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Loyalty Programs - Canada - July 2019

Covered in this report

This report explores the ‘basic’ factors that drive repeat purchases from a company, consumer attitudes towards brand loyalty, attitudes and perceptions towards loyalty programs, desired features and the impact of Amazon on consumer expectations.

“Naturally, getting consumers to shop regularly at stores means delivering on the basics like good prices, quality, service and experience above all else. Loyalty programs are a secondary consideration, however, they do work to drive the namesake behaviour. Having said that, near universal participation means more clutter and retailers must work harder to ensure programs stand out as consumers generally feel that programs are undifferentiated and soft on providing value. While personalization is an obvious avenue to address this, programs that allow for more flexibility in ways to earn and burn rewards will see the greatest engagement. With consumer expectations changing, thanks in part to Amazon, companies today need to more clearly connect loyalty program offerings to the basic pillars that drive return patronage. Today’s consumers will respond better to brands that build relationships than those that simply focus on retention.”

– Carol Wong-Li, Associate Director - Lifestyles & Leisure

This report examines the following issues:

  • Delivering on the basics matters most, consideration of loyalty programs is secondary
  • Prioritization of price doesn’t necessarily coincide with brand loyalty
  • Perceived value gained from participating in loyalty programs is soft

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

      • The issues
        • Delivering on the basics matters most, consideration of loyalty programs is secondary
          • Figure 1: Factors influencing repeat purchases from a company, April 2019
        • Prioritization of price doesn’t necessarily coincide with brand loyalty
          • Figure 2: Attitudes towards brand loyalty, April 2019
        • Perceived value gained from participating in loyalty programs is soft
          • Figure 3: Influence and perceptions of loyalty programs, April 2019
        • Opportunities
          • Focus on building meaningful connections, think relationships over retention
            • Figure 4: Value-related factors influencing repeat purchases from a company, by age, April 2019
          • Challenge a static concept of ‘value’, what matters changes with lifestage
            • Figure 5: Top five most important features of favourite loyalty programs (selected list), by age, April 2019
          • Higher expectations and shopping for themselves, Gen Z are a unique challenge
            • Figure 6: Influence and perceptions of loyalty programs, 18-24s vs over-25s, April 2019
          • What it means
          • The Market – What You Need to Know

            • Softer confidence in financial health means more focus on value
              • In-store shopping is still preferred, reward offerings accordingly
                • The influx of international entrants remains high
                  • An aging population means a greater range of shopping needs
                  • Market Factors

                    • Softening perceived financial health means more attention to incentives
                      • Figure 7: Perception of financial health, January/February 2016-19
                    • Lag in adoption of ecommerce has implications for reward offerings
                      • Figure 8: Shop online at least once a month, Canada vs US, August 2015 and April 2018 (Canada)/March 2015 and March 2018 (US)
                    • Canada’s retail landscape is seeing an influx of international retailers
                      • Companies need to consider a greater range of shopping needs with an aging population
                        • Figure 9: Population aged 0-14 and 65+, 1995-2035*
                    • Key Players – What You Need to Know

                      • Flexibility in ways to earn and burn points wins the game
                        • Emotional connections run deeper than just transactional ones
                          • Things get even more personal and more subscription models to come
                          • What’s Happening?

                            • 2018 was a year of cross-category partnerships
                              • Sephora and Patagonia going beyond transactions to build relationships
                                • Showing a commitment to shared values – Patagonia
                                  • Building a community where like-minded beauty customers can chat – Sephora
                                    • Making good customers feel special – Sephora
                                      • Gamification really does keep things fun and interesting
                                        • Starbucks: earning bonus points with the possibility of winning Starbucks for Life
                                          • No Frills: winning your way to savings by taking a stroll through the Aisles of Glory
                                          • What’s Next?

                                            • More subscription loyalty models to come
                                              • High participation in loyalty programs is yielding only mediocre attachment at best…
                                                • …creating a hunger for better benefits
                                                  • Figure 10: ‘I am willing to pay a membership fee to get better rewards’ (% agree), by gender and age, April 2019
                                                • Notable mention: PC Insiders
                                                  • Notable mention: Lululemon
                                                    • Notable mention: CVS Health
                                                      • Personalization will get even more personal
                                                        • Skin treatment recommendations in context: La Roche-Posay
                                                          • Jet lag recommendations just for you: Etihad Airlines
                                                            • Cameras that make recommendations based on your age and gender are coming to a store near you
                                                            • The Consumer – What You Need to Know

                                                              • Basic factors come before loyalty program for repeat purchases
                                                                • Price and brand loyalty aren’t necessarily on the same side
                                                                  • Loyalty programs drive namesake behaviour, yet value gained is soft
                                                                    • Get personal, consumers are willing to make a trade
                                                                      • Amazon is raising the bar – especially for Gen Z
                                                                      • Factors Driving Repeat Purchases from Companies

                                                                        • Loyalty programs are not a mainstay driving repeat purchases
                                                                          • Figure 11: Factors influencing repeat purchases from a company, April 2019
                                                                        • Companies must go beyond what consumers think of in terms of convenience
                                                                          • Boomers place weight on a willingness to back quality
                                                                            • Figure 12: ‘Reliable product quality’ and ‘stands behind product/service’ as top five factor leading to repeat purchases from company, 18-54s vs over-55s, April 2019
                                                                          • Build up the story behind the product…
                                                                            • …and showcase the satisfied (Boomer) customers
                                                                              • Parents more likely to see loyalty program membership as a driver
                                                                                • Figure 13: ‘Membership to loyalty program’ as a top factor leading to repeat shopping from company, parents with under-18s at home vs non-parents, April 2019
                                                                              • Remind them how easy it is to gain (more) savings
                                                                              • Attitudes towards Brand Loyalty

                                                                                • Most feel they’re brand-loyal, though price matters more
                                                                                  • Figure 14: Attitudes towards brand loyalty, April 2019
                                                                                • Brand loyalty and price don’t usually align – in their words
                                                                                  • Product quality is at the heart of brand loyalty – it is the bridge
                                                                                    • Organically encourage consumers to make product quality the star
                                                                                      • Loyalty programs play a lesser role in determining brand loyalty
                                                                                        • Figure 15: Loyalty program impact on brand loyalty, April 2019
                                                                                      • Make it obvious: show how the value-adds really benefit consumers
                                                                                        • Figure 16: McCafé Mobile Order and Pay | Singing, March 2019
                                                                                        • Figure 17: PC Express – Drama 30sec, May 2019
                                                                                      • Older consumers are most likely to look beyond loyalty programs
                                                                                        • Figure 18: Loyalty program impact on brand loyalty, by age, April 2019
                                                                                      • Consider boosting in-store experiences to appeal to over-55s
                                                                                        • Figure 19: ‘Good service’ as top five factor leading to repeat purchases from company, 18-54s vs over-55s, April 2019
                                                                                    • Participation in and Perception of Loyalty Programs

                                                                                      • Despite high participation and positive influence, perceived value is soft
                                                                                        • Figure 20: Participation in any loyalty programs (net), by gender, April 2019
                                                                                        • Figure 21: Influence and perceptions of loyalty programs, April 2019
                                                                                      • The weakest connection is with the newest crop of consumers: Gen Z
                                                                                        • Figure 22: Influence and perceptions of loyalty programs, 18-24s vs over-25s, April 2019
                                                                                      • Rethink the concept of ‘value’ as lifestage impacts shopping and reward priorities
                                                                                        • Morals matter more for Gen Z
                                                                                          • Figure 23: Value-related factors influencing repeat purchases from a company, by age, April 2019
                                                                                        • Parents: most likely to feel the pull and are keen on leisure/entertainment programs
                                                                                          • Figure 24: Influence and perceptions of loyalty programs, parents of under-18s vs non-parents, April 2019
                                                                                          • Figure 25: Participate in leisure or entertainment loyalty reward programs, parents of under-18s vs non-parents, April 2019
                                                                                        • Make participation personal by tying in the emotional aspects
                                                                                          • Figure 26: Share Reel Love for Father's Day, June 2017
                                                                                        • Consider ways to make programs more accessible to the less affluent
                                                                                          • Figure 27: Any participation in loyalty reward programs (net), by household income, April 2019
                                                                                        • Be creative with ways to earn
                                                                                          • Make it so it’s a lower cost of entry to burn – consider rewards for good behaviour
                                                                                          • Desired Features

                                                                                            • Current favourite features include a good user experience and flexibility
                                                                                              • Figure 28: Top five most important features of favourite loyalty programs, April 2019
                                                                                            • Current programs may be soft on personalization, hence the lower ranking
                                                                                              • Consumers want (programs) to get personal
                                                                                                • Figure 29: Interest in personalization and sharing information with loyalty programs (% agree), April 2019
                                                                                              • Increasing relevance is the key to improving perceived value – in their words
                                                                                                • Women: more engagement means greater expectations
                                                                                                  • Figure 30: ‘Gives me options to earn points faster’ as a top five most important features of favourite loyalty programs, by gender, April 2019
                                                                                                • Mothers need more by way or relevant discounts or places they can spend rewards
                                                                                                  • Figure 31: ‘Rewards redeemable at multiple retailers’ and ‘personalized rewards’ as top five most important features of favourite loyalty programs, mothers vs overall, April 2019
                                                                                                • Younger women want to feel special – think outside-the-box exclusivity
                                                                                                  • Figure 32: ‘Provides exclusive offerings’ as top five most important features of favourite loyalty programs, women 18-34 vs overall, April 2019
                                                                                                • Generate more buzz with tiered rewards programs
                                                                                                  • Boomers: user experience is key
                                                                                                    • Figure 33: ‘Programs are easy to use’ as top five most important feature of favourite loyalty programs, 18-54s vs over-55s, April 2019
                                                                                                  • Consider in-store expertise to engage them online
                                                                                                  • The Impact of Amazon

                                                                                                    • Amazon is raising the bar when it comes to convenience expectations
                                                                                                      • Figure 34: Influence of Amazon on shopping expectations of other retailers (% agree), April 2019
                                                                                                    • Think beyond the transaction and highlight value-adds that align with the brand
                                                                                                      • Expectations for Gen Z men are most likely impacted by Amazon
                                                                                                        • Figure 35: ‘I now have higher expectations from other retailers because of Amazon’ (% agree), men 18-24 vs overall, April 2019
                                                                                                      • It’s more than just changing expectations, companies need to up their value game
                                                                                                        • Figure 36: ‘I am willing to pay a membership fee to get better rewards’ (% agree), men 18-24 vs overall, April 2019
                                                                                                      • Amazon Prime does not have a strong a foothold on Canadians (yet)
                                                                                                        • Figure 37: Membership to Amazon Prime, Canada vs US, April 2019 (Canada)/October 2018 (US)
                                                                                                      • Questioning the value of joining Amazon Prime – in their words
                                                                                                        • Take action now, companies need to be proactive to get ahead of the curve
                                                                                                        • Appendix – Data Sources and Abbreviations

                                                                                                          • Data sources
                                                                                                            • Consumer survey data
                                                                                                              • Consumer qualitative research
                                                                                                                • Abbreviations and terms
                                                                                                                  • Abbreviations
                                                                                                                    • Terms

                                                                                                                    Loyalty Programs - Canada - July 2019

                                                                                                                    £3,435.47 (Excl.Tax)