Eighty-one percent of members of retail loyalty programs don't know the benefits of their programs, or how or when they will receive rewards, finds Edgell study

Cindy Allen

RANDOLPH, New Jersey , December 19, 2012 (press release) – Retailers have historically emphasized monetary rewards for repeat customers, but now loyalty programs need to be used to build gratifying personal relationships with customers, according to a new research study from Edgell Knowledge Network (EKN). "State of the Industry Research Series: Customer Loyalty in Retail" provides a review of the retail industry's loyalty programs, changing consumer behavior and retailers' expansion into new channels.

The report surveyed 60+ retailers to benchmark the current state of loyalty programs in the retail industry. Results from these surveys and interviews with retail executives lead to findings that while customers are enrolled in a growing number of loyalty programs, they are not truly loyal to any one retailer. Some of the highlights from the report include:

81% of loyalty members don't know the benefits of their programs, or how and when they will receive rewards
32% of respondents are targeting a launch of a loyalty program in the next 12 months
Retailers expect the revenue contribution from customers enrolled in loyalty programs to grow substantially over the next 3 years, from 40% in 2012 to 58% in 2015

While wallet share and profitability contribution are better measures of customer loyalty, the fact that retailers expect a significant increase in program membership points to the prediction that retailers anticipate an improvement in their ability to sell more to enrolled customers during the next three years. Other key findings include:

Customers of retailers who offer a loyalty program are no more loyal than those of retailers who do not offer one
Retailers have multiple systems for customer engagement, regardless of whether they offer a loyalty program or not
Activity and frequency continue to be the measures of program effectiveness further highlighting their transactional nature. Strategic influence or emotion measures such as Net Promoter Score (NPS) see low adoption

"Product availability and customer service are two of the top three drivers of customer loyalty as noted by the survey respondent base," said Gaurav Pant, Research Director, EKN. "However, the focus needs to shift to the personal, local and emotional context of customer engagement in order to build rewarding personal relationships."

The report also includes a Loyalty Assessment Program and Customer Segmentation Framework in addition to recommendations on how to encourage more effective customer engagement.

About Edgell Knowledge Network

Edgell Knowledge Network (www.eknresearch.com) is a research and content service that was built based on feedback and advice from retail executives. Part of the Edgell Communications family, Edgell Knowledge Network (EKN) is a subscription-based portal that provides retailers with access to the site's powerful decision-support and data analysis tools, allowing them to leverage EKN's industry-leading database of original research, user-generated vendor indexes and market trends. EKN also lets members share insights and real-world experiences through ongoing peer forums, both virtual and in person.

Retail technology vendors can participate in EKN through a limited number of sponsorships that are available. For information, please contact Ana Weinand at aweinand@edgellmail.com or (904) 619-2681.

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