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Retailer Loyalty Programs - US - July 2014

“While loyalty programs likely do not lead to complete loyalty to a specific retailer, many consumers are likely to change their shopping habits in order to earn incentives. However, there is also a significant demand for more meaningful rewards and easier ways of earning them, suggesting that consumers see a lot of room for improvement in existing loyalty initiatives.”

– Bryant Harland, Technology Analyst 

This report looks at the following issues:

  • Does loyalty program participation translate to customer loyalty?
  • Central frustrations with loyalty programs
  • Should retailers emphasize personalization or privacy?

 

The share of consumers who reported participating in customer loyalty programs rose between 2013 and 2014 for every retail sector, with electronics supply stores, mass merchandisers, and online-only retailers making considerable gains – Mintel data show loyalty participation for all of these categories rose at least 10 percentage points between this report and the last.
 
As overall loyalty program participation rises, however, it will be more difficult for retailers to differentiate their initiatives from the programs offered by the competition.
 
This report finds that monetary incentives are the most important for consumers when they think about loyalty programs.
However, loyalty programs can stand out by offering the types of promotions that loyalty participants are most receptive to and by appealing to shoppers’ myriad shopping motivations. Other themes in this report include overall receptiveness to promotional communication, which communication mediums consumers prefer, and the core frustrations that consumers have with the loyalty programs they participate in.
 
For the purpose of this report, a loyalty program – including store credit/debit card or a reward card – is defined as a customer reward program that is offered by a retailer as an incentive for continued patronage and frequent purchases.
 
Rewards are generally in the form of points, discounts, special offers, rebates, or other prizes.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Consumer survey data
            • Direct marketing creative
              • Abbreviations
                • Terms
                • Executive Summary

                  • Overview
                    • The market
                      • Figure 1: Actions taken to earn loyalty rewards, May 2014
                    • Key players
                      • The consumer
                        • Loyalty programs key factor in determining where consumers shop
                          • Figure 2: Factors influencing where consumers shop, May 2014
                        • Action taken correlates to household size
                          • Figure 3: Action taken to earn loyalty rewards - any, by household size, May 2014
                        • More than four in 10 report frustration with loyalty programs
                          • Figure 4: Frustrations with loyalty programs, May 2014
                        • What we think
                        • Issues and Insights

                            • Does loyalty program participation translate to customer loyalty?
                              • The issues
                                • The implications
                                  • Central frustrations with loyalty programs
                                    • The issues
                                      • The implications
                                        • Should retailers emphasize personalization or privacy?
                                          • The issues
                                            • The implications
                                            • Trend Applications

                                                • Trend: Many Mes
                                                  • Trend: Return to the Experts
                                                    • Trend: Why Buy
                                                    • Market Drivers

                                                      • Key points
                                                        • Consumer spending trending upward since the recession
                                                          • Figure 5: Consumer confidence and unemployment, 2000-14
                                                        • Online shopping forecast to grow
                                                          • Figure 6: US total online shopping sales, at current prices, 2009-19
                                                        • Mobile apps improve the convenience of loyalty programs
                                                          • Credit cards provide universal rewards to consumers
                                                            • Figure 7: Rewards/affiliations with respondents' credit cards, by age, November 2012-December 2013
                                                        • Leading Companies

                                                          • Key points
                                                              • Figure 8: Number of mentions of leading retailers May 2014
                                                            • CVS
                                                              • Walgreens
                                                                • Kroger
                                                                  • Target
                                                                    • Amazon
                                                                      • Best Buy
                                                                        • Starbucks
                                                                          • Kohl’s
                                                                            • Walmart
                                                                              • Safeway
                                                                              • Innovations and Innovators

                                                                                • The North Face offers experiential awards
                                                                                  • Figure 9: The North Face’s VIPeak rewards catalog, April 2014
                                                                                • Delicious Karma translates loyalty into charitable donations
                                                                                  • Figure 10: Delicious Karma’s “Karma Challenge” page, April 2014
                                                                                • Birdback
                                                                                  • Figure 11: Birdback homepage, April 2014
                                                                                • American Express lets loyalty members use points for Uber rides
                                                                                • Marketing Strategies

                                                                                    • Loyalty programs that emphasize cost savings
                                                                                      • Figure 12: Pier 1 Imports, fresh finds for your spring table, April 2014
                                                                                      • Figure 13: Pier 1 Imports, make it an early spring with our candles, lanterns, and fragrances, February 2014
                                                                                      • Figure 14: The Children’s place, loyalty member email campaign, April 2014
                                                                                    • Loyalty programs that emphasize exclusivity
                                                                                      • Figure 15: Banana Republic, cardmembers: add some color with exclusive savings!, January 2014
                                                                                      • Figure 16: Sephora, VIB 15% off: early access event, April 2014
                                                                                    • Loyalty programs with experiential rewards
                                                                                    • Social Media

                                                                                        • Key points
                                                                                          • Market overview
                                                                                            • Key social media metrics
                                                                                              • Figure 17: Key performance indicators, selected retailer loyalty programs, June 16, 2013-June 15, 2014
                                                                                            • Brand usage and awareness
                                                                                              • Figure 18: Brand usage and awareness of retailer loyalty programs, May 2014
                                                                                            • Interaction with brands
                                                                                              • Figure 19: Interaction with retailer loyalty programs, May 2014
                                                                                            • Leading online campaigns
                                                                                              • Rewarding healthy, active lifestyles
                                                                                                • Exclusive partnerships for limited-edition offers
                                                                                                  • Loyalty programs that give to charity
                                                                                                    • Social media promotion rewarded with extra perks
                                                                                                      • What we think
                                                                                                        • Online conversations
                                                                                                          • Figure 20: Selected Starbucks’ My Starbucks Rewards Twitter mentions, November 2013
                                                                                                          • Figure 21: Online mentions, selected retailer loyalty programs, June 16, 2013-June 15, 2014
                                                                                                        • Where are people talking about retailer loyalty programs?
                                                                                                          • Figure 22: Selected Walgreens Balance Rewards Twitter mentions, June 2014
                                                                                                          • Figure 23: Mentions by page type, selected retailer loyalty programs, June 16, 2013-June 15, 2014
                                                                                                        • What are people talking about online?
                                                                                                          • Figure 24: Mentions by topic of conversation, selected retailer loyalty programs, June 16, 2013-June 15, 2014
                                                                                                      • Retailer Loyalty Program Participation

                                                                                                        • Key points
                                                                                                          • Loyalty program participation is on the rise
                                                                                                            • Figure 25: Participation in retailer loyalty programs, June 2013 - May 2014
                                                                                                          • Young men and women participate in the largest number of programs
                                                                                                            • Figure 26: Participation in retailer loyalty programs (mean), by gender and age, May 2014
                                                                                                          • Parents more likely to participate in loyalty programs than those without children
                                                                                                            • Figure 27: Participation in retailer loyalty programs (mean), by gender and parents with children in household, May 2014
                                                                                                          • Participation across retail sectors trends upward with household income
                                                                                                            • Figure 28: Participation in retail loyalty programs, by household income, May 2014
                                                                                                        • Shopping Motivations: Where Loyalty Programs Fit

                                                                                                          • Key points
                                                                                                            • Top motivations for engaging with a business
                                                                                                              • Figure 29: Respondent opinions about shopping, by age, November 2012-December 2013
                                                                                                            • Nearly four in 10 consumers prefer stores with loyalty programs
                                                                                                              • Figure 30: Factors that influence where consumers shop, by gender and age, May 2014
                                                                                                          • The Impact of Loyalty Programs on Shopping Behavior

                                                                                                            • Key points
                                                                                                              • More than half of respondents took action to earn loyalty rewards
                                                                                                                • Figure 31: Impact of loyalty programs on shopping behavior, by demographics
                                                                                                              • Young men and women more likely to spend more to earn rewards
                                                                                                                • Figure 32: Impact of loyalty programs on shopping behavior, by gender and age, May 2014
                                                                                                              • Moms and dads show higher engagement with loyalty programs than nonparents
                                                                                                                • Figure 33: Impact of loyalty programs on shopping behavior, by gender and parents with children in household, May 2014
                                                                                                              • Engagement with loyalty programs trends upward with household size
                                                                                                                • Figure 34: Impact of loyalty programs on shopping behavior, by household size, May 2014
                                                                                                              • More than four in 10 consumers from lower-income households alter shopping behavior to earn rewards
                                                                                                                • Figure 35: Impact of loyalty programs on shopping behavior, by household income, May 2014
                                                                                                            • Perceptions Regarding Customer Loyalty Programs and Sources of Frustration

                                                                                                              • Key points
                                                                                                                • Most common loyalty frustrations
                                                                                                                  • Figure 36: Preferences and frustrations regarding loyalty programs, May 2014
                                                                                                                • Types of loyalty programs consumers prefer
                                                                                                                  • Figure 37: Preferences and frustrations regarding loyalty programs, by gender and age, May 2014
                                                                                                                • Dads express frustration with redeeming rewards
                                                                                                                  • Figure 38: Preferences and frustrations regarding loyalty programs, by gender and parents with children in household, May 2014
                                                                                                              • Loyalty Incentives: Importance of Reward Types

                                                                                                                • Key points
                                                                                                                  • Free products, storewide discounts, and store credit with purchases top loyalty program incentives
                                                                                                                      • Figure 39: Importance of retailer loyalty program features, by gender and age, May 2014
                                                                                                                    • High-priority incentives for subscription-based programs
                                                                                                                      • Figure 40: Importance of features for subscription-based loyalty programs, May 2014
                                                                                                                    • Younger consumers more receptive to subscription-based loyalty programs
                                                                                                                      • Figure 41: Importance of incentives in subscription-based loyalty programs, by gender and age, May 2014
                                                                                                                  • Consumers’ Preferred Mediums and Frequency of Promotional Communication

                                                                                                                    • Key points
                                                                                                                      • How much do consumers want to interact with businesses?
                                                                                                                          • Figure 42: Preferred frequency and medium of promotional communication, May 2014
                                                                                                                        • Young consumers open to frequent promotional communication
                                                                                                                            • Figure 43: Preferences regarding promotional communication – any high frequency, by gender and age, May 2014
                                                                                                                          • More than one third of larger households are receptive to frequent promotions on social media
                                                                                                                              • Figure 44: Preferences regarding promotional communication – any high frequency, by household size, May 2014
                                                                                                                          • Race and Hispanic Origin

                                                                                                                            • Key points
                                                                                                                              • Asians participate in the largest variety of loyalty programs
                                                                                                                                • Figure 45: Participation in retailer loyalty programs, by race/Hispanic origin, May 2014
                                                                                                                              • Half of Asians ask others for advice before making a purchase
                                                                                                                                • Figure 46: Respondent shopping behaviors, by race/Hispanic origin, November 2012-December 2013
                                                                                                                              • Hispanics and Asians are the most likely to prefer frequent communication
                                                                                                                                • Figure 47: Preferences regarding promotional communication – any high frequency, by race/Hispanic origin, May 2014
                                                                                                                              • Blacks show receptiveness to advertising
                                                                                                                                • Figure 48: Respondent general attitudes about the media, by race/Hispanic origin, November 2012-December 2013
                                                                                                                            • Consumer Segmentation

                                                                                                                                • Key points
                                                                                                                                  • Consumer segmentation by promotional communication frequency
                                                                                                                                      • Figure 49: Loyalty program groups, by gender and age, May 2014
                                                                                                                                    • Influence of communication preferences on loyalty participation
                                                                                                                                        • Figure 50: Impact of loyalty programs on shopping behavior, by loyalty programs groups, May 2014
                                                                                                                                      • Consumers who prefer frequent brand communication show greater interest in diverse loyalty programs
                                                                                                                                          • Figure 51: Importance of loyalty rewards, by loyalty programs groups
                                                                                                                                        • Consumers who prefer limited promotional communication are the most price sensitive
                                                                                                                                            • Figure 52: Factors that influence where consumers shop, by loyalty programs groups, May 2014
                                                                                                                                          • Communication preferences and loyalty program frustrations
                                                                                                                                              • Figure 53: Preferences and frustrations regarding loyalty programs by loyalty programs groups, May 2014
                                                                                                                                          • Appendix – Loyalty Program Members

                                                                                                                                            • Overview
                                                                                                                                              • Figure 54: Total US loyalty program memberships and active memberships, 2006-12
                                                                                                                                          • Appendix – Other Useful Consumer Tables

                                                                                                                                            • Participation in retailer loyalty programs
                                                                                                                                              • Figure 55: Participation in retailer loyalty programs, by gender and age, May 2014
                                                                                                                                              • Figure 56: Participation in retailer loyalty programs, by gender and parents with children in household, May 2014
                                                                                                                                              • Figure 57: Participation in retailer loyalty programs, by loyalty programs groups, May 2014
                                                                                                                                              • Figure 58: Participation in retailer loyalty programs (mean), by household income, May 2014
                                                                                                                                              • Figure 59: Participation in retailer loyalty programs (mean), by household size, May 2014
                                                                                                                                              • Figure 60: Repertoire of participation in retailer loyalty programs, by gender and age, May 2014
                                                                                                                                              • Figure 61: Repertoire of participation in retailer loyalty programs, by gender and parents with children in household, May 2014
                                                                                                                                              • Figure 62: Participation in retailer loyalty programs (mean), by race/Hispanic origin, May 2014
                                                                                                                                            • Importance of loyalty rewards by type
                                                                                                                                              • Figure 63: Importance of loyalty rewards, by race and Hispanic origin, May 2014
                                                                                                                                            • Consumer shopping motivations and behaviors
                                                                                                                                              • Figure 64: Respondent opinions about shopping, by gender and age, November 2012-December 2013
                                                                                                                                              • Figure 65: Respondent opinions about shopping, by household income, November 2012-December 2013
                                                                                                                                              • Figure 66: Respondent shopping behaviors, by age, November 2012-December 2013
                                                                                                                                              • Figure 67: Factors that influence where consumers shop, by household income, May 2014
                                                                                                                                              • Figure 68: Factors that influence where consumers shop, by household size, May 2014
                                                                                                                                              • Figure 69: Factors that influence where consumers shop, by gender and parents with children in household, May 2014
                                                                                                                                              • Figure 70: Respondent opinions about shopping, by race/Hispanic origin, November 2012-December 2013
                                                                                                                                            • Sources of product information
                                                                                                                                              • Figure 71: Sources of product information during shopping, by age, November 2012-December 2013
                                                                                                                                              • Figure 72: Sources of product information during shopping, by race/Hispanic origin, November 2012-December 2013
                                                                                                                                            • Participation in credit/debit card rewards programs
                                                                                                                                              • Figure 73: Respondent credit card ownership, by age, November 2012-December 2013
                                                                                                                                              • Figure 74: Rewards/affiliations with respondents' credit cards, by household income, November 2012-December 2013
                                                                                                                                              • Figure 75: Perceptions regarding retail loyalty programs by actions taken to earn rewards
                                                                                                                                              • Figure 76: Rewards/affiliations with respondents' credit cards, by gender and age, November 2012-December 2013
                                                                                                                                            • Preferences regarding promotional communication
                                                                                                                                              • Figure 77: Preferences regarding promotional communication – any high frequency, by gender and parents with children in household, May 2014
                                                                                                                                              • Figure 78: Preferences regarding promotional communication – any usage, by gender and age, May 2014
                                                                                                                                              • Figure 79: Preferences regarding promotional communication – any usage, by loyalty programs groups, May 2014
                                                                                                                                              • Figure 80: Loyalty program groups, by household income, May 2014
                                                                                                                                              • Figure 81: Loyalty program groups, by race/Hispanic origin, May 2014
                                                                                                                                              • Figure 82: Loyalty program groups, by household size, May 2014
                                                                                                                                              • Figure 83: Loyalty program groups, by gender and parents with children in household, May 2014
                                                                                                                                            • Perceptions regarding advertising
                                                                                                                                              • Figure 84: general attitudes about the media, by gender and age, November 2012-December 2013
                                                                                                                                          • Appendix – Social Media

                                                                                                                                            • Online conversations
                                                                                                                                              • Figure 85: Online mentions, selected retailer loyalty programs, June 16, 2013-June 15, 2014
                                                                                                                                            • Brand analysis
                                                                                                                                              • Figure 86: Starbucks’ My Starbucks Rewards key social media indicators, June 2014
                                                                                                                                              • Figure 87: Best Buy’s My Best Buy key social media indicators, June 2014
                                                                                                                                              • Figure 88: CVS ExtraCare Rewards Program key social media indicators, June 2014
                                                                                                                                              • Figure 89: Walgreens Balance Rewards key social media indicators, June 2014
                                                                                                                                              • Figure 90: Kroger Rewards key social media indicators, June 2014
                                                                                                                                              • Figure 91: Safeway Rewards Points key social media indicators, June 2014
                                                                                                                                            • Brand usage or awareness
                                                                                                                                              • Figure 92: Brand usage or awareness, May 2014
                                                                                                                                              • Figure 93: Walgreens Balance Rewards usage or awareness, by demographics, May 2014
                                                                                                                                              • Figure 94: CVS ExtraCare Rewards Program usage or awareness, by demographics, May 2014
                                                                                                                                              • Figure 95: Kroger Rewards usage or awareness, by demographics, May 2014
                                                                                                                                              • Figure 96: Safeway Reward Points usage or awareness, by demographics, May 2014
                                                                                                                                              • Figure 97: Best Buy’s My Best Buy usage or awareness, by demographics, May 2014
                                                                                                                                              • Figure 98: Starbucks’ My Starbucks Rewards usage or awareness, by demographics, May 2014
                                                                                                                                            • Activities done
                                                                                                                                              • Figure 99: Activities done, May 2014
                                                                                                                                              • Figure 100: Walgreens Balance Rewards – activities done – I have looked up/talked about this brand online on social media, by demographics, May 2014
                                                                                                                                              • Figure 101: Walgreens Balance Rewards – activities done – I have contacted/interacted with the brand online on social media to, by demographics, May 2014
                                                                                                                                              • Figure 102: Walgreens Balance Rewards – activities done – I follow/like the brand on social media because, by demographics, May 2014
                                                                                                                                              • Figure 103: Walgreens Balance Rewards – activities done – I have researched the brand on social media to, by demographics, May 2014
                                                                                                                                              • Figure 104: CVS ExtraCare Rewards Program – activities done – I have looked up/talked about this brand online on social media, by demographics, May 2014
                                                                                                                                              • Figure 105: CVS ExtraCare Rewards Program – activities done – I have contacted/interacted with the brand online on social media to, by demographics, May 2014
                                                                                                                                              • Figure 106: CVS ExtraCare Rewards Program – activities done – I follow/like the brand on social media because, by demographics, May 2014
                                                                                                                                              • Figure 107: CVS ExtraCare Rewards Program – activities done – I have researched the brand on social media to, by demographics, May 2014
                                                                                                                                              • Figure 108: Kroger Rewards – activities done – I have looked up/talked about this brand online on social media, by demographics, May 2014
                                                                                                                                              • Figure 109: Kroger Rewards – activities done – I have contacted/interacted with the brand online on social media to, by demographics, May 2014
                                                                                                                                              • Figure 110: Kroger Rewards – activities done – I have researched the brand on social media to, by demographics, May 2014
                                                                                                                                              • Figure 111: Safeway Reward Points – activities done – I have looked up/talked about this brand online on social media, by demographics, May 2014
                                                                                                                                              • Figure 112: Safeway Reward Points – activities done – I have contacted/interacted with the brand online on social media to, by demographics, May 2014
                                                                                                                                              • Figure 113: Safeway Reward Points – activities done – I have researched the brand on social media to, by demographics, May 2014
                                                                                                                                              • Figure 114: Best Buy’s My Best Buy – activities done – I have looked up/talked about this brand online on social media, by demographics, May 2014
                                                                                                                                              • Figure 115: Best Buy’s My Best Buy – activities done – I have contacted/interacted with the brand online on social media to, by demographics, May 2014
                                                                                                                                              • Figure 116: Best Buy’s My Best Buy – activities done – I follow/like the brand on social media because, by demographics, May 2014
                                                                                                                                              • Figure 117: Best Buy’s My Best Buy – activities done – I have researched the brand on social media to, by demographics, May 2014
                                                                                                                                              • Figure 118: Starbucks’ My Starbucks Rewards – activities done – I have looked up/talked about this brand online on social media, by demographics, May 2014
                                                                                                                                              • Figure 119: Starbucks’ My Starbucks Rewards – activities done – I have contacted/interacted with the brand online on social media to, by demographics, May 2014
                                                                                                                                              • Figure 120: Starbucks’ My Starbucks Rewards – activities done – I follow/like the brand on social media because, by demographics, May 2014
                                                                                                                                              • Figure 121: Starbucks’ My Starbucks Rewards – activities done – I have researched the brand on social media to, by demographics, May 2014
                                                                                                                                          • Appendix – Trade Associations

                                                                                                                                            Companies Covered

                                                                                                                                            • Amazon.com Inc
                                                                                                                                            • Best Buy stores (USA)
                                                                                                                                            • CVS Caremark Corporation
                                                                                                                                            • Kohl's Corporation
                                                                                                                                            • Safeway Inc
                                                                                                                                            • Starbucks Corporation
                                                                                                                                            • Target Corporation
                                                                                                                                            • The Kroger Co.
                                                                                                                                            • Walgreen Co
                                                                                                                                            • Walmart Stores (USA)

                                                                                                                                            Retailer Loyalty Programs - US - July 2014

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