Loyalty programs drive profit

loyalty programLoyalty programs are becoming key profit drivers for Australian retailers, as consumers are more active in their participation than ever before, according to new research.

The For Love or Money 2015 study, commissioned by strategic loyalty consultancy, Directivity, and retention agency, Citrus, found that despite perceptions consumers are battling loyalty program fatigue, 59 per cent of members are active in all of their programs, a 31 per cent incremental increase from 2013.

Boosting retail bottom lines is also the amount consumers are spending, with 82 per cent of those surveyed buying more from brands with a program, and 16 per cent purchasing items they didn’t need just to earn rewards.

Report co-author and CEO of Directivity, Adam Posner, said while some retailers question the value of loyalty programs, the research confirms that successful programs have evolved from cost centres into key profit drivers, and provide a key competitive advantage for brands.

“Loyalty programs are a real business imperative for driving brand loyalty and profitability,” he said.

“This research is a good news story for retailers. While consumers are telling us they’re more selective with their programs, they’re also more active and engaged.

“Programs also drive impulse purchasing as evidenced by 16 per cent of members who buy things they didn’t need just to earn rewards, which jumps to 26 per cent for men under 45,” said Posner. “If you do the maths, that’s a reasonable additional spend that goes straight to the bottom line,” he said.

According to the research, 48 per cent of members believe programs have improved, up from 41 per cent in 2013. Additionally, fewer people are dropping out of programs, with member defection falling from 26 per cent in 2013 to 22 per cent this year.

“Reduced defection can be attributed to the fact that retailers are keeping their programs simple, with only 12 per cent of people saying programs are too confusing, down from 19 per cent two years ago,” said Peter Noble, report co-author and CEO, Citrus.

In other key findings the report also reveals the Coles flybuys program retained first place in the Top 10 unprompted most mentioned programs as ‘doing a very good job’ (33 per cent), increasing its lead over Woolworths everyday rewards (13 per cent). Qantas Frequent Flyer remained in third place since the first study in 2013.

2015 Australia’s top 10 most mentioned programs (unprompted) as ‘doing a very good job’:

  1. Coles flybuys
  2. Woolworths everyday rewards
  3. Qantas Frequent Flyer
  4. Virgin Velocity
  5. MYER one
  6. Priceline Sisterclub
  7. Millers
  8. Westpac Altitude Rewards
  9. Commbank Awards
  10. Hoyts Rewards

The full 70 page report is available at theloyaltypoint.com.au.

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