Another major trend supporting GCP’s approach and business model is the continued growth of customer loyalty programs. The 2011 COLLOQUY Loyalty Census reveals that the number of loyalty memberships in the U.S. more than doubled, from 973 million to 2.09 billion over the past decade. Since 2006, the number of loyalty programs per household rose by more than 50% from 12 to more than 18. With that many memberships, I guess it shouldn’t be surprising that each household reports being active in only 8.4 (or 46%) of the loyalty programs in which they are enrolled.
Digging deeper into the numbers reveals some interesting trends. Because frequent flier miles and credit card-based programs have been around for such a long time, Travel and Financial Services represent the bulk of both memberships and rewards. However, growth in these mature sectors has been relatively flat over the past few years.
U.S. Loyalty Program Memberships by Sector, 2010
Industry Sector Memberships ’08-’10 Growth
Financial Service 428.8 2%
Airline 324.9 17%
Specialty Retail 286.8 50%
Hotel 176.8 9%
Grocery 173.7 13%
Gaming 133.0 26%
Mass Merchant 129.7 4%
Department Store 113.9 23%
Drug Store 98.1 33%
Fuel & Convenience 31.9 -21%
Car Rental & Cruise 17.8 32%
Restaurant 9.7 17%
Other 164.1 n/a
The real growth in loyalty enrollment is taking place in the Specialty Retail sector which rose 50% since 2008, and 109% since 2006. This growth is driven not only by an increase in the number of loyalty programs available, but also by an increased focus on using loyalty programs as a competitive edge and differentiator. Toys ‘R’ Us and Best Buy are great examples of companies that use their rewards programs to add value to their in-store shopping experiences. The more competitive and fragmented Restaurant industry, meanwhile, saw a more modest 17% increase in memberships, to 9.8 million, as chains including Panera Bread and Starbucks followed the example set by the airlines and credit card issuers.
We believe that emerging mobile shopping and payment technologies will accelerate growth in these sectors by enabling even small, single location merchants and restaurants to provide full-featured loyalty programs. The challenge for smaller establishments will be finding ways to offer compelling rewards that allow them to differentiate themselves from other local businesses. Offering a unique reward or benefit is a great way to differentiate.
Airline miles emerged as a popular loyalty currency more than a decade ago targeting consumers who were motivated by accumulating travel-related benefits. Our carbon-based Points allow loyalty programs to appeal to environmentally-conscious consumers in a meaningful and compelling way.
It also turns out that there is strength in numbers. COLLOQUY’s study found that “multi-partner” loyalty programs have higher perceived value to consumers and achieve better results than stand-alone category programs. That means more partners equals more value to customers because they provide greater opportunities for members to both earn and redeem rewards.