Consumers shun loyalty programmes forcing brands to rethink the customer relationship

06 May 2016

There has been a 20 percent drop in membership of loyalty programmes among the affluent middle class since 2014. Collinson surveyed attitudes to programmes run by supermarket and grocery stores, airlines, credit card providers, retailers, hotels, telecom and media companies, coffee shops, and banking. Membership was down across all industries:

  • 64 percent are members of supermarket loyalty programmes, down from 70 percent
  • 55 percent hold frequent flyer memberships, down from 65 percent
  • 48 percent participate in credit card programmes, down from 63 percent
  • Banks fared the worst with their programmes now used by only 30 percent of respondents, down from 47 percent

The affluent middle class is also now less likely to repeat purchase, recommend a brand to friends or refrain from switching to a competitor as a result of loyalty programmes that are too generic.

"This is a critical wake-up call to brands using points-based programmes offering only generic rewards. Given the importance of affluent middle class consumers on the fortunes of companies, brands must lift their game and rethink how they recognise, engage and reward customers," said Christopher Evans, Joint CEO, Collinson"Despite lower membership numbers, the results show that personalised and relevant loyalty initiatives do positively influence consumer behaviour. Three quarters of respondents who are actively engaged in a loyalty programme said it encouraged them to spend more."

Collinson polled 6,125 of the top 10-15 percent of earners from Australia, Brazil, China, France, Hong Kong, India, Singapore, the United Kingdom, the United States of America and the United Arab Emirates.

India bucks the global trend and is one of the most engaged countries when it comes to loyalty. 81 percent state that strong programmes would make them purchase more from a brand, and 82 percent would recommend a brand that offered a loyalty programme. These figures were similar in Brazil and China (72 percent and 78 percent; 75 percent and 75 percent), suggesting these societies are yet to experience the frustration of uninspiring programmes seen in mature Western markets.

In the 2015 version of this study, Collinson identified four global tribes, or groups of people, who share common traits that cut across age, gender and international boundaries. These tribes have proved very useful in gleaning a deeper context of the affluent middle class, who prioritise family, altruism and enriching experiences. Each has its own nuances, whether it is a desire to save for the future or see the world, but one common thread among all tribes in the 2016 research is a high expectation of brands. 69 percent expect high quality, consistent customer service however they interact with a brand. The same percentage expect brands to be easy to do business with, and 67 percent value the flexibility to choose the rewards and benefits they are offered.

When asked what would encourage higher and more frequent spending on their preferred brands, half of respondents requested a loyalty programme where it is easy to earn, redeem and adapt to their personal preferences.

"There is a clear appetite for loyalty and customer engagement initiatives, but consumers are turning their backs on programmes that no longer resonate with them. The affluent middle class value spending time with, and providing for, their families, as well as saving for the future. These rank far higher than driving a good car or going on a luxury holiday. Brands should seek to tap into what motivates their customers, instead of reaching for only discounts or material goods as rewards," continued Christopher Evans."Brands that are not innovating and addressing evolving customer expectation will simply be left behind."

The financial services opportunity

Customer expectation is highest in financial services, with almost two-thirds (65 percent) of affluent middle class customers expecting their bank to reward them for their loyalty. Retail banks and credit card providers can meet this demand by developing innovative loyalty programmes that draw on the wealth of customer data held on record.

Of all the industries surveyed, the financial services sector is best placed to succeed, as globally 49 percent of respondents agree that their bank knows and understands their needs. This 13 percent increase since 2014 suggests the sector is learning the value of a relevant and personal customer experience, although just not at the pace that consumers expect.

Further, banking loyalty programmes specifically were found to encourage 82 percent of members to spend more, while credit card initiatives positively influenced 79 percent of respondents. The research also uncovered increases in the levels of trust in financial services' ability to manage personal data, and faith in institutions to act in their customers' best interests.

The financial services sector must however be aware of challenges to their business in the form of new fintech start-ups offering services that impact revenues, as well as the reduction in interchange fees which have traditionally been used to fund loyalty programmes.

To succeed, financial services and other industries must:

  • Recognise the value of relevance - The abundance of generic programmes has diluted the impact of loyalty programmes causing consumer fatigue. Brands need to balance programme objectives for motivating short-term behaviour and driving deeper engagement for long-term loyalty. Personalisation and breadth of rewards and benefits is key for brands to remain relevant.
  • Address how loyalty programmes are funded - For financial services, the loss in interchange fees can be mitigated by increasing fees in other areas of the business, developing their own loyalty programmes, increasing collaboration with merchant funded programmes, and building bank-wide loyalty through account add-ons like insurance.
  • Embrace digital - The smartphone is becoming the consumer device of choice for many brand interactions. Incorporating loyalty programmes and initiatives into payment card and mobile ecosystems will drive engagement and increase consumer brand affinity.
  • Move beyond transactional rewards - Although discounts and cash-back provide instant gratification, they do little to drive long- term loyalty. Brands should instead get to the heart of what matters to their customers. For the affluent middle class, this is often their friends and families, so rewards should be more experiential, lifestyle and life-goal oriented.

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