Customer loyalty can be a financial boon for businesses and a money saver for shoppers and clientele.
Information technology services and consulting company Accenture says about 90% of companies have a loyalty program.
Businesses large and small, chains and independents buy into the need to provide incentives to customers to keep them coming back. It might be in the form of spending money on groceries and then getting discounts on gas, it could be getting a free smoothie after a certain number of purchases, or it could be a free spa treatment once you have spent a requisite number of nights at a hotel.
More people in the United States are joining loyalty programs, according to Forrester Research, which is based in Massachusetts and has an office in San Francisco. In 2022, 86% of adults in the U.S. belonged to at least one program. That number has increased to 89% this year.
“I think part of it is driven by inflation and I think people want to save money,” principal analyst Mary Pilecki said. “They are also demanding more and want more from loyalty programs.”
Some people will remember plastic cards that hooked onto key chains that were used at retailers and grocery stores to obtain a discount. Punch cards are another relic now hard to find.
Today, phone numbers and email address are ways businesses keep tabs on customers.
Some programs track what people are buying so deals are tailored to past purchases.
Loyalty programs continue to evolve — part driven by technology, part by consumer demand, part by a company’s bottom line. Some places, such as Dunkin, have gotten rid of their birthday programs for rewards members.
“Over the last five years or so we’ve seen customer loyalty programs change. They are not necessarily disappearing, but changing in big ways,” said Julie Ramhold, consumer analyst with DealNews.com, a company that curates deals online. “More are using a tiered model. Consumers may have to pay to be in a higher tier or they may have to spend more to be in a higher tier.”
Since the pandemic, Ramhold said there has been an increase in paid loyalty programs, “Retailers find that by rewarding customers it will keep people coming back for years and years.”
Pilecki at Forrester Research shared these stats:
- 60% of consumers in the U.S. who belong to loyalty program say they do so for the special offers that aren’t available to others.
- 54% say special treatment is important to them.
- 49% state getting relevant personalized offers or promotions are the key reason to join.
- 47% of people in the U.S. belong to a supermarket rewards program, 46% to a credit card one, 40% to a pharmacy/drugstore
- 35% belong to hospitality plans like airlines and hotels.
- 28% belong to gas station programs (up 3 percentage points from 2022).
Retail is probably the biggest user of loyalty programs and that’s because there are a lot of retailers,” Pilecki said.
Forrester Research published a report last year about the return on investment for companies with loyalty programs.
“What we found is you can get anywhere from 56% to 77% of your investment back in one year,” Pilecki said. “That is great because the investment in the technology is huge.”
She said multiple vendors offer various platforms for companies of all sizes to choose from, some more sophisticated than others, with most integrating into established point of sale software.
What it comes down to is loyalty programs are a way for companies to save and make money.
“It is less expensive to retain customers than get new ones,” Pilecki said. Rewarding them helps retain them.
Note: A version of this story first appeared in the North Bay Business Journal.