriented when it comes to redemption. Nine out of 10 redeemers reported themselves as the primary beneficiary of their redemption events. Family members were cited as a primary recipient less than 20% of the time for all segments except Women and the Affluent. Among redeemers, the “me” factor far outweighs the “we” factor.
A dramatic gap exists between consumers’ desire for the special access and member-only privileges associated with loyalty offers, and the delivery of these “soft benefits” by loyalty program operators. Seventy-three percent of Hispanics rated soft benefits as extremely important, but only 17% could actually confirm delivery of such benefits. For Women, 64% vs. 14%. The benefits are either absent or invisible to consumers. Seniors are the exception, with just 47 percent identifying preferential treatment as important.
These insights are instructive. In an era of loyalty saturation, brand marketers want to know what to do to differentiate their programs and combat consumer fatigue. Clearly, they need to make a concerted effort to collect demographic, lifestyle and attitudinal information and merge it with their transactional databases. With each customer carrying a unique set of values, those marketers who use data to deliver relevant rewards, recognition benefits and communications will capture customer engagement, spend and advocacy.
Some other key findings from the research include the fact that the highest level of loyalty involvement rests with the Affluent, who have an 80% participation rate. That level is unlikely to show much growth. Also, approximately 67% of consumers said they are very likely to keep shopping at a retailer as a result of a loyalty program.
The demographic information came from a consumer survey conducted in May 2007. Researchers obtained 500 completed interviews from each of the six consumer segments, and questions focused on three key loyalty industry categories: financial services, travel and retail.
Rick Ferguson is the editorial director for Colloquy, a provider of loyalty marketing services.
