Colloquy: Loyalty membership up, activity not
Membership in loyalty rewards programs in the US has reached a high of 1.808 billion — a 24% jump since Colloquy's last census in 2007. There are 14.1 loyalty program memberships per household, however, only 6.2 are actively used. Active participation is relatively flat compared to 2007. Colloquy researchers say that this consumer non-engagement with loyalty programs is a call for marketers to increase the value of their programs, rather than the size.
“It seems that, in terms of membership growth, loyalty programs have gotten as big as they need and arguably too big,” said Rick Ferguson, editorial director for Colloquy, which released the census Tuesday. “A lot of these numbers are just names in the database and are inert, so I think it's time to stop thinking about program size and thinking about loyalty programs as backdoor acquisition vehicles. Instead, marketers should look at the customers that are active and contributing most to their bottom line and really use loyalty programs to connect and communicate with those people.”
Loyalty marketers must look more closely at their consumer data and use it more wisely than they have done in the past, Ferguson added. This advice rings particularly true in a rapidly changing economy, where it's difficult to foresee how consumers will be spending their money next year or even next month.
“Loyalty marketers have an advantage,” Ferguson said, “because they are really going to be able to pay attention to how consumer behavior is changing. It's imperative that they look at their data and decide what customers they really want to have a relationship with and what that relationship is going to look like. It might change the way they start to reward customers.”
For example, he said, programs offering co-branded credit cards may work at being better financial partners — offering ways to spend and even save more sensibly — rather than encouraging people to rack up credit card debt.
Changes in credit loyalty programs could have a huge effect on the loyalty industry in general, thanks to the sector's large membership numbers. The financial services sector contributed most to the overall growth rate in loyalty membership, with numbers skyrocketing more than 75% since 2006 and bypassing airlines as the most popular type of program.
Ferguson attributed the expansion in this sector to the dramatic expansion of consumer credit that occurred between 2006 and 2008. With today's contraction in the credit industry, he expects that growth to slow and maybe even reverse slightly as issuers focus only on their most valuable customers.
Although its membership numbers are lower than the bloated financial, travel and hospitality and retail sectors, the gaming industry boasts some of the highest activity rates. Ferguson credits the gaming industry's emphasis on experiential rewards — better in-house service, room upgrades and rewards based on preferred activities —with driving customers' engagement in such programs.
“The gaming industry overall is really a lot farther ahead in terms of using data to influence the customer experience,” he said. “I think that provides an eye-check lesson to others to really take this data and start to leverage it because they're all sitting on big piles of customer data. It's a challenge to sort through it and find insights you can exploit, but they're going to have to increase activity rates. They need to shift from short-term thinking to using programs that develop sticky relationships.”