Loyalty Programs Promote Higher Spending

Members of retailer loyalty programs tend to spend more and shop across more channels, according to “The Loyalty Effect: Retail Loyalty/Reward Programs’ Impact on the 2006 Holiday Season” published by Epsilon. The report calls for retailers to begin loyalty membership campaigns early in the year and build toward the holiday in the fall.

Loyalty program members accounted for 48 percent of holiday shoppers in the 2006. Non-loyalty members primarily shopped at brick-and-mortar locations, while only 22 percent of loyalty members shopped in stores. Two-thirds of loyalty members shopped online, and 41 percent ordered from a catalog or through the mail.

Members of loyalty programs tend to be more affluent, with incomes of $100,000 or higher. The group also tends to spend more each holiday. Forty-four percent of program members spent in excess of $1,000 on holiday purchases.

Consumers participating in such programs weren’t influenced to purchase certain items but were more inclined to purchase from retailers where there was an established relationship. Fifty-eight percent of retail loyalty program members bought from companies where they had a membership. The allegiance to a particular retailer was higher with women (63 percent) than men (51 percent).

Word of mouth benefits from two factors in terms of loyalty program members. Members are influenced by reviews and comments on social networking sites. Conversely, members of loyalty programs also spread the word about the retailers and their membership programs.

“Loyalty program members were much more likely than consumers to be influenced by social networking sites,” said Ron Shevlin, VP of client solutions at Epsilon. “Loyalty program members are also more likely to provide recommendations, especially about programs they do business with.”

Enrollment programs should begin by summer to ramp up in the fall for the holiday season, according to Shevlin. “Firms need to be more proactive about enrollment,” he said. “Because these consumers are more likely to share and look for word of mouth, growing the loyalty program itself [is important], because members are more likely to recommend the programs they are members in.”

The survey was conducted with 722 consumers who shopped at a retailer over the 2006 holiday season. The study’s goal was to learn more about what influenced consumer purchases and the role retail loyalty programs played in those purchases.