The Great Divide: How Consumers vs. Retailers Perceive Loyalty Programs

Retailers have consistently relied upon loyalty programs that offer incentivizing rewards to consumers in exchange for repeat business. In fact, according to the 2017 COLLOQUY Loyalty Census, U.S. consumers hold 3.8 billion memberships in customer loyalty programs.

While many retailers equate membership with loyalty, often this is a false indicator. To illustrate a more accurate picture of consumer perceptions on loyalty, Oracle Retail published Retail 2018: The Loyalty Divide, based on a global research study across retail, hotels and restaurants, which surveyed over 13,000 consumers and 500 brands across 10 countries. The results point to a significant gap in what retailers and consumers think about loyalty.

Retail’s ‘Great’ Loyalty Divide

The average U.S. citizen has 38 loyalty memberships. Of those 38 memberships, consumers are typically active in an average of 12 programs. This highlights a fundamental misconception around loyalty programs: Being enrolled in a membership program doesn't indicate loyalty.

What’s driving this lack of engagement? The data suggests that consumers suffer from loyalty fatigue, are overindexed with points and aren't being targeted with relevant content. Our research found that although 58 percent of retailers believe consumers will sign up for every program or offer, consumers are more discriminate, with nearly 70 percent indicating that they limit their participation or rarely sign up for offers at all. What’s more, nearly 60 percent of retailers believe what they’re sending consumers is relevant, however, only 32 percent of customers say the same. This massive divide is the result of retailers passing off discounts as opposed to creating real connections with their customers and interchanging the concepts of personalization and relevance. Shoppers desire more targeted and intelligent recommendations that don’t just personalize based on purchase history, but rather understand and anticipate what an individual’s preferences are.

With GDPR having gone into effect last month, consumers are gaining more control over their personal data and retailers are challenged to operate and execute personal offers in an increasingly complex environment. Our research finds that while 69 percent of consumers want personalized offers, 81 percent of those same consumers would have brands remove their personal information if given the option to do so. This reality poses a major dilemma: How can retailers make personal connections with an anonymous customer?

Earning the Right to Be Remembered

Retailers are heavily invested, both financially and resource-wise, in their loyalty programs. This poses a huge operational risk as they continue to throw money at programs that aren’t hitting the mark, in addition to increasing customer churn. The future of loyalty will be a balancing act between a customers’ desire for anonymity and an expectation for relevant and targeted promotions.

Striking this balance requires advanced retail science and technology solutions that allow companies to make better decisions, predict consumer behavior, and deliver relevant and memorable experiences. For example, in the absence of customer loyalty data or robust social sentiment data, retailers can (and should) be leveraging their store point-of-sale data to identify influential stores that drive trend adoption, then prioritize their promotions accordingly. When this approach is applied correctly, it yields an impressive set of business outcomes and will allow us to return retailing back to what it has always been — one of the most compelling and fulfilling parts of our lives.

Mike Webster is the senior vice president and general manager, Oracle Retail and Hospitality.