New data has revealed that return on loyalty programs is now higher than ever, but many loyalty programs are not as effective as they could be.

Bond Brand Loyalty has released the 2016 Bond Loyalty Report, its sixth annual consumer loyalty report. Data collected in the report has revealed that a growing number of consumers choose to do business with brands that offer loyalty programs. However, the report also revealed that a number of brand loyalty programs that are currently in the market are missing opportunities to greatly increase customer loyalty.

The 2016 Bonds Loyalty Report reveals that 81% of consumers are more likely to continue doing business with brands that offer loyalty programs. Despite this, the report finds that many programs are missing the opportunity to personalize offers and communications. Only 22% of respondents are very satisfied with the level of personalization they’re getting from brands, yet, satisfaction is eight times higher when programs are highly personalized. When it comes to customer experience only 20% strongly agree that a brand or program representative makes them feel special and only a quarter of respondents feel that the program experience is consistent across varied touch points (such as online, by email, by phone and in person).

The 2016 Bond Loyalty Report, conducted in collaboration with Visa, is the largest study of its kind. The report captures responses from roughly 12,000 U.S. and 7,000 Canadian consumers. The report covers 58 dimensions of loyalty program performance including program mechanics, communications, rewards, needs fulfillment, loyalty emotional and behavioral outcomes and brand alignment.

Year-over-year program satisfaction is steady at 44%, even as loyalty solutions continue to innovate, indicating that member expectations are increasing just as quickly as programs are evolving. Developing meaningful loyalty programs that meet customers’ needs while deepening their relationship with brands is a difficult challenge, but when designed and operated effectively can reduce program costs and strongly influence consumer behavior.

Loyalty Impact

• Consumers belong to an average of 13.4 loyalty programs, but are active in only 6.7 programs.
• The number of consumers who say they modify the brands/companies they purchase from in order to maximize points continues to increase (67%, up from 64% in 2015 and 55% in 2014).
• 73% of members are more likely to recommend brands with good loyalty programs, which equates to a boost in member acquisition and reduced marketing spend. Top programs that members are very likely to recommend include Sally Beauty Club, My Sheetz, Amazon Prime and Giant Eagle fuelperks!.
• 66% of consumers modify amounts spent to maximize points.

Program Satisfaction, Brand Alignment and Rewards Redemption

• Program satisfaction holds steady from last year—less than half (44%) of program members are very satisfied with their loyalty programs, which points to a need for continued focus on program enhancements and improvements to keep up with consumer expectations.
• 39% of members feel that their program fits very well with what they expect from a brand. Top ranked brand-aligned programs include Carter’s Rewarding Moments, Amazon Prime, Kroger Fuel Points and Nordstrom Rewards.
• The rewards and redemption experience is key to member satisfaction, yet more than a fifth of members have never made a redemption. Rewards play an important role in retention, as non-redeemers are 2.3 times more likely to defect than recent redeemers, suggesting brands would be well served to focus on the redemption experience, not (just) the reward itself.
• Credit card loyalty programs can benefit by offering instant retail and online points redemption both to lower the cost per point but also to improve the program experience, as 70% of consumers find this redemption option appealing, and 43% are willing to pay a points premium for this convenience.

Demographic Differences

• 68% of female versus 60% of male members are interested in earning rewards for non-purchase activities (updates to profile, refer-a-friend, social activity, etc.).
• Millennials have unique and increasing demands and require further program differentiation:
  • Millennials are 2.2 times more willing than boomers to pay a premium for products and services if they can also earn loyalty and reward points.
  • Six out of 10 millennials are comfortable receiving product recommendations based on their purchase history, compared to only four out of 10 boomers.
  • Substantially more millennials value programs that offer special services like concierge (59% of millennials versus 38% of boomers).

Mobile is a Strategic Advantage (but Missed Opportunity)

• Demand increases to 57% of members who want to engage with programs on a mobile device.
• 62% of women versus 52% of men would like to engage with programs on a mobile device.
• Nearly 50% of program members don’t know if there is a mobile app to compliment their loyalty program.
• Outside of a program app, consumers are most interested in using their mobile device to check their points balances (57%), redeem reward points (55%), find a location/store (54%) and browse reward options (54%).

Leaders in Loyalty
The 2016 Bond Loyalty Report performs in-depth profiling of more than 280 loyalty programs across key sectors including payment, retail, hospitality, airlines, gas, dining, CPG, coalition and others. Some of the top loyalty programs based on overall member satisfaction include Southwest Rapid Rewards, Carter’s Rewarding Moments, Giant Eagle fuelperks!, Kohl’s Yes 2 You, Pampers Rewards, Barnes & Noble Member, Amazon Prime and Chick-Fil-A The A-List.

Informal Loyalty Brands Perform Well
The study also looked at a number of informal loyalty brands—these are brands without a formal loyalty program, but who engage in many similar mechanics to keep their customers happy and loyal. The study provides insights into what these brands are doing well, and how these learnings can be applied to formal loyalty programs. Top informal programs ranked on member satisfaction include Dollar Shave Club, Netflix and Apple Genius.

“Marketers are telling us that loyalty program investments are paying off in a big way,” said Bob Macdonald, president and CEO of Bond Brand Loyalty. “This report arms decision makers with the critical insights required to build better strategies, keep up with consumer expectations and drive more profitable outcomes for brands.”