COUNTLESS TIMES OF SEEKING: LOYALTY PROGRAMS THAT LIGHTS UP CONSUMERS LIFE

Transcription

1 COUNTLESS TIMES OF SEEKING: LOYALTY PROGRAMS THAT LIGHTS UP CONSUMERS LIFE OPINIONS FROM CONSUMERS WITH MEMBERSHIP CARDS ON INVOLVING IN RETAILER LOYALTY PROGRAMS & THE BENEFITS COUNTLESS TIMES OF SEEKING

2 FAITHFUL FOLLOWERS OR FAIR-WEATHER FANS? When it comes to shopping, choice is the operative word. Whether consumers shop at a specialty retailer or a mass merchandiser, on a computer or a mobile device, they have never had so many ways to please the palate, discover the deal or pay the piper. Differentiating your brand in such a crowded space is not only critical, but also more difficult than ever. A retail loyalty program can be an effective way to create competitive advantage by reducing customers likelihood to switch stores. Indeed, more than seven in 0 loyalty-program participants in Nielsen s Global Loyalty-Sentiment Survey (72%) somewhat or strongly agree that, all other factors equal, they will buy from a retailer with a loyalty program over one without. Loyalty programs can also help drive more frequent visits and heavier purchasing. Nearly three-quarters of global loyalty-program participants (74%) agree that loyalty programs make them more likely to continue doing business with a company, and two-thirds (67%) agree that they shop more frequently and spend more at retailers with loyalty programs. Brick-and-mortar retailers are not the only ones benefiting from loyalty-program participation. Two-thirds of global respondents (66%) agree they d shop more at online retailers if these sellers provided loyalty benefits similar to those of traditional in-store retailers. And increasingly, loyalty programs are at the leading edge of technology as retailers incorporate advanced analytics, mobile experiences and other digital solutions into their programs. And many shoppers appear to love loyalty programs. In fact, 66% of global respondents say they belong to one or more programs. But there is often a large gap between the number of programs in which shoppers are enrolled and the number in which they actively participate. So what distinguishes the winners from the rest of the pack? While many tried-and-true retail loyalty-program fundamentals can be applied anywhere in the world, there also are 2 COUNTLESS TIMES OF SEEKING

3 unique differences by country. For example, mobile loyalty apps are particularly appealing in India and China, while non-monetary retail loyalty reward programs are important in Morocco. Knowing what program attributes resonate best with your customers will equip you to drive engagement. Loyalty programs are intended to ultimately increase a retailer s share of the consumer s wallet, said Louise Keely, executive vice president, Nielsen Global Retail Practice. But loyalty programs cannot be designed in a one-size-fits-all manner. There are big differences in loyalty program preferences and habits across countries, and across consumer groups within countries. These differences include how consumers want to use technology to engage with their loyalty program, what tangible benefits they are seeking from loyalty programs, and even how much they care about loyalty programs. Retailers need to determine who they want to bring into the store or onto the website more, and design a loyalty program for them. The Nielsen Global Retail Loyalty-Sentiment Survey polled more than 0,000 online respondents in 6 countries to understand what drives consumers to participate in retail loyalty programs. We examined self-reported participation rates, the rewards or benefits valued most, and the features that are most appealing in the loyalty programs of the future. Finally, we provide insight into the ways to build and maintain a winning loyalty program. WIDESPREAD LOYALTY PROGRAMS IN TAIWAN The Nielsen Global Retail Loyalty-Sentiment Survey, 60% of respondents in Taiwan are in loyalty programs. Among those, 80% are in one or more loyalty programs. Additionally, 60% of respondents joining loyalty programs in Taiwan claim their loyalty membership in-store by giving a telephone number or other personal information, while more 5% do so simply by scanning their membership card. Copyright 206 The Nielsen Company

4 60% OF RESPONDENTS ARE LOYALTY PROGRAM MEMBERS, AND AROUND 80% OF THEM BELONG TO MORE THAN PROGRAM HOW MANY RETAIL LOYALTY PROGRAMS DO YOU BELONG TO? % AU CN HK IN ID JP KO MY NZ PH SG TW TH VN AP ONE 2 TO 5 6 TO 0 + NONE Source: Nielsen Global Survey-Q-206 MOST RESPONDENTS EASILY INDICATE THEIR MEMBERSHIP BY PROVIDING PERSONAL INFORMATION HOW DO YOU INDICATE YOU ARE A RETAIL LOYALTY MEMBER? LOOK UP ACCOUNT BY PROVIDING PHONE NUMBER, ADDRESS OR OTHER PERSONAL INFORMATION IN STORE 60 SCAN CARD IN STORE 5 ENTER INFORMATION OR LOG INTO ACCOUNT ON RETAILER WEBSITE 9 % USE RETAILER'S MOBILE APP 27 ENTER AND STORE LOYALTY PROGRAM INFORMATION IN A THIRD-PARTY APP (SUCH AS KEYRING, CARDSTAR) THAT ALLOWS ME TO STORE MULTIPLE REWARD CARDS IN ONE PLACE ENTER AND STORE LOYALTY PROGRAM INFORMATION INTO DIGITAL PAYMENT SYSTEM SUCH AS APPLEPAY/PASSBOOK OR GOOGLE WALLET OTHER 7 Source: Nielsen Global Survey-Q COUNTLESS TIMES OF SEEKING

5 Moreover, 70% of respondents suggest that loyalty programs are drivers for them to continue to shop in those specific retailers, while two-thirds (67%) state they prefer to shop at a retailer that has a loyalty program. Still further, respondents say that if loyalty programs provided by online shops resemble those of traditional retailers, they would prefer to shop online more often. This shows that promoting loyalty programs allows retailers to stand out among fierce competition, Terri Kang suggested, Director, Retailer and ecommerce Vertical, Nielsen Taiwan. THE MAJORITY OF RESPONDENTS SAID THEY RE MORE WILLING TO SHOP AT A RETAILER WITH A LOYALTY PROGRAM INDICATE YOUR LEVEL OF AGREEMENT WITH THE FOLLOWING STATEMENTS? ALL OTHER FACTORS EQUAL, I WILL BUY FROM A RETAILER WITH A LOYALTY PROGRAM OVER ONE WITHOUT I READ RETAILER PROMOTIONAL FLYERS/LEAFLETS AT THE RETAILER I SHOP MOST BEFORE I GO SHOPPING LOYALTY PROGRAMS MAKE ME MORE LIKELY TO CONTINUE DOING BUSINESS WITH A COMPANY I SHOP MORE FREQUENTLY AND SPEND MORE AT RETAILERS WITH LOYALTY PROGRAMS I WOULD SHOP MORE AT ONLINE RETAILERS (E-RETAILERS) IF THEY PROVIDED SIMILAR LOYALTY BENEFITS AS TRADITIONAL IN-STORE RETAILERS % I ONLY JOIN LOYALTY PROGRAMS TO GET FREE PRODUCTS OR DISCOUNTS I AM COMFORTABLE WITH RETAILERS COLLECTING INFORMATION ABOUT MY SHOPPING HABITS IN EXCHANGE FOR DISCOUNTS I READ RETAILER PROMOTIONAL FLYERS/LEAFLETS AT THE RETAILERS THAT I DON'T SHOP IN LOYALTY PROGRAMS ARE AN IMPORTANT PART OF MY RELATIONSHIP WITH A COMPANY I AM MORE LIKELY TO PARTICIPATE IN A LOYALTY PROGRAM IF THERE IS A MOBILE APPLICATION AVAILABLE FEE-BASED LOYALTY PROGRAMS (SUCH AS AMAZON PRIME) OFFER BETTER REWARDS THAN FREE ONES I'M WILLING TO PAY A LITTLE MORE FOR A PRODUCT FROM A RETAILER WITH A LOYALTY PROGRAM THAN FROM A RETAILER WITHOUT ONE STRONGLY AGREE SOMEWHAT AGREE NEITHER AGREE NOR DISAGREE SOMEWHAT DISAGREE STRONGLY DISAGREE Source: Nielsen Global Survey-Q-206 In Taiwan, a good loyalty programs allow consumers to take advantage of a number of useful benefits. 82% of respondents said a good program includes points or rewards for purchases regardless of whether they were made in store, on a website or a mobile device or personalized discounts or promotional offerings based on past purchases. Ability to choose among several types of rewards (80%) and opportunities to earn bonuses through a specified activity (79%) are also popular loyalty benefits Taiwan consumers prefer. Copyright 206 The Nielsen Company 5

6 But what are the rewards or benefits that consumers in Taiwan value the most? The answer is instant and direct feedback. Nearly three-fourths (7%), 28% greater compared to the global average, of respondents with memberships suggest that rebates or cash back are most important, followed by product discounts (55%) and free products (5%). RESPONDENTS FOCUS ON COMPREHENSIVENESS IN ACQUIRING RELEVANT REWARDS WHEN EVALUATING A LOYALTY PROGRAM HOW APPEALING ARE EACH OF THE FOLLOWING RETAILER LOYALTY FEATURES TO YOU? POINTS/REWARDS FOR PURCHASES REGARDLESS OF WHETHER THEY WERE MADE IN STORE, ON A WEBSITE OR ON A MOBILE DEVICE PERSONALIZED DISCOUNTS OR PROMOTIONAL OFFERINGS BASED ON PAST PURCHASING COMPREHEN- SIVENESS RELEVANT FLEXIBLE REWARDS OR THE ABILITY TO CHOOSE AMONG SEVERAL TYPES OF REWARDS OPPORTUNITIES TO EARN BONUSES BY DOING SOME SPECIFIED ACTIVITY POINTS/REWARDS FOR SHARING PRODUCTS AND PAGES ON SOCIAL NETWORKS INTEGRATION WITH MOBILE PAYMENT SYSTEM SO I CAN AUTOMATICALLY EARN AND USE POINTS/REWARDS WHEN I USE A MOBILE WALLET POINTS/REWARDS FOR REFERRALS TIERED PROGRAMS WITH EXCLUSIVE REWARDS ONLY AVAILABLE TO CUSTOMERS IN A PARTICULAR LEVEL/STATUS PERSONALIZED PRODUCT OR SERVICE RECOMMENDATIONS STORE-SPECIFIC LOYALTY PROGRAM MOBILE APP INTEGRATION WITH THIRD-PARTY APPS THAT CONSOLIDATE LOYALTY PROGRAM INFORMATION SUCH AS KEYRING OR CARDSTAR VERY APPEALING SOMEWHAT APPEALING NEUTRAL SOMEWHAT UNAPPEALING VERY UNAPPEALING Source: Nielsen Global Survey-Q-206 Taiwan consumers want their loyalty programs to be simple and comprehensive. Retailers have an opportunity to enhance the attractiveness of loyalty programs by strengthening integration and convenience through reward accumulation across stores. Consumers want to take in loyalty programs that they know will offer them real benefits, like cash back at the register or providing tangible rewards. By offering customers more personalized and flexible options through their memberships, retailers have an excellent opportunity to improve their members satisfaction, and ultimately the retailer s bottom line, says Kang. 6 COUNTLESS TIMES OF SEEKING

7 MOBILE APPLICATIONS ARE USED LESS IN TAIWAN THAN ASIA PACIFIC, BUT PRESENT A FUTURE OPPORTUNITY FOR RETAILERS HOW DO YOU INDICATE YOU ARE A RETAIL LOYALTY MEMBER? USE RETAILER'S MOBILE APP ENTER AND STORE LOYALTY PROGRAM INFORMATION IN A THIRD-PARTY APP (SUCH AS KEYRING, CARDSTAR) THAT ALLOWS ME TO STORE MULTIPLE REWARD CARDS IN ONE PLACE 7 2 ENTER AND STORE LOYALTY PROGRAM INFORMATION INTO DIGITAL PAYMENT SYSTEM SUCH AS APPLEPAY/PASSBOOK OR GOOGLE WALLET 2 TW AP AVERAGE HOW APPEALING ARE EACH OF THE FOLLOWING RETAILER LOYALTY FEATURES TO YOU. FEATURE RANKING (MOST APPEALING LEAST) TW AP AVERAGE STORE-SPECIFIC LOYALTY PROGRAM MOBILE APP 0th 8th Source: Nielsen Global Survey-Q-206 Kang further suggested there is an opportunity for leveraging mobile devices in loyalty programs. Compared to the Asia- Pacific region, retailers in Taiwan have yet to drive mobile application usage in connection with their loyalty programs. This is another area where we see white-space for retailers to innovate and further strengthen their engagement with consumers. We already know mobile is an incredibly effective way to get in front of your target customer, so the we see mobile applications as a key tool where Taiwanese retailers can further expand their efforts and reach. Copyright 206 The Nielsen Company 7

8 MONEY MAKES THE LOYALTY PROGRAM GO ROUND It should come as no surprise that for the majority of respondents, financial incentives are the primary reason for participating in loyalty programs. Two-thirds of global respondents who participate in loyalty programs (67%) somewhat or strongly agree that they join these programs only to get free products or discounts. When it comes to the most-valued loyalty-program benefits, monetary incentives top the list in every region, by a wide margin. More than half of global loyalty-program participants (5%) say product discounts are among the three most valued benefits, and discounts are particularly popular in Europe (62%). Fewer global program participants (45%) say rebates or cash back are among the most-valued benefits, but cash back is slightly more popular than discounts in North America (49% versus 46%) and Latin America (48% versus 47%). However, creating meaningful differentiation requires offering more than generic deals. While tangible discounts are a usage driver for loyalty programs, share-driving programs go far beyond these benefits, said Keely. Tailoring loyalty benefits for specific consumers, and using the loyalty program engagement vehicles be it via an app, , or in-store interaction all allow retailers to personalize the loyalty program so that it s not just a discount vehicle. Providing advice, tailored offerings, and other services will delight the loyaltyprogram member. In this way, there is no one loyalty program each shopper will have his or her own version of the program, tailored to his or specific needs. Financial rewards are the most highly-valued loyalty-program benefits for members of all ages, but product discounts and cash back or rebates are rated higher by older respondents than by their younger counterparts. Younger loyalty-program participants value a few non-monetary benefits more highly than their older counterparts, though the percentages who say these are among the top three benefits are rather low. Fifteen percent of Millennials say higher-priority service, such as first-class seating or VIP customer service is one of their top three loyalty-program benefits, more than double the percentage of Baby Boomers and Silent Generation respondents (6% of each group) who say so. In addition, 2% of Millennials say their most-valued benefits include personalized products or service experiences, and 0% say the same of charitable donations. These response rates are more than three times higher than for Baby Boomers (% for each type of benefits) and Silent Generation respondents (4% and %, respectively). 8 COUNTLESS TIMES OF SEEKING

9 FLEXIBILITY IS THE FUTURE OF RETAIL LOYALTY When it comes to the loyalty-program features members are looking for, flexibility is very important. More than eight in 0 global loyalty-program participants (8%) say it s somewhat or very appealing to be able to earn rewards regardless of whether a purchase was made in store, on a website or on a mobile device. Slightly smaller shares (79%) cite the ability to choose among several types of rewards. More than three-quarters of global loyalty-program members rate two other benefits as appealing: personalized promotions based on past purchasing (77%) and the opportunity to earn bonuses by doing some specified activity (76%). An omnichannel experience is the new reality for consumers, said Keely. Retailers can t think of the online browsing and instore buying experience as disparate activities. Loyalty programs and the engagement with members should engage holistically across brick-and-mortar and digital channels across the entire path to purchase, not just at check out. As adoption of nontraditional payment methods rises, loyalty programs also should be flexible in terms of payment type. Twothirds of global loyalty-program participants (67%) say integration with a mobile payment system is somewhat or very appealing, so they can automatically earn and use rewards when they use a mobile wallet. Mobile-wallet integration is even more appealing in Asia-Pacific (78%) and Latin America (75%) than globally. Mobile payments platforms will increasingly provide an opportunity for loyalty-program engagement with consumers, providing a convenient and personalized way for program members and retailers to engage with one another all along the path to purchase, said Keely. Flexible rewards, integration across channels, and personalized promotional offers are highly appealing to respondents of all ages. However, not surprisingly, younger loyalty-program members are more likely than their older counterparts to recognize the appeal of these features particularly those regarding mobile or socialmedia integration. Copyright 206 The Nielsen Company 9

10 ASIA-PACIFIC: AN APPETITE FOR APPS In the more-developed markets of Asia-Pacific, smaller-format stores (convenience stores and mini-markets) are the primary retail growth engines, as urban shoppers increasingly seek convenient options compatible with their on-the-go lifestyles. Meanwhile, large-format stores are increasingly reliant on promotions to maintain sales growth, creating a vicious cycle that can often result in a decline in sales over time. To break the cycle and to find growth in a tough retail environment, retailers looking to find a competitive advantage are using well-designed loyalty programs that provide relevant offers that drive customer engagement and incremental revenue opportunities. Retail loyalty programs are well established in Southeast Asia, the Pacific and China, dating back to the mid- to late 990s; in India, they were introduced in the late 2000s. Given their long history, it s no surprise that online respondents in the region are avid loyalty-program members. More than seven in 0 consumers with online access in India and Southeast Asia say they participate in one or more retail loyalty programs (74% and 72%, respectively). Vietnam, New Zealand and Australia have the highest self-reported rates of loyalty-program participation in the region (84%, 84% and 8%, respectively), followed closely by Japan (80%), Korea (77%) and Malaysia (77%). Participation is lower in Greater China (6%), but Chinese retailers are now focusing more on loyalty programs for several reasons. First, e-commerce is growing fast, and off-line retailers are under intense pressure to protect their share. In addition, slowing economic growth is hurting fastmoving consumer goods (FMCG) retailers. Finally, more Chinese consumers are paying greater attention to the quality of products and the overall shopping experience. How do loyalty-program participants indicate they re a member of the program? It varies by market. Presenting a membership card to be scanned in store is the most common method in several of the most mature loyalty markets, including New Zealand (85%), Australia (8%) and Japan (62%). Digital methods are more commonly used in Asia. Looking up the account by providing an associated phone number or address in store is most common in Taiwan (60%), Vietnam (60%) and India (52%), while logging into a retailer website is the most common method in China (5%) and Indonesia (47%). In a few markets, mobile has emerged as the channel of choice. Using a retailer s mobile app is the most commonly cited method in Thailand (49%) and Korea (40%, tied with scanning the card in store). China (47%) and India (45%) also exceed the global average when it comes to the use of a retailer s mobile app, as well as third-party apps that consolidate program information (9% and 6%, respectively) and mobile payment systems (8% and 8%, respectively). 0 COUNTLESS TIMES OF SEEKING

11 Digital loyalty-program attributes or features are particularly appealing in the region. Asia-Pacific has the highest percentage of loyalty-program participants in the worldwide study who say store-specific loyalty mobile apps are somewhat or very appealing (69% versus 60% globally). Mobile apps are particularly attractive in India (80%), Thailand (78%) and China (74%). Integration with digital payment systems (78%) and with third-party apps that consolidate loyalty-program information (6%) also are more appealing in the region than globally (67% and 5%, respectively), with India, China and Thailand the most enthusiastic supporters. In fact, mobile features are so highly desirable that more than two-thirds of loyalty-program members in Asia-Pacific (69%) somewhat or strongly agree they re more likely to participate in a loyalty program if a mobile app is available, compared with 56% globally. Undoubtedly, digital strategies must be a core part of any retailer loyalty program in Asia-Pacific, and we expect to see more interactive marketing with cross-sell by retail partners and incentives based upon physical location, said Alex Morgan, executive director of global loyalty, Nielsen Asia-Pacific. With respect to the most-valued benefits, product discounts (5%) and rebates or cash back (45%) top the list in nearly all countries in the region. The only exceptions: Japan and Indonesia, where free shipping (5% and 45%, respectively) is second behind product discounts (59% and 64%, respectively), and Korea, where discounts and frequent-flier points are valued equally (60% for each benefit). STRATEGIES FOR SUCCESS: DATA IS AT THE HEART OF ANY WINNING LOYALTY PROGRAM The ultimate goal of any loyalty program is to provide a compelling value proposition that keeps consumers coming back time after time. How can retailers create valuable, differentiated loyalty programs? Strategies should be driven by a deep understanding of your consumers shopping decision process, and then programs can designed to bring them back again and again. Copyright 206 The Nielsen Company

12 Measure and monitor performance. Loyalty programs can be used to drive better business decisions, as well as to refine program offers. But to do both, loyalty program data must be tools for retailer learning. Research costs prevent many retailers from fully assessing whether their programs meet the objective of increasing consumer share of wallet, but the importance of data cannot be overstated and will only continue to grow. The future lies in integration combining granular, internal loyalty data with rich contextual media and market data to make more insightful decisions. Use segmentation tools. Understand which consumer groups loyalty programs really matter to and why. The execution of any loyalty program should allow for personalization and dynamic learning, but the initial design should be geared toward serving the consumers whose behavior will be most influenced, and a segmentation analysis will help identify those consumers. Personalize the shopping experience. Winning loyalty programs understand that every customer is an individual and that success comes from giving customers what they want, not what the retailer wants. Program offers that are unique to the shopping habits of each consumer can not only drive brand affinity, but they can also send a signal to the customer that they are valued patrons. In fact, personalization deepens the shopper-retailer relationship, enhancing engagement and encouraging shoppers to return again and again to redeem their offers. Provide offers customers value. Retailers need to use the breadth of data available through their loyalty programs and predictive analytics to identify the promotions to which a shopper is most likely to respond and to establish a one-to-one communications channel, providing shoppers offers they care most about in the channel they most prefer. While bigger families may be enticed by buy-one-get-one-free deals or stock-up offerings, older customers may prefer special savings days when store traffic is lighter. Differentiate your offering. How is your loyalty program different than your competitors? Give shoppers a compelling reason to visit your store rather than another. Consider exclusive rewards and in-store experiences that are unique to your location or brand positioning and make it engaging and fun to participate for all generations of consumers. 2 COUNTLESS TIMES OF SEEKING

13 Leverage technology wisely. Advancements in technology and the proliferation of mobile devices allow retailers to provide more relevant, timely offers than ever before, and many consumers are enthusiastic about integrating their digital devices with loyalty programs. But a build it and they will come approach to digital integration isn t that simple. Retailers must leverage digital tools that create value for consumers, and digital interactions must be aligned with how much or how little consumers want to be contacted. Consider an opt-in program, whereby consumers indicate the level of frequency they wish to receive digital communications. Consider non-monetary rewards. Financial incentives are a musthave, but non-monetary incentives are the differentiator of loyalty programs, and can build the relationship between retailers and shoppers. Retailers looking for ways to engage in more direct interactions with consumers could try rewarding members for referrals or interacting with the brand on social media. Even better, retailers could use their loyalty programs for brand building, incentivizing activities that fit with their brand image or expertise. For example, brands that want to establish or cement a reputation as a leader in the health-and-wellness space could reward consumers for meeting exercise or health goals, while those that want to solidify themselves as socially responsible could consider rewarding consumers for volunteering, making charitable donations or choosing more environmentally friendly options. Above all, programs should be aligned with the more important priorities and values of consumers. Copyright 206 The Nielsen Company

14 ABOUT THE NIELSEN GLOBAL SURVEY The Nielsen Global Loyalty-Sentiment Survey was conducted March -2, 206, and polled more than 0,000 online consumers in 6 countries throughout Asia-Pacific, Europe, Latin America, the Middle East/Africa and North America. The sample includes internet users who agreed to participate in this survey and has quotas based on age and sex for each country. It is weighted to be representative of internet consumers by country. Because the sample is based on those who agreed to participate, no estimates of theoretical sampling error can be calculated. However, a probability sample of equivalent size would have a margin of error of ±0.6% at the global level. This Nielsen survey is based only on the behavior of respondents with online access. Internet penetration rates vary by country. Nielsen uses a minimum reporting standard of 60% internet penetration or an online population of 0 million for survey inclusion. ABOUT NIELSEN Nielsen Holdings plc (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers watch and buy. Nielsen s Watch segment provides media and advertising clients with Total Audience measurement services for all devices on which content video, audio and text is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen also provides its clients with analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 00 countries, covering more than 90% of the world s population. For more information, visit Copyright 206 The Nielsen Company. All rights reserved. Nielsen and the Nielsen logo are trademarks or registered trademarks of CZT/ACN Trademarks, L.L.C. Other product and service names are trademarks or registered trademarks of their respective companies. 6/068 Copyright 206 The Nielsen Company 4

15 Copyright 206 The Nielsen Company 5