THE RISE OF PREMIUM LOYALTY What Do Your Customers Expect in 2020?
CLARUS commerce TABLE OF CONTENTS
03 Introduction
06 Premium Loyalty Is on the Rise
10 Loyalty Members Expect Clear Value
15 Millennials and Premium Loyalty
19 Popular Premium Loyalty Programs
22 The Time Is Now for Premium Loyalty
24 Methodology A New Decade of Premium Loyalty
A new decade signals a fresh start. to spend now to receive benefits For retail brands, 2020 presents an later, premium loyalty programs opportunity to drive major change give customers what they want, in the way they attract and retain when they want it. As a result, customers going forward. premium loyalty members have higher engagement rates and In 2020, loyalty is critical: Nearly often become valuable brand two-thirds of customers say their ambassadors that bring in even loyalty is more difficult for retailers more satisfied customers. to maintain than ever before, confirming what we already know Whether by communicating clear to be true: With unlimited choices value and specific benefits or at customers’ fingertips, earning adjusting existing loyalty programs loyalty today takes more than just to cater to the needs of emerging a plastic punch card or weekly generations, brands must be coupon. Consumers expect more cognizant of premium loyalty’s than just traditional loyalty programs power in motivating today’s easily to keep them coming back – they distracted customers to return to expect the instant benefits and their brand time and again. experiences that premium loyalty programs can offer. Based on a survey of 2,500 consumers, the following report Premium loyalty programs give digs into and analyzes what retailers’ most dedicated customers today’s customers expect from a instant, 24/7 transactional benefits premium loyalty program and how like discounts and free shipping retailers can adapt accordingly to as well as top-tier experiences in keep long-term customers close exchange for an annual or monthly as loyalty becomes even harder membership fee. Rather than to come by. requiring your customers
Clarus Commerce — Premium Loyalty Data Study 2020 3 Comparing Premium and Traditional Loyalty Programs
Premium Traditional
Recurring membership fee in exchange What it takes Accumulate points with each transaction to earn for instant transactional benefits plus to earn benefits benefits over time exclusive experiences
Intended audience The top 20% of your customer base Casual shoppers
Increased engagement, AOV and frequency A high volume of signups across a broad segment Results among your best customers, while paving the way of consumers, but limited engagement for greater brand advocacy
Clarus Commerce — Premium Loyalty Data Study 2020 4 Key Findings
69% 94% of premium loyalty members of premium loyalty members shop plan to join additional premium at that program’s retailer at least programs in 2020 once a month
70% 88% of those not in a premium program of respondents are likely to choose would join if their favorite retailer a retailer whose premium loyalty offered one and the benefits program they belong to over a were valuable competitor that is offering a lower price
74% of millennials plan to join additional premium loyalty programs in 2020
Clarus Commerce — Premium Loyalty Data Study 2020 5 SECTION 01
Premium Loyalty Is on the Rise The steady growth of premium loyalty Premium loyalty is on the rise — which is good news for retailers hoping to enter the premium loyalty arena and secure long-term loyalty from their customers this year. The survey found that 66% of respondents currently belong to a premium loyalty program. This is a promising increase when compared to the 58% reported in 2019.
Frequency of consumers who shop with retailers while participating in their premium loyalty program
11% 25% 22% 25% 11% 6% Every day Every few days Once a week Once every Once a month Less than once few weeks a month
Percentage of consumers who plan to join premium loyalty programs in the future
30% 40% 26% 4% Definitely yes Probably yes Probably not Definitely not
Clarus Commerce — Premium Loyalty Data Study 2020 7 Here’s even better news: Once Beyond this spike in membership, For which of the following categories consumers become premium loyalty consumers also expect premium would you be willing to join a premium members, they use the programs to loyalty programs to exist in more their fullest. In fact, respondents use shopping categories. While loyalty program? their current programs frequently, staples like groceries and gas with the majority making a purchase remain obvious frontrunners, at least once a month, and many new categories like clothing, 60% Grocery shopping weekly. entertainment, and health and beauty are seeing a boost in And as an added bonus, interest compared to 2019 data. an overwhelming majority of For brands that offer products in respondents (69%) plan to join these categories, this is the year to 54% Clothes and accessories more premium loyalty programs consider how premium loyalty in 2020. could elevate the experience for your customers.
41% Gas
38% Entertainment
35% Health and beauty
34% Travel and hospitality
23% Furniture
Clarus Commerce — Premium Loyalty Data Study 2020 8 Traditional and premium programs work together
Traditional loyalty programs can In fact, 67% of respondents are boost the growth of a premium likely to join a premium loyalty program by acting as excellent program if they already belong to recruitment sources. A free that retailer’s free loyalty program. program gathers a ready-to-use pool of customers that already Currently, over half (52%) of survey enjoy your brand enough to join respondents who don’t belong to a a loyalty program once. With the premium program already belong to right mix of added value and clearly a free program. That’s a significant communicated benefits, customers group of consumers from which to will jump at the chance to level recruit for premium programs in up and join the premium program the future. so they can experience it for themselves.
Likelihood consumers will join a premium loyalty program if they already belong to a free loyalty program
28% 39% 18% 14% Very likely Somewhat likely Somewhat unlikely Very unlikely
Clarus Commerce — Premium Loyalty Data Study 2020 9 SECTION 02
Loyalty Members Expect Clear Value Premium members are brand evangelists “Brands can’t wait for customers to So, what drives consumers to join a premium loyalty program? It comes down to consumers clearly seeing the value that the program offers its members: stumble on the program themselves — 70% of all respondents who are not yet in a premium program said they they need to be proactive about showing would join one if it was offered to them and the benefits were valuable. The the clear, personalized value of upgrading key word here is “offered.” Brands can’t wait for customers to stumble on the to a premium program.” program themselves — they need to be proactive about showing the clear, personalized value of upgrading to a premium program.
Reasons why consumers do not participate in any premium loyalty programs
35% 42% 31% 5% They’re too expensive I don’t see the value I’m open to them, but Other the retailers I shop with don’t offer them
Clarus Commerce — Premium Loyalty Data Study 2020 11 When customers do see the value family or friends if the retailer’s and join, however, these members premium loyalty program become key ambassadors of the offers valuable benefits. program — and the brand as a whole. Consumers overwhelmingly To ensure the sustainability of Likelihood consumers will recommend choose brands they are loyal your program and the long-term to over price tags: 88% of success of your brand, it’s critical a retailer to friends/family if they find respondents are likely to choose to communicate the value your the benefits from that retailer’s premium a retailer whose premium loyalty program offers clearly, early, loyalty program valuable program they belong to over a and often. Your premium loyalty competitor that is offering a lower members are key evangelists of price. Plus 89% of respondents your brand, but they need to be would recommend a retailer to guided to fulfill that role. 53% Very likely
36% Somewhat likely
6% Somewhat unlikely
2% Very unlikely
3% No influence
Clarus Commerce — Premium Loyalty Data Study 2020 12 Where do today’s customers find value?
Communicating value is critical, First and foremost, 40% of so the important question is: What respondents expect to receive do consumers value in a premium their premium loyalty benefits loyalty program? immediately, not after 10 purchases and not after a month of consistent The answer is different for each buying. And when it comes to retailer and brand. It depends benefits, free shipping, instant on the industry, the competitive discounts and free giveaways top climate and the demographics of the list of incentives that would the consumer base. However, the encourage consumers to join a survey reveals some insights on premium loyalty program. While the “must-haves” that any good experiential benefits are critical, premium loyalty program especially when it comes to brand should include. differentiation, transactional benefits are often what get members in the door.
What was the main reason you joined Amazon Prime?
“Although I joined Prime for shipping, I ended up using many of the other 81% Faster/free shipping features... I would consider all those extras in the Prime membership as
11% Video streaming benefits 3% Customer events perks that motivate.”
2% Music streaming benefits 2% Food delivery
Clarus Commerce — Premium Loyalty Data Study 2020 13 Perks that motivate consumers to join a premium loyalty program
66% Free shipping 38% Holiday discounts
60% Instant discounts that can be used whenever you shop 35% Exclusive deals (i.e. access to pre-sales)
56% Free giveaways 27% Personalized offers
47% Faster shipping 19% Exclusive in-store experiences (i.e., a personal stylist, fitness classes, etc)
45% Surprise rewards 6% Nothing would motivate me to invest in a premium loyalty program
14 SECTION 03
Millennials and Premium Loyalty Ready to recruit the next generation? When it comes to premium loyalty recruitment efforts, millennials are the ones to watch. Not only is this age group gaining buying power in the market as they move into higher level jobs, but they are starting or expanding their families, which comes with different purchasing needs and categories.
Frequency of millennial consumers who shop with retailers while participating in their premium loyalty program
16% 28% 22% 22% 8% 4% Every day Every few days Once a week Once every Once a month Less than once few weeks a month
Frequency of non-millennial consumers who shop with retailers while participating in their premium loyalty program
11% 25% 22% 25% 11% 6% Every day Every few days Once a week Once every Once a month Less than once few weeks a month Clarus Commerce — Premium Loyalty Data Study 2020 16 This could explain why 74% of millennial respondents are likely to join a And in terms of recruitment, another 74% of millennial respondents plan to premium loyalty program if they already belong to a retailer’s free program join additional premium loyalty programs in 2020. Sixty-five percent already — a healthy jump from the 67% of total respondents who say the same. shop with their premium loyalty programs at least once a week, and 1 in 4 are willing to pay up to $100 a year for premium loyalty membership.
Percentage of millennial consumers who plan to join premium loyalty programs in the future
38% 36% 23% 3% Definitely yes Probably yes Probably not Definitely not
Percentage of non-millennial consumers who plan to join premium loyalty programs in the future
30% 40% 26% 4% Definitely yes Probably yes Probably not Definitely not
Clarus Commerce — Premium Loyalty Data Study 2020 17 Millennials holiday shop early
If brands are itching to recruit “Early” is even earlier than brands millennials to their loyalty programs might initially think for the holiday in 2020, they should start early. shopping season, especially for this During the holiday season, demographic. In fact, nearly half millennial shoppers are fiercely (48%) of millennials begin holiday loyal to their favorite retailers: 89% shopping before October, and just of millennial respondents are more under 1 in 4 do so before July. likely to holiday shop at a retailer where they are already a loyalty For those millennials who begin member. And among millennials holiday shopping before October, who are already premium loyalty 73% have joined a loyalty program members and plan to join more solely to use the benefits and programs in 2020, the number who rewards during the holiday choose their loyalty retailers during shopping season. the holidays jumped to 95%.
Time of year millennials begin holiday shopping
10% January-March
10% April-June
24% July-September
56% October-December
Clarus Commerce — Premium Loyalty Data Study 2020 18 SECTION 04
Popular Premium Loyalty Programs Popular Premium Loyalty Programs
GameStop: PowerUp Rewards Bed Bath & Beyond: Beyond+
Price point $20/Year $29/Year
Exclusive offers and games, 20 points for every dollar 20% off discount on each purchase, free shipping Benefits spent, 10% extra trade credit, $60 annual rewards and 50% off design services. certificate, digital subscription to Game Informer.
A lot of benefits for regular gamers who frequent No more searching for and stowing away paper What’s the value? the store anyway, and the rewards credit pays for coupons for future purchases. the annual fee.
Clarus Commerce — Premium Loyalty Data Study 2020 20 Popular Premium Loyalty Programs
CVS Pharmacy: CVS CarePassTM Amazon: Amazon Prime
Price point $60/Year $119/Year
Free two-day, same-day and no-rush shipping, Free delivery, 24/7 pharmacist helpline, 20% off CVS video and music streaming, Whole Foods and Benefits Health® brands plus a $10 monthly promo reward. Amazon Fresh two-hour grocery delivery, Prime Day, Prime Reading and more.
This goes beyond the free program (ExtraCare®) Fast, free delivery for everyday essentials to bring added benefits for more frequent What’s the value? and everything in-between plus a long list of customers, critical for retail brands in the extra benefits. healthcare space.
Clarus Commerce — Premium Loyalty Data Study 2020 21 SECTION 05
The Time Is Now For Premium Loyalty Getting started with premium loyalty
Premium loyalty is growing steadily, or Amazon’s. Once you determine and retailers from all industries and that unique value point, you can put categories should consider the the corresponding customer needs benefits that premium programs can first as you develop the program. create. Not to mention, premium loyalty programs are often ROI- Then, find a partner that positive from the very first day — understands the ins and outs they cost little upfront and revenue of premium loyalty programs to flows almost immediately. guide the initiative as it grows and evolves. With a trustworthy guide However, a successful program isn’t to lean on for support and advice, something that’s one-size-fits-all. To you can be sure that your premium get started on the path to premium, offering continues to provide value you must determine where your years down the line for both your customers find value in your brand, business and customers. not your closest competitors’ brands
“To get started on the path to premium, you must determine where your customers find value in your brand, not your closest competitors’ brands or Amazon’s.”
Clarus Commerce — Premium Loyalty Data Study 2020 23 Methodology
Clarus Commerce surveyed 2,500 American consumers in February 2020. The respondents were broken down by a number of different factors, including their familiarity with free and premium loyalty programs.
Do you currently belong to any free loyalty programs? (i.e., Starbucks Rewards or a points program from a local business)
73% 27% Yes No
Do you currently belong to any premium loyalty programs? (i.e., Amazon Prime, CVS Carepass)
66% 34% Yes No
Clarus Commerce — Premium Loyalty Data Study 2020 24 About Clarus Commerce
Clarus Commerce is the only company solely focused on building, managing and optimizing customizable premium loyalty programs for retailers. The company is a true loyalty partner that not only provides a technology platform, but also a full suite of managed services including strategy, creative, marketing, analytics and client services.
Learn more at claruscommerce.com
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