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Loyalty Marketing - US - September 2010

Whether despite the recession or because of it, loyalty marketing programs are alive and thriving. There are more than 1.8 billion program memberships in this country today—more than ever before—and considering the commitment to increased expenditures marketers have expressed, that number is certain to grow. With a troubled economy that is not yet quite stable, loyalty programs are proving to be a staple that many consumers rely on in order to help them get through. The trick for marketers is to define their customers, segment them based on their needs and create a loyalty program that differentiates them from all the others and makes loyal customers feel like the special customers they are.

The explosion in technology is creating so many changes in loyalty marketing that it’s hard to keep up with it all. Online campaigns, mobile capabilities, sophisticated CRM data that can track every bit of a consumer’s shopping or online behavior and translate that into targeted promotions—the industry has come a long way from giving out toasters to customers who open a passbook account. Customized programs, individualized marketing campaigns, online campaigns that press customers into service by asking them to promote products to their “friends,” are all being utilized to one degree or another by virtually every marketer out there.

But there are steps marketers need to take to differentiate their programs from all the others out there and increase the profitability of their programs. A customer who redeems rewards is a customer that is likely to remain with the program, so developing an effective and profitable loyalty program is a business strategy that will pay dividends far into the future.

The themes reflected in this report include, but are not limited to:

  • How the economy has affected the growth of loyalty programs
  • What consumers are looking for in their loyalty programs
  • How technology is changing the face of the loyalty program industry
  • How to redesign a loyalty program to make it more relevant and therefore successful

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Data sources
        • Consumer survey data
          • Advertising creative
            • Abbreviations and terms
              • Abbreviations
                • Companies mentioned in this report:
                • Executive Summary

                  • Industry overview
                    • Loyalty programs are more popular than ever
                      • They are also underutilized
                        • The economy has a great deal to do with loyalty program popularity
                          • Making the programs more effective
                            • Technology is changing loyalty programs
                            • Insights and Opportunities

                              • Key points
                                • Targeting moms
                                  • Figure 1: Percent of decisions influenced by moms, April 2010
                                • Social networking sites
                                  • Figure 2: Number of unique users of top social networking sites, 2008-10
                                • Mobile – the next frontier
                                  • Application-based mobile loyalty programs
                                    • Mobile couponing
                                      • Figure 3: Mobile Coupons redeemed in North America (in millions), November 2009
                                    • More sophisticated CRM data help create more effective incentives
                                      • SMEs offer opportunity
                                        • Creating partnerships
                                          • Use clues from members to improve programs
                                          • Inspire Insights

                                              • Trend: Screenagers
                                                • Trend: Credit Card Companies Target Customers Who Pay On Time
                                                  • Trend: Smart Shopping Gets Smarter
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • Membership in loyalty programs continues to rise
                                                        • Figure 4: Loyalty program memberships (in billions), 2000, 2006 and 2008
                                                        • Figure 5: Financial services loyalty program memberships (in millions), 2000, 2006 and 2008
                                                        • Figure 6: Number of loyalty memberships, by sector, 2008
                                                        • Figure 7: Financial services loyalty program participating members vs. active members, June 2010
                                                        • Figure 8: Loyalty Memberships, by category, 2008
                                                      • But bigger doesn’t necessarily mean more effective
                                                      • Competitive Context

                                                        • Key points
                                                          • The slow economy increases the competitive challenge
                                                            • Competition is fierce—communication is key
                                                            • Marketing Channels

                                                              • Key points
                                                                • Social networking sites offer great opportunity
                                                                  • Who’s using social networking sites?
                                                                    • Figure 9: Average age distribution across all social networking sites (U.S. only), February 2010
                                                                  • Different age groups use different sites
                                                                    • Word-of-mouth still works
                                                                      • Email works best
                                                                        • Regular mail still works, too
                                                                        • Market Drivers

                                                                          • Key points
                                                                            • The recession has affected spending habits
                                                                              • Younger groups are increasingly important
                                                                                • New regulations may affect debit rewards programs
                                                                                • Innovation and Innovators

                                                                                  • Key points
                                                                                    • American Express
                                                                                      • British Airways
                                                                                        • Starbucks
                                                                                          • MasterCard
                                                                                            • Nissan
                                                                                              • Regions Bank
                                                                                                • Prepaid and debit cards are offering rewards
                                                                                                • Marketing Strategies

                                                                                                  • Key points
                                                                                                    • Overview
                                                                                                      • Figure 10: Growth of ad spend on top social network sites, August 2008-August 2009
                                                                                                      • Figure 11: Top U.S. social networking site for advertising, by industry, ranked by display ad impressions, August 2009
                                                                                                    • Print advertising
                                                                                                      • Still popular: Opportunity to save or earn cash
                                                                                                        • Figure 12: American Express print ad, 2010
                                                                                                        • Figure 13: Commerce Bank print ad, 2010
                                                                                                      • More than just toasters
                                                                                                        • Figure 14: Bar Harbor Bank print ad, 2010
                                                                                                      • Direct mail advertising
                                                                                                        • Consumers’ choice: More rewards or rewards earned faster
                                                                                                          • Figure 15: Discover direct mail campaign, January-December 2010
                                                                                                          • Figure 16: Bank of America direct mail letter, January-February 2010
                                                                                                          • Figure 17: American Express direct Mail, December 2009-January 2010
                                                                                                          • Figure 18: Key Bank direct mail, June 2009
                                                                                                          • Figure 19: Capital One direct mail, November 2009
                                                                                                        • Online and email advertising
                                                                                                          • Maximizing advantages of social networking sites
                                                                                                            • Figure 20: Free Spirit MasterCard email, February 2010
                                                                                                          • Targeting a specific audience
                                                                                                            • Figure 21: Best Buy/MasterCard email, June 2010
                                                                                                          • Unique opportunities can also be a reward
                                                                                                            • Figure 22: American Express ticket offer, June 2010
                                                                                                          • Rewards for being a card member
                                                                                                            • Figure 23: Disney/Visa Rewards card, June 2010
                                                                                                          • Television advertising
                                                                                                            • Helping people save
                                                                                                              • Figure 24: Bank of America, “Chuck earns Cash Back With Gas”, 2009
                                                                                                              • Figure 25: Bank of America, “Elizabeth is seen as she swipes her card to earn cash back shopping”, 2009
                                                                                                            • Taking aim at customer objections
                                                                                                              • Figure 26: Chase, “Couple picks out their next vacation”, 2010
                                                                                                              • Figure 27: Capital One, “Vikings grocery shop, go to dry cleaner & use a live mouse for computer”, 2010
                                                                                                            • Differentiation through extra rewards
                                                                                                              • Figure 28: Capital One, “Vikings take their ski trip with double points”, 2010
                                                                                                              • Figure 29: Capital One, “Vikings take beach vacation: Double miles on every purchase”, 2010
                                                                                                          • The Consumer

                                                                                                            • Key points
                                                                                                              • Types of loyalty programs in which consumers participate
                                                                                                                  • Figure 30: Type of loyalty program participation, by gender, June 2010
                                                                                                                  • Figure 31: Loyalty program participation, by age, June 2010
                                                                                                                  • Figure 32: Loyalty program participation, by income, June 2010
                                                                                                                  • Figure 33: Loyalty program participation, by race, June 2010
                                                                                                                • Attractive incentives
                                                                                                                  • Figure 34: Incentives for using loyalty program, by gender, June 2010
                                                                                                                  • Figure 35: Incentives for using loyalty program, by age, June 2010
                                                                                                                  • Figure 36: Incentives for using loyalty program, by income, June 2010
                                                                                                                  • Figure 37: Incentives for using loyalty program, by race, June 2010
                                                                                                                  • Figure 38: Incentives for using loyalty program, by marital status and presence of children, June 2010
                                                                                                                • Important attributes of a loyalty program
                                                                                                                  • Figure 39: Important attributes of a loyalty program, by gender, June 2010
                                                                                                                  • Figure 40: Important attributes of a loyalty program, by age, June 2010
                                                                                                                • Primary credit card issuer
                                                                                                                  • Figure 41: Primary card issuer, by age, June 2010
                                                                                                                  • Figure 42: Primary card issuer, by income, June 2010
                                                                                                                  • Figure 43: Primary card issuer, by region, June 2010
                                                                                                                • Most important card benefits
                                                                                                                  • Figure 44: Reasons for using card most frequently, by gender, June 2010
                                                                                                                  • Figure 45: Reasons for using card most frequently, by age, June 2010
                                                                                                                  • Figure 46: Reasons for using card most frequently, by race/ethnicity, June 2010
                                                                                                                • Number of cards consumers have
                                                                                                                  • Figure 47: Number of credit cards used in past 60 days, by gender, June 2010
                                                                                                                • Comparing credit card offers
                                                                                                                  • Figure 48: Compare credit card offers, by gender, June 2010
                                                                                                                  • Figure 49: Compare credit card offers, by age, June 2010
                                                                                                                  • Figure 50: Whether compare credit card offers, by income, June 2010
                                                                                                              • Cluster Analysis

                                                                                                                  • Key points
                                                                                                                    • Loyalists
                                                                                                                      • Demographics
                                                                                                                        • Characteristics
                                                                                                                          • Opportunity
                                                                                                                            • Immediates
                                                                                                                              • Demographics
                                                                                                                                • Characteristics
                                                                                                                                  • Opportunity
                                                                                                                                    • Cashies
                                                                                                                                      • Demographics
                                                                                                                                        • Characteristics
                                                                                                                                          • Opportunity
                                                                                                                                            • Cluster characteristics
                                                                                                                                              • Figure 51: Loyalty marketing clusters, June 2010
                                                                                                                                              • Figure 52: Loyalty program participation, by loyalty marketing clusters, June 2010
                                                                                                                                              • Figure 53: Incentives for using loyalty program, by loyalty marketing clusters, June 2010
                                                                                                                                              • Figure 54: Important attributes of a loyalty program, by loyalty marketing clusters, June 2010
                                                                                                                                              • Figure 55: Reasons for using card most frequently, by loyalty marketing clusters, June 2010
                                                                                                                                            • Cluster demographics
                                                                                                                                              • Figure 56: Loyalty marketing clusters, by gender, June 2010
                                                                                                                                              • Figure 57: Loyalty marketing clusters, by age group, June 2010
                                                                                                                                              • Figure 58: Loyalty marketing clusters, by income group, June 2010
                                                                                                                                              • Figure 59: Loyalty marketing clusters, by race, June 2010
                                                                                                                                              • Figure 60: Loyalty marketing clusters, by Hispanic origin, June 2010
                                                                                                                                            • Cluster methodology
                                                                                                                                            • Key Drivers Analysis

                                                                                                                                              • Key drivers
                                                                                                                                                • Discussion
                                                                                                                                                  • Importance of Incentives
                                                                                                                                                    • Figure 61: Incentives to use a credit card loyalty program by whether respondent has switched in the past, June 2010
                                                                                                                                                    • Figure 62: Incentives to use a credit card loyalty program by self-reported FICO® or other credit score, June 2010
                                                                                                                                                • Custom Consumer Groups

                                                                                                                                                  • Key points
                                                                                                                                                    • Type of loyalty programs in which consumers participate
                                                                                                                                                        • Figure 63: Loyalty program participation, by gender and age, June 2010
                                                                                                                                                        • Figure 64: Loyalty program participation, by race and income, June 2010
                                                                                                                                                        • Figure 65: Loyalty program participation, by marital status and presence of children, June 2010
                                                                                                                                                      • Attractive incentives
                                                                                                                                                        • Figure 66: Incentives for using loyalty program, by race and income, June 2010
                                                                                                                                                        • Figure 67: Incentives for using loyalty program, by gender and age, June 2010
                                                                                                                                                        • Figure 68: Incentives for using loyalty program, by size of household, June 2010
                                                                                                                                                        • Figure 69: Incentives for using loyalty program, by marital status and presence of children, June 2010
                                                                                                                                                      • Primary card issuer
                                                                                                                                                          • Figure 70: Primary card issuer, by race and income, June 2010
                                                                                                                                                        • Most important card benefits
                                                                                                                                                            • Figure 71: Reasons for using card most frequently, by marital status and presence of children, June 2010
                                                                                                                                                            • Figure 72: Reasons for using card most frequently, by gender and age, June 2010
                                                                                                                                                        • Appendix: Trade Associations

                                                                                                                                                          Companies Covered

                                                                                                                                                          • American Express Company (The)
                                                                                                                                                          • Bank of America Corporation
                                                                                                                                                          • Bebo Inc
                                                                                                                                                          • Continental Airlines Inc.
                                                                                                                                                          • Facebook, Inc.
                                                                                                                                                          • Google, Inc.
                                                                                                                                                          • Henry J. Kaiser Family Foundation
                                                                                                                                                          • HSBC USA Inc.
                                                                                                                                                          • Kimberly-Clark Corporation
                                                                                                                                                          • LinkedIn
                                                                                                                                                          • McDonald's U.S.A.
                                                                                                                                                          • MySpace.com
                                                                                                                                                          • Netflix, Inc.
                                                                                                                                                          • PricewaterhouseCoopers
                                                                                                                                                          • Starbucks Corporation
                                                                                                                                                          • Twitter, Inc.
                                                                                                                                                          • U.S. Bureau of Labor Statistics

                                                                                                                                                          Loyalty Marketing - US - September 2010

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