There has been an explosion in the number of loyalty programs offered by businesses in the U.S. The evidence is on your key chains, in your wallets, and sometimes, installed onto your mobile device. The growing number of large businesses with rewards program is some indication of their value, but are they worth the effort for small business owners.
The logic behind reward and loyalty programs is that they promote brand loyalty and repeat business. However, these benefits have to be weighed against the cost of these kinds of programs. Like all things, this will lead to different choices for different businesses. Helpfully, the Direct Marketing Association has compiled some data on the good and negative of aspects of brand loyalty. This data answers the questions of how and why brand loyalty still matters.
Though you may think that things like price and convenience matter most to consumers, the DMA research shows that brand loyalty can play a big role in buying decisions. According to their report, 40 percent of consumers are "active loyals". This means that they "stay loyal to brand for routine and special purposes".
The "active loyals" group seems to straddle age demographics. According to the DMA, these consumers tend to be older and younger. This may sound contradictory at first, but it makes sense when you think about it. Young consumers often only have brand name to go on when buying products and older consumers tend to stick with what they know. On the flip side, middle-aged consumers with families and mortgages may be more inclined to be more concerned with price than with brand.
Most consumers were "Active Loyals". Next to them 23 percent of consumers are what the DMA refers to has "Habitual Loyals". These consumers are loyal to a brand for most purchases, but will shop around on special occasions. This means that nearly two out of three (63 percent) of consumers either Active or Habitual Loyals. It's a sign that promoting loyalty through rewards programs and discount offers is probably a worthwhile tactic.
To be fair, the study found that over a quarter (27%) of consumers have no brand preference. This happens most in the 45-64 age group. Also, brand loyalty decreases as the price of the item to be bought increases. People are more likely to show brand loyalty for things like clothing than they are for high-end consumer goods like electronics.
The report highlighted the reasons why people would choose a particular brand over cost savings. While more than half of the respondents (52 percent) said they would pay more for the brand's "good service", there was also an indication that loyalty programs could help too. Nearly a third of the people surveyed by the researchers (32 percent) indicated they would pay more if it were tied to rewards.
When it comes to promoting brand loyalty, coupons and special offers ranked highly among what people wanted to see from brands. Nearly half (46 percent) specifically asked for more "loyalty schemes". Exclusive access to offers and products would be compelling for 39 percent. And over a third (36 percent) would even like to see time-sensitive offers.
All of this shows that brand loyalty is still is still a thing and that it can play a big role in the decisions of consumers. People don't have the time to examine every option in the store or online, so they often use brands they trust, or that give them rewards, to help them make their choice.
The DMA report has a lot of interesting information and is worth taking a look at. It's presented in an infographic format which makes it faster to read but harder to examine the underlying data. In spite of this, for business owners who are trying to decide whether an incentive program is worthwhile for their target demographic, it's a very useful infographic.
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