In an increasingly fragmented retail landscape, customer loyalty programs are an important tool to help retailers maximize their "share of wallet" among consumers.
A recent study we conducted at Maritz, a market research and consumer loyalty program consulting and implementation company, found that rewards-program members are more likely to have spent a greater amount of money in the previous six months across the 11 retail categories examined in the study, including home improvement, electronics, grocery, and book stores.
While it's interesting to see rewards-program members are spending more, we need to keep in mind that the programs might not directly cause shoppers to increase their purchases. It could be that those who spend more join programs to obtain rewards for purchases that they would have made even if they weren't members.
Nevertheless, enrolling shoppers who are spending more is a great way for retailers to mine the data collected from loyalty programs, in order to identify and create a dialogue with profitable customers.
What's in Your Wallet?
The study also examined various demographic characteristics (including rural vs. city living, marital status, income levels, and gender) for significant differences to determine what types of people are carrying consumer loyalty program cards in their wallets.
The study revealed that loyalty program members are more likely to be one or more of the following: female, young, living with children under the age of 18 in the household, and from the Northeast.
The Man Myth: Do They Like to Shop More Than We Think?
Not surprisingly, women (62%) are significantly more likely to belong to a store or membership loyalty program than men. However, more than half of the men surveyed (54%) say they are part of a program.
The significant difference between the number of men and women isn't shocking, because most people expect moms to be the primary purchaser in the household. What should be of interest for a retailer is that more than half of the male population carries around loyalty program cards in their wallets. Based on that finding, retailers should tell their employees not to hesitate to ask men about joining a program.
Fountain of Youth
Customer loyalty program members tend to be younger than those who aren't members: 71% of 25-34-year-olds belonging to store or membership programs, and survey respondents older than 55 comprised the highest percentage of non-program members.
A logical assumption is that those in or approaching retirement anticipate they won't be spending as much money as younger shoppers and might not feel they'll reap the benefits of loyalty programs. The challenge for retailers is to recognize customers can be valuable to them in all life stages, and they can keep all shoppers enrolled and active in loyalty programs by offering rewards that are meaningful to them throughout their lives.
Having a child at home is another influencing factor. Those who have kids under the age of 18 in their household are significantly more likely to have a store or membership program card or a co-branded credit card.
Across the USA
Regardless of the fact that many stores are national chains, according to the study members of customer-rewards programs tend to be clustered by region.
The Northeast (70%) and West (63%) have the highest concentration of store or membership loyalty program participants. People in the South (37%) and the Midwest (42%) are significantly more likely to not belong to any type of consumer loyalty program.
Who's Missing From Retail Loyalty Programs?
It's important to know who is likely to join a program so stores can adjust their merchandise offerings, layout and product adjacencies, and customer service to cater to their most loyal customers. However, knowing which demographic groups are likely not to be members offers retailers an opportunity to identify and interact with other potentially valuable customers who may not be interested in being a part of a loyalty program.
Non-members were found to have one or more of the following significantly relevant characteristics (by retail category):
- Specialty apparel/large premium specialty stores (e.g., Nordstrom, Gap)—Those from the South
- Home improvement (e.g., Home Depot, Lowes)—Single/widowed/divorced; no children under the age of 18 in the household; women
- Electronics (e.g., Best Buy, Circuit City)—65 years old and older; no children under the age of 18 in the household; women
- Department store or mass merchandise (e.g., Macy's, Sears)—Older (age 35 and over); from the West, South, and Midwest
- Drug stores (e.g., Walgreens, Medicine Shoppe)—Men; from the West; living in a suburb, town, or rural area
- Discount mass merchandisers (e.g., Target, Wal-Mart)—Single/widowed/divorced; no children under the age of 18 in the household
- Grocery stores (e.g., Kroger, Safeway)—From the Midwest
- Toy stores (e.g., Toys R Us, FAO Schwarz)—Women
- Office supply stores (e.g., Office Depot, Staples)—From the Midwest
- Book stores (e.g., Barnes & Noble, Borders)—Women; those with incomes less than $30,000 per year
- Home furnishing stores (e.g., Pottery Barn, Linens 'n Things)—Women; those with children under the age of 18
More About the Study
The online study involved 2,178 adult shoppers who made a purchase in the six months prior to the study from at least one of 11 retail categories included in the study. The margin of error for this study is +/- 2 percent.
For the purpose of this study, rewards programs are defined as a store or membership program or a private or co-labeled credit card that award customers points for purchases or other behaviors they can later redeem for various rewards, including discounts, gift certificates, merchandise or travel.
Continue reading "The Demographics of Loyalty Programs" ... Read the full article
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