Consumers say they value free shipping on online orders above all other loyalty program perks, though they also like to get points they can turn into discounts. Benefits that don’t save them money appeal to a minority of shoppers, but that doesn’t mean retailers should ignore those consumers, as some of a retailer’s best customers may be more interested in feeling special than scoring a deal, new research finds.
When asked what loyalty program features they most value, 70% said free shipping, ahead of the 61% who pointed to reward points they could redeem for discounts, according to an October survey of about 1,000 online shoppers conducted by Bizrate Insights for Internet Retailer. Far behind were perks such as early notification of sales (11%) and exclusive access to products or store events (9%).
Amazon Prime, the Amazon.com Inc. program that offers free shipping and other perks for an annual fee of $119, loomed large over the survey results. Nearly seven in 10 respondents (68%) said they belonged to Prime, and 49% called free shipping the most important retailer loyalty benefit to them. Amazon is No. 1 in the Internet Retailer 2018 Top 1000 ranking of North America’s leading online retailers.
Free shipping has become “table stakes” for retailers that are selling products easily available on Amazon.com, as many consumers know their Prime membership will guarantee them free shipping if they order from Amazon, says Katherine Black, a a principal in advisory firm KPMG’s Retail and Consumer Strategy practice, and co-author of a 2017 report on loyalty programs.
And while consumers say they most value free shipping and discounts, Black says each retailer should understand what its best customers want and design a loyalty program for those shoppers. “Typically, what we see is that the deal-hunting customer can be completely different than the service-seeking customer,” she says. “Oftentimes, a free bottle of water when you shop, special tickets or an exclusive shopping area can be highly valued by the service-seeking customer.”
She says she often sees retailers make the mistake of designing programs for one type of shopper— bargain hunters, for example—when their best customers may include many who are more interested in convenience or pampering.
The Bizrate survey also found that consumers who belong to loyalty programs are most likely to hold memberships in two or three such programs. 69% of respondents say they only join a loyalty program when they shop with the retailer frequently.
Satisfaction with retailer loyalty programs is mixed. Only 37% of survey respondents said they are “very satisfied” with the retail loyalty programs they belong to, although another 46% called themselves “somewhat satisfied.” Only 4% were mostly or very dissatisfied. The other 13% were “neither satisfied nor dissatisfied.”
And while some surveys have suggested that millennials are less likely to be loyal to brands, this survey found little difference based on age in how consumers rate retailer loyalty programs. In fact, 89% of consumers under 40 called themselves at least somewhat satisfied with their loyalty programs compared with 81% of older shoppers.
What’s more, 55% of all those surveyed agreed with the statement that retailers are making their loyalty programs more appealing.
Retailers should keep in mind that the main way to gain customer loyalty is by providing a good core shopping experience, and that loyalty programs are only a complement to that, says KPMG’s Black. “All loyalty program benefits need to be the icing on the cake,” she says. “They can’t be the cake themselves.”