Renata Freund
Brands are failing to keep consumers engaged with loyalty programs, according to a study by marketing consultancy Honeycomb.
More than a third of consumers say they use a brand due to its loyalty program benefits.
The study, The Science of Loyalty – from Situationship to Relationship, analysed 52 of Australia’s leading loyalty programs across retail, travel, telco/banking/finance and paid programs.
Loyalty programs were evaluated on membership rates, engagement and impact on spend, with the top programs including Bunnings PowerPass, Coles Plus, One Pass, Woolworths Delivery Unlimited, Costco membership, FlyBuys, American Express Membership Rewards, eBay Plus, Telstra Plus and Uber One.
The report found that more loyalty benefits did not equate to more success with consumers - despite signing up for a variety of loyalty programs Australians are only actively engaged with an average of five.
“For most brands that challenge isn’t providing the right mix, or more or meaningful benefits, it’s delivering a loyalty program that addresses the other key areas that are commonly overlooked –frictionless engagement and triggers to engage,” said Renata Freund, founder of Honeycomb Strategy.
“The brands that are doing this well are seeing loyalty translate into tangible impact on spend, not just membership vanity rates. The truth is that a large portion of Australia’s loyalty programs are great at driving the initial sign-up with a motivating benefit, but very few are translating that into ongoing engagement that ladders up to meaningful ROI."
One factor contributing to this is the rise of paid loyalty programs with 72% of Millennials and 65% of Gen Z’s now subscribed. The most popular programs are One Pass, Costco Membership, Coles Plus, eBay Plus, and Woolworths Delivery Unlimited.
Another influence is “the human factor" with top programs meeting customer expectations.
“Seven in 10 consumers expect immediate benefits from their loyalty program, while 63% quickly lose interest if the program doesn’t give them something new or valuable,” Freund said.
“While consumers join loyalty programs to receive immediate benefits, only a handful of programs make it into active mental rotation, with the rest falling into the noise. Brands are not just competing on benefits, they are competing for attention, and attention is scarce.”
Brands with low engagement are Emirates Skywards, Baby Bunting Family, Marriott Bonvoy, H&M Hello Member and Club BCF.
Brands need to be taking advantage of behavioural science to re-engage customers according to the study.
Loss Aversion Theory: where brands create a sense of ownership and customers are staying to protect their earned “value”.
Mental accounting: loyalty programs are a “mental bucket” that separates benefits from spending real money, driving satisfaction in the process, and motivating them to continue using them.
Social Identity Theory: loyalty programs use its "member group" to create a community customers want to stay a part of.
Reciprocity Effect: By framing rewards as gifts, brands are creating goodwill and positivity and customers want to reciprocate this through their loyalty.
Cognitive Ease: focuses on removing friction and ensuring the process of using the programme becomes effortless and habitual.
“Behavioural Science helps us understand how people actually behave – not just what's top of mind for them. By applying behavioural science, brands can better diagnose challenges with their existing programs and refine their programs to actively engage customers with a meaningful proposition,” Freund said.
“The Science of Loyalty equips CMOs, customer insights professionals, and marketing leaders with practical frameworks to identify the friction points holding back loyalty program engagement, pinpoint the behavioural levers that top-performing brands use to influence spend and translate insights into strategies that deliver measurable ROI.”
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