Retailers investing 2% to 4% of total revenues in loyalty, CRM programs

Customer loyalty is big business and getting even bigger.

A new research report from LoyaltyOne found that the total 2019 customer loyalty landscape totals $323 billion. The total includes $126 billion in direct loyalty and customer relationship management, along with significant investment in technology and transaction enablers and customer engagement platforms.

In the report, “Loyalty Big Picture,” 69% of C-suite executives reported that they’ve increased loyalty investment in the past two years. More than half (55%) said their investments will continue to grow over the next two years.

Increasingly, the value of loyalty and the insights garnered from customer loyalty strategy are influencing decisions across organizations. Sixty-one percent of respondents said they use loyalty data across at least three different departments — only 2% reported that loyalty data is used strictly by traditional departments like marketing and public relations.

“Executive teams see how programs can contribute to company valuation,” said Caroline Papadatos, senior VP, global solutions for LoyaltyOne. “In fact, 88% of loyalty practitioners said their company leaders view loyalty program strategy as an important component of the overall company strategy.”

In other highlights from the “Loyalty Big Picture” report:

• Seventy-one percent said they’re investing a minimum of 2% of total revenues, with most spending upward of 4%, for loyalty and CRM to activate customers and leverage the data asset to create personalized offers and extensions.

• Loyalty program members contribute to 43% of companies’ annual sales. A full 95% of companies reported that members spend more than non-members annually, with 60% reporting that members spend two to three times more than non-members.

• Twenty-one percent of loyalty club members said they will abandon a loyalty program if it doesn’t provide relevant rewards.

• More than three-fourths of consumers (75%) reported that they do not pay a fee for the loyalty programs in which they participate, but 64% would be willing to do so in exchange for additional benefits including discounts, expedited free shipping and better earn rates. To that end, more than half of companies surveyed reported that they are considering implementing fee-based programs.

• Only 30% of companies cited “increase the value provided to loyalty members” as a reason they increased their loyalty investment in the past two years. Many loyalty operators fail to fully dig into the data that loyalty programs collect and realize all the benefits.

• Twenty-one percent of loyalty club members said they will abandon a loyalty program if it doesn’t provide relevant rewards.

• Seventy-nine percent of the top loyalty programs have a digital component. However, while a digital presence might be a minimal entry requirement, it doesn’t set programs apart – only 18% of members say digital experience plays a role in program preference.

Loyalty operators look for member growth (31%) and active membership (26%) to determine success, but only 13% look to estimated lift – or increase in the amount spent by a customer.
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