What Customers Really Think – And Feel – About The Programs They Engage With

1. 1
What Customers Really
Think – And Feel – About
The Programs They
Engage With
Busting Loyalty Myths

2. 2
Barry Kirk
VP of Loyalty Solutions
@barrykirk
Cheryle Frenzel
Director of Loyalty Strategy
Cheryle.Frenzel@maritz.com

3. 3
How do customers
behave
in loyalty programs?

4. 4
What do customers
think and feel
about the programs
they engage in?

5. 5
• 2000+ respondents
• US-based consumers
• Age: 18+
• Even distribution across Millennials,
Gen Xers and Boomers
• Decision making purchase authority
in one or more studied verticals
• Member of at least one loyalty program
Maritz LoyaltyNext® 2016
Customer Study

6. 6
Program
Fees
Loyalty Myth
#1

7. 7
Loyalty programs members
are highly resistant to
paying a fee
in return for the benefits
of a program.
Myth #1

8. 8
“I would consider paying an upfront membership fee to join
a company’s customer loyalty program if…”
48% are willing.
Maritz 2016 Customer Loyalty Study
Reality:
52% of consumers are not willing
to pay a member fee.

9. 9
“I would consider paying an upfront membership fee to join
a company’s customer loyalty program if…”
1.0%
16.6%
18.1%
21.8%
40.2%
52.3%
other (specify): rewards would save
me time/hassle
it was a/my favorite
company
rewards were
exclusive—something I
couldn’t get/experience
otherwise
rewards would save
me money
I would never pay a fee
of consumers are willing
to pay a member fee.48%
Most popular rationales:
• Rewards that provide financial benefit
• Rewards that offer exclusivity
Maritz 2016 Customer Loyalty Study
Reality:

10. 10
Of consumers willing
to pay a fee,
“The most I would pay to become a customer program member is…”
52.3%
5.4%
8.3% 7.9%
18.5%
7.6%
$0 $1-5 $6-10 $11-20 $21-50 >$50
26%
$20
will pay more than
Maritz 2016 Customer Loyalty Study

11. 11
What’s the
takeaway?
• An annual program fee can significantly
offset the operating costs of a loyalty
program.
• Making a fee palatable to members
requires providing a compelling
rationale.
• Leveraging the desire for status and
exclusivity could be the key to unlocking
member receptivity to a fee.

12. 12
Enrollment
Vs
Engagement
Loyalty Myth
#2

13. 13
Myth #2
Convincing a customer to
enroll in your program
is equivalent to
convincing them to
engage in your program.

14. 14
of consumers can recall
a program they’ve joined
but never actually engaged in.
Can you recall a program you joined, but never really participated in?
20.6%
79.4%
Yes (please indicate the company
name):
No
21%
Yes No
Maritz 2016 Customer Loyalty Study
Reality:

15. 15
Why did you never really participate?
19.2%
17.2%
18.4%
19.4%
21.6%
25.0%
41.0%
Other (please specify):
Types of program benefits/rewards were not appealing to me
Not enough program communications/reminders from
^DISENG1O1^ about the program
The program was boring—Nothing new or different over time
Program rules on how to earn were confusing or unclear
I started purchasing less from ^DISENG1O1^ overall
because:
Program benefits/rewards were too hard to earn or took too
long to earn
Maritz 2016 Customer Loyalty Study
Program benefits were too hard to earn
or took too long to earn
Other
Program rules were confusing or unclear
The program was boring
Not enough communication/reminders
about the program
Program benefits/rewards were not appealing
I started purchasing less overall
from the company41%
of consumers
don’t engage in a
program at all post-
enrollment due to
reward or benefits being
too difficult to earn

16. 16
When you have quit a program, how soon after enrollment do you
disengage (quit paying attention to and/or earning)?
6.3%
13.8%
19.6%
20.9%
39.4%
Within first 30
days
1 to 3 months 3 to 6 months 6 months to 1
year
More than 1
year in
Maritz 2016 Customer Loyalty Study
60%
disengaged within 90 days.20%
of consumers who have participated in a
program, but then disengaged, most
often disengaged within the first year.

17. 17
Why did you stop participating in the program
after a period of engagement?
15.2%
12.4%
13.5%
14.3%
19.8%
33.6%
39.1%
Other (please specify):
Program rules on how to earn were confusing or
unclear
Types of program benefit(s)/reward(s) were not
appealing to me
Not enough program communications/reminders
from ^DISENG2O1^ about the program
The program was boring— Nothing new or
different over time
I started purchasing less from ^DISENG2O1^
overall because:
Program benefits/rewards were too hard to earn or
took too long to earn
Program benefits were too hard to earn
or took to long to earn
Other
Program rules were confusing or unclear
The program was boring
Not enough communication/reminders
about the program
Program benefits/rewards were not appealing
I started purchasing less overall
from the company
39%
of consumers
stopped participating
after some period of
engagement due to
reward or benefits being
too difficult to earn
Maritz 2016 Customer Loyalty Study

18. 18
13%
23%
24%
17%
23%
3%
9%
25%
26%
38%
3%
10%
11%
20%
56%
0%
0%
0%
25%
75%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Within first 30 days
1 to 3 months
3 to 6 months
6 months to 1 year
More than 1 year in
18-33 (Millennial/GenY) 34-49 (GenX) 50-69 (Boomers) 70+ (Silent)
When you have quit a program, how soon after enrollment do you
disengage (quit paying attention to and/or earning)?
Maritz 2016 Customer Loyalty Study
56%
Of Boomers stay with
a program more than
a year before disengaging,
whereas…
Of Millennials
will disappear within
the first six months.
60%

19. Enrollment
The Zone of Risk

20. 20
• Enrollment should only be seen as the
minimal level of commitment to the
program.
• The critical time to capture member
engagement is in the first six months
with an aggressive, segmented
communications strategy.
• Making rewards seem attainable is
critical to sustained engagement.
What’s the takeaway?

21. 21
The Focus on
Redemption
Loyalty Myth
#3

22. 22
Loyalty programs members
are mostly focused on
redemption
and the sooner they redeem,
the better.
Myth #3

23. 23
of consumers in points-based
programs save points with a
specific reward or benefit in mind,
vs. spend them right away.
When I earn points (miles, stars, etc.) I usually…
8.3% 7.7%
55.7%
28.0%
0.3%
spend them
right away on a
reward or
benefit I had in
mind ahead of
time.
spend them
right away on a
reward or
benefit I decide
on as soon as I
earn the points.
save them for a
specific reward
or benefit I have
in mind.
save them, but
not with any
specific reward
or benefit in
mind.
NA—I’ve never
earned points in
a program.
Maritz 2016 Customer Loyalty Study
56%
save points, but with no specific
reward or benefit in mind.
28%
Reality:

24. 24
who have earned points
check their balance
more than once a month.
How often do you check your points balance
(how many you’ve earned and/or redeemed)?
12.0%
16.5%
34.4% 33.8%
3.3%
At least once a
week
Every couple
weeks
Monthly Less than
monthly
Never
Maritz 2016 Customer Loyalty Study
1/3
Just under

25. 25
of consumers
cannot recall
what they last
redeemed
their points for
What is the last reward you redeemed your points for?
75.5%
24.5%
I redeemed points for I’ve redeemed, but can’t remember for what
25%
Maritz 2016 Customer Loyalty Study

26. 26
What’s the takeaway?
• Don’t assume that every member is
focused primarily on redeeming points.
• Balance reward redemption messaging
with intriguing point earning
opportunities.
• Provide tools for members to easily
track earnings progress, especially
progress toward an earnings goal.

27. 27
How Lasting
is Loyalty?
Loyalty Myth
#4

28. 28
Once your members are
committed “loyalists,”
they will remain loyal
on their own.
Myth #4

29. 29
of consumers say
their purchasing
loyalty would be
impacted by removal
of a program.
If a customer loyalty program were to be eliminated,
what impact would removal have?
36.9%
18.0% 18.1%
2.2%
43.1%
Less likely to buy as
much or as often
from ^SELECT_1^
Less likely to buy at
all from
^SELECT_1^
Less likely to
recommend a
purchase from
^SELECT_1^ to
others
Other impacts of
deleting this
program:
No impact at all
55%
Less likely to buy
as much/as often
Less likely to
buy at all
Less likely to
recommend
a purchase
to others
Other impacts of
program removal
No impact
Reality:

30. 30
For financial services
brands, the impact of
program removal
would be even
more pronounced.
37%
21% 20%
37%38%
20%
26%
41%41%
18% 19%
39%
54%
8%
31%
38%
0%
10%
20%
30%
40%
50%
60%
Less likely to buy as much or as often Less likely to buy at all Less likely to recommend a purchase to
others
No impact at all
Bank Loyalty Programs
48%
28%
22%
30%
46%
29% 27% 27%
52%
16% 20%
30%
62%
19% 19% 15%
0%
10%
20%
30%
40%
50%
60%
70%
Less likely to buy as much or as often
from
Less likely to buy at all Less likely to recommend to others No impact at all
Credit Card Programs
18-33 (Millennial/GenY) 34-49 (GenX) 50-69 (Boomers) 70+ (Silent)
Maritz 2016 Customer Loyalty Study

31. 31
For financial services
brands, the impact of
program removal
would be even
more pronounced.
Maritz 2016 Customer Loyalty Study
20%
7%
20%
63%
44%
18% 19%
37%38%
15%
24%
44%47%
26% 23% 26%30% 26%
17%
39%38%
31%
25%
31%
0%
10%
20%
30%
40%
50%
60%
70%
Less likely to buy as much or as often Less likely to buy at all Less likely to recommend a purchase to
others
No impact at all
Banking
Under $25,000 $25,000 - $49,999 $50,000 – $74,999
$75,000 - $99,999 $100,000 - $149,999 $150,000 or more
49%
19%
25%
30%
57%
16%
20%
28%
44%
29%
23%
30%
38% 36%
14%
30%
59%
26%
33%
18%
50%
25% 25%
38%
0%
10%
20%
30%
40%
50%
60%
70%
Less likely to buy as much or as often Less likely to buy at all Less likely to recommend a purchase from No impact at all
Credit Card

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• The best assumption is that all
members are perpetually at risk.
• Its critical that you never assume that
your high-value members are “safe.”
• Best practice is to establish a surprise-
and-delight strategy specifically for
long-tenured, high-value members.
What’s the takeaway?

33. 33
The
Motivation
for Loyalty
Loyalty Myth
#5

34. 34
Consumers primarily
join loyalty programs for
mercenary reasons.
Myth #5

35. 35Proprietary and Confidential © 2015 Maritz
4-Dimensional Loyalty Framework
Relational
Transactional
Passive Active

36. 36
4 Types of Loyalty – All Respondents
Inertia True Loyalty
17% 5% 4%31%
Mercenary Cult Other
43%
Maritz 2016 Customer Loyalty Study
Reality:

37. 37
of respondents qualify
as Mercenary loyalists based on the
4D Loyalty Framework.
What best describes the main reason you purchase?
15.2%
45.5%
23.9%
15.4%
INERTIA
MERCENARY
TRUE
CULT
Maritz 2016 Customer Loyalty Study
46%
are True loyalists, driven by love
of a company’s products or services.
24%

38. 38
of consumers join
programs due to
mercenary motivation.
What is the major reason you initially joined?
31.1%
42.9%
16.7%
5.2% 4.0%
It was easy or
automatic to sign
up—No effort on
my part. [INERTIA]
I wanted to earn
rewards.
[MERCENARY]
I love the
company’s
products and/or
services. [TRUE]
I identify with the
company’s purpose
and values, and
feel part of a
“community” with
other customers.
[CULT]
Other (specify):
Maritz 2016 Customer Loyalty Study
43%
31%
join out of inertia.

39. 39
41% pay little attention
to programs at all. (Inertia)
Regarding your member experience, to what extent do you agree…?
22.9%
37.8%
35.2% 41.1%
26.8%
37.4%
35.9%
18.2% 21.5% 30.7% 32.2% 19.5%
37.1% 25.9%
I’m a member of the
program, but I don’t
pay much attention
to it or make a
specific effort to
earn or participate.
[INERTIA]
The customer
loyalty program
^SELECT_1^ offers
is a tactical way for
the company to get
me to buy the things
they want me to buy
short term.
[MERCENARY]
I make purchases
from ^SELECT_1^
to maximize/build
my rewards in the
program.
[MERCENARY]
The customer
loyalty program is
one way that
^SELECT_1^ shows
it cares about its
long-term
relationship with me.
[TRUE]
I feel a sense of
connection to the
program member
community. [CULT]
I would recommend
being a member of
the program to
friends/family.
[ADVOCACY]
The program has
strong reputation
that customers
purposefully seek
out being a member.
Strongly Disagree Tend to Disagree Neither Agree nor Disagree
Tend to Agree Strongly Agree
Avg.: 3.1 3.6 3.8 3.9 3.3 4.0 3.7
6 in 10
feel loyalty programs
are a mercenary tactic
by companies.
66% feel membership is a
mercenary decision on
their own part.
I don’t pay much
attention to the
program or make
a specific effort to
participate.
The program
offers a tactic for
the company to
get me to buy
what they want
me to buy short
term.
I make
purchases to
build or
maximize
my rewards in
the program.
INERTIA MERCENARY MERCENARY TRUE CULT MERCENARY/CULT TRUE
The program is
one way the
company shows
it cares about a
long-term
relationship
with me.
I feel a sense
of connection
to the
program
member
community.
I’d recommend
being a member of
the program to
friends & family.
The program
has a strong
reputation that
customers
purposely seek
out.
Maritz 2016 Customer Loyalty Study

40. 40
What’s the takeaway?
• Mercenary Loyalty is effective, but it’s the
beginning of your loyalty strategy, not the
end.
• Few brands are offering consumers an
option for anything other than Inertia or
Mercenary loyalty.
• Moving to a multi-loyalty strategy
(Mercenary + True + Cult) is an opportunity
to differentiate your program and provide a
compelling rationale for engagement.

41. 41
Maritzmotivationsolutions.com

42. 42
Questions?

43. 43
What Customers Really
Think – And Feel – About
The Programs They
Engage With
Busting Loyalty Myths