eMarketer Webinar: Loyalty Marketing—Creating Stickiness in a Mobile World

© 2016 eMarketer Inc.
Loyalty Marketing: Creating
Stickiness in a Mobile World
Yory Wurmser
Retail Analyst
January 28, 2016
Made possible by

Agenda
 Trends in loyalty marketing
 Drivers of consumer loyalty
 Mobile’s effects on customer expectations
 Tactics to communicate with loyal customers

Trends in Loyalty Marketing

Three major trends in loyalty marketing:
 Companies are spending more on loyalty programs
 Loyalty program membership is growing
 Active loyalty program membership is decreasing

1. Companies
are spending
more on
loyalty
programs

Increased spending on loyalty in part reflects a
better understanding of customer retention
 Over a third of marketing
executives see improved
visibility of customer
retention and lifetime
value (LTV)

Better CRM and analytics capabilities allow for a
broad range of applications for loyalty data
 Leading use of
loyalty data is in
marketing
campaigns

Loyalty marketing produces better results than
acquisition marketing
“We have found most marketers do
best when they spend about 70%
of their marketing dollars talking
to actual buyers, 20% of those dollars
talking to people new to the brand and the
remaining 10% on people that just happen
onto their website that they’ve never tried
to acquire.”
—Ric Elert, President, Conversant

Loyalty is fleeting for the majority of customers
 Less than half
of customers
stayed loyal to
US CPG brands
over the course
of a year

Levels of loyalty vary only slightly by age cohort
 Baby boomers
are slightly less
loyal to brands
than millennials

Roughly
75% of US
loyalty card
holders say
they are more
likely to shop
at stores that
offer loyalty
points

Four reasons for increased marketer spending on
loyalty programs:
1. Better CRM and analytics systems make the data
benefits for businesses larger
2. Better capabilities in targeting customers directly
3. Better understanding of the importance of retention
marketing
4. Programs succeed at drawing people into stores

2. Loyalty program membership is growing
 In 2014, there
were 3.3 billion
memberships in
the US—roughly
10 per resident

Rising loyalty
program
membership
is occurring
across most
sectors

Two reasons for increased loyalty program
membership:
1. Companies are spending more to establish programs
and entice users to join
2. Signing up has become easier with mobile apps and
point-of-sale (POS) systems

Two reasons for increased loyalty program
membership:
1. Companies are spending more to establish programs
and entice users to join
2. Signing up has become easier with mobile apps and
point-of-sale (POS) systems
NEITHER HAS TO DO WITH TRUE CUSTOMER LOYALTY

3. Active participation in programs is falling
 In 2014, 71.5%
of US loyalty
program
memberships
were “active”
 In 2015, it was
roughly 50%

Drivers of Consumer Loyalty

Loyalty is a product of two components:
Value
$
 Transactional
 Rational
Customer Experience
 At points of engagement
 Emotional

The value side is important: Discounts are a cost
of entry
“There are certainly
rising expectations
today around
discounting as the
cost of entry for
loyalty programs.”
—Jeff Berry, Research
Director, Colloquy
“Never discount …
the transactional
side. While it is
perhaps not the most
important thing, it is
still a very important
concept and a part of
most every program
out there.”
—Geoff Smith, CMO,
CrowdTwist

Saving money is the most common reason for
joining a loyalty program, including for millennials

But discounts without a deeper connection
actually reduce loyalty
“For far too long, ‘loyalty programs’ have
really just been a mechanism for distributing
price discounts, which really has virtually
nothing to do with loyalty. It frankly can
create precisely the opposite
behavior of loyalty. It can create loyalty
to the lowest price, wherever that lowest
price can be found.
—Katie Casavant, CEO, Kantar Shopcom

Consumers
join loyalty
programs for
discounts,
stay for
relevance of
rewards and
simplicity

Loyalty is an emotional state and depends on the
customer experience
“Loyalty is an emotional state. The way to
drive real loyalty is to create
engagement through experiences.
… Consumers are looking for a seamless
and pleasant experience with companies,
more than they’re looking for some kind of
future discounts.”
—Mark Taylor, Senior Vice President, Digital
Customer Experience, Capgemini Consulting

Four key elements of an engaging experience:
1. Relevant offers
2. Alignment with lifestyles
3. Exclusivity
4. Gamification

1. Relevance: People expect an even value
exchange for their data
“A huge frustration for customers [is that]
they’ve given you all this data. They’ve
stated they’re interested in your brand.
They’re shopping physically there and
they’re willing to download an app and opt in
to the various relationships with you, and
you’re still not using the data.”
—Gabe Weiss, Digital Customer Experience
Strategy Lead, SapientNitro

Lack of relevance is the biggest complaint about
loyalty programs

2. Alignment
with lifestyle

Successful loyalty programs align benefits with
brand positioning

‘Aspirational’ consumers want brands aligned
with their values
“Aspirationals are most driven to the
brands that are delivering
innovation, embedding purpose and
positive impact ... in a way that is on
performance or better, and on price parity or
better. It informs purchase decisions,
purchase intent, loyalty and evangelism.”
—Raphael Bemporad, Founding Partner and Chief
Strategy Officer, BBMG

Significant portion of consumers want programs
to align with their personal values
Percentage of internet users in North America who
consider donations to charities an important loyalty
program benefit:
Millennials: 30.0%
Gen X: 30.0%
Baby Boomers: 31.5%
Source: CrowdTwist, June 2015

Brands increasingly incorporate social
responsibility into branding—and loyalty
Source: Toms.com

3. Exclusivity: Strongest impact with younger
consumers
25%
of millennials joined a program in the past year to attend a
members-only event, compared with 16% for the US
population
Source: Colloquy

Pepsi lets members cash in points for exclusive
experiences
 Members can earn
points for hanging out
with other members
 Members get access
to exclusive events,
concerts and trips
Source: iTunes

4. Gamification: Turning participation into the
reward
“[Loyalty marketing] needs to really help you
create that sense of accomplishment and
that sense of progress, and give you
meaningful feedback, but most programs
these days don’t because they’re
essentially the same, exact
program over, and over again.”
—Ankit Shah, Managing Director, Dopamine

Starbucks and
Target create
loyalty
experiences
that reward
participation
Starbucks Target
Source: iTunes Source: Cartwheel app

Mobile’s Effect on
Consumer Expectations

1. Consistent experience across channels
67%
of US consumers in an iVend study said that it was “very
important” or “somewhat important” for retailers to have
an integrated view of them across channels
Source: iVend, December, 2015

2. Immediacy
 Real-time reward
redemption can run as
high as 70% to 80%, a
figure that drops in half
when it’s offered in a
follow-up email two hours
later (Source: Ifeelgoods)
“Customers are willing
to even pay more in
points than they
typically would in order
to receive them
instantly.”
—Sean Claessen,
Executive Vice President,
Strategy,
Bond Brand Loyalty

3. Real-time relevance
“The messages we deliver with the highest
engagement rates are those data-driven
messages that have a personalized
context, that are based on both the
historical profile of the customer
and what are they doing in real
time.”
—Lars Albright, CEO, SessionM

Mobile Loyalty Channels

1. Email: Still the leading channel for loyalty
marketing
 Nearly three times
as many US
retailers use email
marketing as offer
official loyalty
programs

Majority of
smartphone
owners use email
daily on their
phones

Dynamic content is gaining traction in email
marketing
32%
of US marketers use dynamic content
Source: The Relevance Group, December 2014

Email works well when geared toward personal
preferences and points in the customer lifecycle
“The odds of opening an email right then when you’re
at the store is probably a little lower than a push
notification on a smartphone. [But] keeping that
overall customer lifecycle in mind and the
touchpoints that you’re creating along the way, I don’t
think it necessarily takes away from the power that
email has.”
—Cynthia Price, Director of Marketing, Emma

2. Loyalty apps:
More than a
third of US
smartphone
users planned to
use apps to link
to a loyalty
account for
holiday shopping

Most consumers do not use a retailer app
25%
of US internet users use a retailer app (excluding Amazon)
Source: TSYS, June 2015

It’s very hard for retailers to break into
consumers’ app rotation
 The largest
share of US
smartphone
owners use only
four to six apps
per day

3. Mobile wallets: Simplified loyalty membership
management and wide-scale push platform
“In terms of adoption, we are hoping that it’s
much easier to get people on board with
passes [than apps] because they don’t
have to download anything. It’s one
touch. These are people who have already
opted in to email, so this is just incremental.”
—Jonathan Wall, CTO and Co-Founder, Index

A majority of US smartphone owners express an
interest in storing loyalty cards in mobile wallets

Mobile wallets are still early in their adoption life
cycle

4. Social
media: Nearly
a third of US
loyalty card
members
follow the
brand on
social media

Social
networks
draw the
biggest share
of US users’
time spent
with mobile
apps

Facebook Messenger has added new business
messaging tools
“This is a unique
opportunity for businesses
to interact with
people both where
they’re already
spending their time
and … also in this context
of one to one.”
— Benji Shomair, Director of
Product Marketing for Pages,
Facebook
Source: Facebook

5. Clienteling
 Only 6% of
retailers in
North America
can identify a
customer on
store entry, but
nearly 40%
expect to be
able to by
mid-2017

Many consumers want more in-store
personalization
23%
of North American consumers wish the personalized experience
they have online could be replicated in-store
Source: iVend, December 2015

Recap
 Marketers are spending more on shoring up the loyalty of fickle
customers
 Loyalty program membership is increasing, but active
participation is decreasing
 Although value considerations are important, lasting loyalty is a
more emotional connection
 Mobile has raised consumer expectations for channel
consistency, immediacy and real-time relevance
 Email is the leading loyalty channel, but apps, mobile wallets,
social media, and mobile-enabled clienteling can deliver real-
time engagement

Often challenges with executing loyalty
strategies get in a marketer’s way…
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 Building a single view of the customer
 Delivering relevant content to each customer
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Client Case Studies
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Yory Wurmser
Loyalty Marketing: Creating
Stickiness in the Mobile World
 Beacons for Retailers: Beyond the Hype
 Loyalty Marketing: Creating Stickiness in a Distracted World
(Forthcoming, February 8, 2016)
 Retail Email Marketing: Benchmarks and Trends in the US
 US Mcommerce 2015: eMarketer’s Forecast and Trends

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eMarketer Webinar: Loyalty Marketing—Creating Stickiness in a Mobile World