In response to cross-shopping, retailers often turn to loyalty programming to engage existing customers and drive more visits. That’s a wise decision, according to a recent Upside survey — but the data also shows that relying on loyalty alone won’t change customer behavior. 

Consumer loyalty and the impacts of loyalty programs on customer behavior are highlighted in Upside’s inaugural Consumer Spend Report. To dive deeper into customer loyalty data, continue reading here — or get your copy of the full report, featuring data from over a billion retail transactions and over 7,000 consumer survey responses.

How loyalty programs influence shoppers (and how they don’t)

Just over 90% of consumers in that sample at least consider loyalty (or its absence) when making decisions about where to shop. Plus, 72% of consumers agree it is important to earn loyalty rewards or cash back at a given retailer. These figures show that consumers do want loyalty programming.

Taking these statistics at face value, it appears that loyalty has positive impacts on nearly all customers. However, there is a gap between the number of customers who say that loyalty programs are important for their buying decision, and the number of customers who actually use the benefits of loyalty programs frequently. 

Whereas 72% of shoppers said that loyalty rewards or cash back on their purchases were important to them, only 46% of fuel customers, for example, actually make use of those rewards most of the time. Every category in our survey has a large opportunity gap for loyalty programming.

The following chart, meanwhile, shows how often survey respondents make use of loyalty benefits. For both grocery and fuel purchases, a plurality of respondents always use loyalty rewards or cash back promotions. It’s not a surprise that grocery stores have the highest share of shoppers who always use loyalty — top programs in the industry can have upwards of 80% penetration, making them by far the most widely adopted programs in retail.  

Depending on your point of view, this chart can be interpreted positively or negatively. There is clearly a category of consumers for whom loyalty is really effective, as evidenced by the number of shoppers who make use of loyalty frequently. On the other hand, loyalty has no bearing on the purchases for the remainder of shoppers — and again, there’s a sizable opportunity gap for loyalty in each retail category.  

Our survey also uncovered a small but critical minority: “loyalty mercenaries.” They make up roughly 10% of consumers in each retail category, give or take a few percentage points. These shoppers always change where they shop or try a new retailer based on the rewards they could earn, as illustrated in the chart below. It’s good for retailers to know these people exist, but there’s not much you can do to win their business profitably.

Understanding the limitations of loyalty programs

A recent report from Bond on customer loyalty indicated that the average American consumer belongs to 19 loyalty programs overall, though they’re only active in about nine of those programs. And as we highlighted earlier in this report, consumers often join multiple programs within the same retail category. While a given customer might belong to your program, they could also belong to your competitor’s.

There’s one primary issue with loyalty programs: They’re all fairly similar to each other, as each retailer’s program offers fairly similar benefits to its members. Need proof of that truth? Try searching online for the “best loyalty programs.” You’ll surface a handful of “top-10” lists, but the publications lack any real consensus.

And in the race to add benefits that are truly differentiated, retailers are committing huge sums of money, investing in things like ever-increasing discounts in fuel, or free delivery on online grocery orders. In the end, these retailers are spending more on their program than they’ll ever be able to recoup from their members. 

The role of loyalty programs in a cross-shopping environment

All of this is not to say that loyalty is an unhelpful tool to win more spend from customers. It is helpful, especially when it comes to a shining group of customers every retailer should strive to win: the loyalty “super-user.”

“Super-users” are your most frequent visitors, and they are even more valuable than most retailers realize. Though they only make up 22% of loyalty members, according to our recent loyalty report, they account for roughly half of total transactions and revenue (not just those from loyalty members).

Growing that group of loyalty super-users and reducing the number of shoppers who spread around their trips should be a priority for all retailers. In order to drive long-term behavior change in cross-shoppers, retailers should base their loyalty program success on outcomes, not simply signups. And in order to drive outcomes that matter to the bottom line, retailers need to prioritize three factors:

• True personalization: Influencing one individual at a time by meeting their unique value points without impacting sales expected to take place anyway.
• Relevance: Interacting with consumers at their moment of need, with the right selection, using the right medium.
• Reach: Employing strategies that can be scaled to thousands (or even millions) of frequent customers.  

Get more consumer loyalty data

These insights on consumer loyalty come from an excerpt from Upside’s inaugural Consumer Spend Report 2024. Get your copy of the full report.