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Loyalty Programs - US - July 2019

"Loyalty program membership continues to grow, even as many programs struggle to keep current members actively participating. With so much competing for their attention, consumers have no patience for programs that are complex, confusing or time-consuming. Yet, well-executed loyalty programs can be a powerful tool to drive customer engagement and harness the power of data-driven marketing.
In the retail landscape, Amazon is changing not just how people shop, but also what they expect from loyalty programs. Flexibility and personalization are emerging as the keys to making loyalty programs relevant and effective."
- Vince DiGirolamo, Director of Retail Research

This Report looks at the following areas:

  • Participation growing, but saturation a risk
  • Ease of use and relevancy key concerns
  • Amazon has changed the playing field

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • Overview
          • Top takeaways
            • The issues
              • Participation growing, but saturation a risk
                • Figure 1: US loyalty program count of memberships (2014, 2016), any membership (April 2019), active use (October 2017-November 2018)
              • Ease of use and relevancy key concerns
                • Figure 2: Loyalty program dislikes, April 2019
              • Amazon has changed the playing field
                • Figure 3: Attitudes toward loyalty programs – Amazon effect, by Amazon Prime members, April 2019
              • The opportunities
                • Programs can change behavior
                  • Figure 4: Loyalty program engagement – “Swayable consumers,” by age, April 2019
                • Personalization motivates key customers
                  • Figure 5: Select participation drivers, by willingness to visit or spend more after joining loyalty program, April 2019
                • Loyalty programs get social
                  • Figure 6: Attitudes toward loyalty programs – Rewards for reviews, by age, Hispanic origin and parental status, April 2019
                • What it means
                • The Market – What You Need to Know

                  • Loyalty programs growing, led by retail
                    • Communication a delicate balance
                      • A bad app may be worse than no app
                        • Consumers to cash in
                        • Market Indicators

                          • Loyalty programs proliferate
                            • Figure 7: US loyalty program membership, 2014 and 2016
                          • Retail represents largest share of memberships
                            • Figure 8: US loyalty program membership, by sector, 2017
                        • Market Sector Trends

                          • Retail outpaces hospitality in participation
                            • Figure 9: Loyalty program use/membership across retail, travel, finance, October 2017-November 2018
                          • Supermarkets lead in active use
                            • Figure 10: Retail loyalty program use in the last 4 weeks, October 2017-November 2018
                          • Reward credit cards natural partners for travel rewards programs
                            • Figure 11: Travel loyalty program redemption, attitudes, credit card ownership, October 2017-November 2018
                        • Analyst Perspective

                          • Apps present opportunities and challenges
                            • Figure 12: User reviews of supermarket apps, 2019
                          • Make it easy without becoming invisible
                            • Communication must be timely, targeted and not too frequent
                              • Figure 13: Discover Card Cashback Match email campaign, January 2019
                          • Market Factors

                            • Strong economic trends create prime opportunities for loyalty programs
                              • Figure 14: GDP change from previous period and PCE (personal consumption expenditure), Q1 2007-Q1 2019
                              • Figure 15: Consumer confidence and unemployment, 2000-April 2019
                            • US adding more than a million $100K+ households each year
                              • Figure 16: US distribution of household income, 2013-17
                          • Key Players – What You Need to Know

                            • Prime success
                              • Gamification working to Starbucks’ advantage
                                • Broad partnerships carry risks
                                  • Majority of memberships are inactive
                                    • Merging programs proves to be problematic
                                      • Rewards incentivize micro-influencers
                                        • Leveraging multi-tier programs to satisfy disparate desires
                                        • What’s Working?

                                          • Amazon Prime passes 100 million US members
                                            • The shipping advantage
                                              • The entertainment subscription advantage
                                                • Figure 17: Amazon Prime email campaign, December 2017
                                              • Gamification still effective with consumers
                                                  • Figure 18: Jewel-Osco Monopoly game Facebook post, 2018
                                                • Starbucks bright light in gamification of rewards programs
                                                  • Beyond standard incentives
                                                    • Figure 19: Sephora Facebook post, 2019
                                                  • T-Mobile ditches the points
                                                    • Figure 20: T-Mobile Tuesdays Facebook post, 2019
                                                • What’s Struggling?

                                                  • Saturation and inactivity
                                                    • Broad coalition loyalty programs not a good fit for US market
                                                      • Consumers “Bonvoyed” by mergers and devaluations
                                                        • Figure 21: Twitter posts with #bonvoyed, June 2019
                                                    • What’s Next?

                                                      • Loyalty gets (more) social
                                                        • Figure 22: DSW friends and benefits email campaign, May 2019
                                                      • Loyalty gets (more) personal
                                                        • Figure 23: TOMS Facebook post
                                                        • Figure 24: TOMS “Stand for Tomorrow” ad, 2019
                                                      • Fighting fatigue
                                                        • Figure 25: Kingsford Charcoal Facebook post, June 2019
                                                      • Broader appeal via multi-tier programs
                                                        • Loyalty apps as entertainment?
                                                          • Figure 26: Starbucks partnership with Seattle International Film Festival, June 2019
                                                      • The Consumer – What You Need to Know

                                                        • Supermarkets narrowly best Amazon, drugstores
                                                          • One in four members make additional purchases to reap rewards
                                                            • Personalization, exclusivity drivers for high-value customers
                                                              • Rewards effective, brand values important for building loyalty
                                                                • Timing and value top complaints; Amazon bucks anti-fee sentiment
                                                                  • Majority of consumers see loyalty programs as valuable
                                                                    • Consumers want flexibility, freebies and rewards for reviews
                                                                    • Loyalty Program Membership

                                                                      • Majority of adults have membership in at least three programs
                                                                        • Value in targeting Asian Americans
                                                                          • Higher-income groups participate in more program categories
                                                                            • Figure 27: Count of loyalty program memberships, by key demographics, April 2019
                                                                          • Supermarkets overtake drugstores for memberships
                                                                            • Prime headed toward overtaking supermarket participation
                                                                              • Figure 28: Loyalty program memberships, April 2019
                                                                            • 35-44s anchor many loyalty categories
                                                                                • Figure 29: Loyalty program membership types, by age, April 2019
                                                                            • Loyalty Program Engagement

                                                                              • Loyalty programs drive shopping behavior for one third of members
                                                                                  • Figure 30: Loyalty program engagement – Revenue and visitation, by age, April 2019
                                                                                • Higher income 18-34s a sweet spot for loyalty programs
                                                                                  • Figure 31: Promotion of loyalty programs by members, by age and household income, April 2019
                                                                                • Apps serve high-value customers
                                                                                  • Figure 32: Loyalty program engagement – App usage, by gender and age and online shopping frequency, April 2019
                                                                              • Participation Drivers

                                                                                • Consumers ready for personalized loyalty programs
                                                                                  • Figure 33: Participation drivers, April 2019
                                                                                • Ideal program combines discounts with personalized rewards
                                                                                  • Figure 34: TURF Analysis – Participation drivers, April 2019
                                                                                  • Figure 35: Table – TURF Analysis – Participation drivers, April 2019
                                                                                • Exclusivity, personalization and fun draw 18-34s
                                                                                  • Figure 36: Participation drivers most appealing to younger adults, by age, April 2019
                                                                                  • Figure 37: Participation driver: discounts on merchandise, by age, April 2019
                                                                                • Personalization draws the best loyalty customers
                                                                                  • Figure 38: Select participation drivers, by willingness to visit or spend more after joining loyalty program, April 2019
                                                                              • Loyalty Drivers

                                                                                • Rewards drive loyalty for nearly half of consumers
                                                                                  • Figure 39: Loyalty drivers – Ranked, April 2019
                                                                                • Connect with 18-34s through unique brand qualities and values
                                                                                  • Figure 40: Selected loyalty drivers, 18-34s vs all, April 2019
                                                                              • Loyalty Program Dislikes

                                                                                • Top complaints relate to value
                                                                                  • Figure 41: Loyalty program dislikes, April 2019
                                                                                • Amazon Prime has overcome widespread reluctance to pay membership fees
                                                                                  • Figure 42: How loyalty program membership fees impact Amazon Prime membership, April 2019
                                                                                • Reward expiration frustrates best customers
                                                                                  • Figure 43: Dislike of reward expiration, by willingness to visit or spend more after joining loyalty program, April 2019
                                                                              • Loyalty Program Value

                                                                                • Frequent online shoppers see loyalty programs as a necessity
                                                                                  • Figure 44: Attitudes toward loyalty programs – Value and necessity, by online shopping frequency, April 2019
                                                                                • Niche category members find greater value in programs
                                                                                  • Figure 45: Attitudes toward loyalty programs – Value, by loyalty program memberships, April 2019
                                                                                • Programs can reward even loyalty skeptics
                                                                                  • Figure 46: Attitudes toward loyalty programs – Skepticism, April 2019
                                                                              • Attitudes toward Loyalty Programs

                                                                                • Amazon effect extends beyond Prime members
                                                                                    • Figure 47: Attitudes toward loyalty programs – Amazon effect, by Amazon Prime members, April 2019
                                                                                  • Flexibility and free stuff are the paths to customer satisfaction
                                                                                    • Figure 48: Attitudes toward loyalty programs – Preferences, April 2019
                                                                                  • Expiring rewards a key messaging opportunity
                                                                                    • Figure 49: Attitudes toward loyalty programs – Communication, April 2019
                                                                                    • Figure 50: Sam’s club email campaign, January 2019
                                                                                  • Rewards for reviews an effective strategy
                                                                                    • Figure 51: Attitudes toward loyalty programs – Influencing, April 2019
                                                                                  • Incentivized reviews a good fit with parents, Hispanics
                                                                                    • Figure 52: Attitudes toward loyalty programs – Rewards for reviews, by age, Hispanic origin and Parental status, April 2019
                                                                                • Appendix – Data Sources and Abbreviations

                                                                                  • Data sources
                                                                                    • Consumer survey data
                                                                                      • Marketing creatives
                                                                                        • Abbreviations and terms
                                                                                          • Abbreviations
                                                                                            • Terms
                                                                                            • Appendix – The Consumer

                                                                                              • TURF Analysis
                                                                                                • Methodology

                                                                                                Loyalty Programs - US - July 2019

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