Loyalty Programs: Key Metrics, Trends and Challenges

NEW YORK -- Members of customer loyalty programs generate 12% to 18% more revenue for retailers than non-members. But while retailers believe their loyalty and rewards programs are differentiated from those of their competitors, customers don’t.

More than two-thirds (71%) of retailers in an Accenture Interactive survey of loyalty programs said their program was “differentiated” or “significantly differentiated” from those of their competitors.

Other research, however, has found that approximately one-third of each retailer’s loyalty members cross-shop at another key competitor within the same channel, and nearly half (44%) of consumers believe it would be easy to replace a retailer’s loyalty program with a competitor’s program.

New York-based Accenture Interactive surveyed retailers across specialty, big-box, department, drug and convenience stores in the United States to identify key trends and challenges of retailers’ loyalty programs.

It found that fewer than one in five retailers focuses on return on investment (ROI) as a key metric of the success of a loyalty program. When asked to identify success metrics for their program, only 19% of the retailers surveyed cited ROI.

The areas retailers focus on most for their loyalty programs are growth and revenue production metrics, member value metrics and engagement metrics.

Top growth and revenue production metrics:

1. Membership growth rates (cited by 45% of respondents)
2. Share of transactions by members (42%)
3. Number of transactions per year (36%)

Top member value metrics:

1. Retention rate (cited by 40% of respondents)
2. Customer long-term value (37%)

Top engagement metrics:

1. Number of reward redemptions (cited by 32% of respondents)
2. Campaign response rates (27%)
3. Customers engaged socially (16%)

“Given the maturity and sophistication of loyalty programs today, it’s surprising how little scrutiny retailers place on program ROI rather than just growing membership,” said Farrell Hudzik, managing director of Accenture Interactive’s Global Loyalty and Rewards practice.

The top trends having the greatest positive financial effect on loyalty programs:

1. For convenience stores and drug stores: the mobile evolution of program features or mobile apps.
2. For specialty retailers: personalization of the offers and use of the data.
3. For big-box and department stores: improvements to the overall program and member experience.

According to Accenture, the biggest challenges retailers face with their loyalty programs relate to technology, strategy, financial management and people and talent. When asked to identify their biggest challenges, respondents most often cited:

1. Keeping up with the underlying technology (mobile and digital capabilities) or investing enough in technology (40%).
2. Keeping up with competing loyalty programs (33%).
3. Managing the liability and financial complexity of the program (33%).
4. Having enough people and the right kind of talent required for today’s loyalty programs (30%).

The top three areas of greatest investment for convenience stores and drug stores:

1. Technology (cited by 56% of respondents).
2. Marketing (44%).
3. Strategy (31%).

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