• by Jack Loechner , Staff Writer @mp_research, August 7, 2014

According to a new study from TechnologyAdvice, customer loyalty programs have been a staple of coffee shops, airlines, and grocery stores for years, typically in the form of credit cards or special punch cards. Recently, the nature and scope of loyalty programs has been shifting, and 59% of people would be more likely to join a loyalty program that offered a smartphone app. The majority of consumers aren’t yet ready for digital-only loyalty programs, but respondents reported being over 80% more likely to shop at stores that offered some type of loyalty program

New services are expanding the reach of loyalty programs to small and medium businesses that have previously lacked the resources and capabilities to implement cohesive rewards programs. To learn more about consumer preferences towards digital loyalty programs, TA surveyed loyalty program users across the US, finding that saving money is the primary reason for participation.

Reason for Participation in Loyalty Programs

• Save money   57.4%
• Receive rewards   37.5
• Earn rewards   3.6

 The second most cited reason for participation was receiving rewards. This is the strategy employed by companies such as Starbucks with their My Starbucks Rewards system. Instead of offering consistent discounts, consumers build up points, to be redeemed for rewards or free products. This is a strong choice for companies that feel a discount system is at odds with their business model.

VIP status came in as a distant third preference, while social recognition was cited by just 0.8% of respondents.  These results suggest pursuit only for extremely niche interests, or business models.

Based on the responses to digital-based or digital-enhanced loyalty programs, there is a strong preference for loyalty apps, and by extension digital-enhanced programs. 59% of consumers would be “more likely” or “much more likely” to join a program that offered a digital app. Only 41% of consumers said they would be “less likely” or “much less likely” to join such a program.

To determine if customers were ready for fully-digital programs, or whether card-based programs remained a low-tech favorite, the results ended up being too close to call, but trending towards card-based loyalty programs.

Customer Preference for Digital and Card-Based Programs

• Card based   36.8%
• Digital   33.3
• Not sure   29.9

Surprising, says the report, given their overwhelming preference for loyalty programs that offered smartphone apps. The report opines that most consumers want smartphone apps as a feature of loyalty programs, but may not want to use an app exclusively, or completely forgo the convenience of a physical card.

To determine what type of rewards consumers are most interested in (beyond simply saving money), respondents were asked whether they would be more or less likely to participate in a loyalty program that offered social rewards.

Degree to Which Social Rewards Incentivize Participation (% of Respondents)

• Less likely   43.8%
• Much less likely   39.5
• More likely   14.4
• Much more likely   2.3

Just 14.4% of people said they would be “more likely” to use a program that offered such rewards. Overall, just 16.7% of respondents felt this was a compelling feature, while 83.3% of respondents said they would be either “less likely” or “much less likely” to participate in a program that relied on social rewards. But, VIP status is a winner.

43.7% of consumers indicated they would be more likely to participate in a program that offered VIP status, or related perks. That number rises to 56.8% when factoring in respondents who were “much more likely.”

Degree to Which Exclusivity Rewards Incentivize Participation

• More likely   56.8%
• Less likely   43.2

Gauging the effectiveness of loyalty programs at enticing members back to the store, and whether current loyalty program users sought out such opportunities at other businesses, once consumers “buy-in” to a loyalty system, says the report, they are highly likely to reward the company with repeat business.

Overall, 82.4% of respondents said they would be “more likely” or “much more likely” to shop at stores that offered loyalty programs. Only 17.6% of consumers indicated they would be either “less likely” or “much less likely” to do so.

Likelihood of Shopping At Stores With Loyalty Programs

• More likely   82.4%
• Less likely   17.6

Concluding, the report notes that, based on the responses collected and analyzed, consumers are not only open to, but welcoming of loyalty programs. While consumers appear to be unsure of fully-digital rewards programs, and are decidedly against social rewards, there’s widespread desire for both smartphone apps and exclusivity-based incentives.

For additional information from Technicology Advice, please visit here.