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Younger Generations Key Market
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August 30, 2017

Author: HIR Staff

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Retailer loyalty program membership is nearly universal across Canada, but it appears that participation wanes among the nation's lower income households, finds research by Mintel. In fact, while 98 per cent of those with a household income of $150,000 or higher report belonging to a retailer loyalty program, this declines to just 86 per cent of consumers with a household income of less than $50,000. Overall, nine out of 10 (91 per cent) Canadians say they participate in a loyalty program, with drug stores (51 per cent) and supermarkets (50 per cent) leading the way.

Despite the overwhelming popularity of loyalty programs, there are still barriers to joining, especially when it comes to cost, as 60 per cent of Canadians agree they are not interested in paying a membership fee. However, there is a greater willingness to overlook membership fees amongst younger consumers. Just 53 per cent of consumers aged 18 to 34 say they aren't interested in paying a membership fee compared to three quarters (71 per cent) of those aged 55+.

Deals Outweight Benefits

“Loyalty programs prove to be effective at increasing engagement among consumers, but there is potential to target less affluent consumers who may be skeptical of the actual cost savings they will gain. While the quest for better deals outweighs the potential benefits of loyalty programs for some lower income consumers, the lower likelihood of participation is a missed opportunity,” says Carol Wong-Li, lifestyles and leisure analyst at Mintel. “Less affluent consumers may have a perception that loyalty programs cost money, require purchases of multiple items or do not necessarily offer the best value, indicating retailers need to better communicate the benefits of joining such programs – especially if the programs are free to join and rewards can be earned with single purchases.”

With value top of mind for shoppers, those who participate in loyalty programs are most likely (62 per cent) to say that discounts on merchandise or services would encourage them to participate in loyalty programs. Loyalty program participants are also interested in having flexibility with how and where they redeem rewards. More than half would like to be able to redeem rewards online (55 per cent) as well as at a variety of retailers (53 per cent). What's more, personalization is key as 42 per cent are interested in receiving personalized rewards, rising to 49 per cent of those aged 18 to 34.

Reward Reviews

As modern lifestyles encourage consumers to be constantly connected, scoring deals for activities they are already engaged in is proving successful, especially among younger women. Women aged 18 to 24 who participate in loyalty programs are more likely than consumers overall to say they are interested in rewards for writing online product reviews (43 per cent versus 26 per cent overall), and are nearly twice as likely to want rewards for engaging with a company on social media, such as 'liking' or 'following' (35 per cent versus 18 per cent overall).

“As retailers are well aware, getting consumers to join a loyalty program is merely the first hurdle to engagement; getting them to be active in the program is where retailers reap the benefits,” says Wong-L. “Success of loyalty programs will likely be gained by playing up the interests of consumers, including online or social efforts and centering rewards around areas where customers are most likely to draw a higher sense of value.

“Younger women are keen to be recognized for their social advocacy efforts rather than be rewarded solely for their patronage, highlighting that rewarding consumers for social posts or online reviews should yield gains in the form of more attention to the brand.”

It appears that membership may indeed drive loyalty as half of Canadians who are enrolled in loyalty programs say they prefer to shop at retailers where they participate in the loyalty program. What's more, over one third agree they would choose to shop at a certain retailer over their competition because of its loyalty program.

Take Advantage Of Rewards

When it comes to cashing in on their loyalty one third of Canadian loyalty program members say they spend more at certain retailers to take advantage of loyalty program rewards, and 30 per cent say they buy specific products to take advantage of loyalty program deals. Getting a good deal is even worth a longer trip for some as one in five (22 per cent) agree they would visit a store that's farther away because of their loyalty program.

Redemption behaviour amongst loyalty programs members shows a thirst for maximizing value. Three in 10 say they save their rewards to use on more expensive purchases when using dollars-off rewards. Shoppers also aim to allocate rewards toward the items they want as 31 per cent agree they would rather use their rewards to receive a discount on merchandise than to receive free products. For some, there is a desire for seeking instant gratification as 30 per cent usually redeem their rewards as soon as they're available.

“Brands may intuitively consider delivering more discounts as a way to deepen engagement in loyalty programs. However, as the retail environment faces a challenging market and the potential for a weaker dollar further impacting the bottom line, cutting costs may not be the optimal answer. Loyalty program engagement could offer a solution, further strengthened by focusing on elements that the customer doesn't necessarily immediately think about, such as simplifying the purchasing process or enhancing the customer experience rather than simply offering a discount,” says Wong-Li.

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