Research Unwraps Holiday Loyalty Behaviors
Forecasts for this year's U.S. holiday season are indicating we'll see a moderate lift in sales. Combined November and December holiday sales are predicted to increase 4.1%, to $616.9 billion, according to the National Retail Federation. Synchrony Financial, meanwhile, projects a more conservative gain of 3.5%.
For merchants, how the near future plays out depends on how they use insights of shoppers past and current. At this time of year, retail marketers typically update their loyalty marketing efforts to engage their best customers over the next few months. Many merchants and marketers do this well, including Discover and American Express, which have dedicated websites that serve as consumer guides for holiday shopping and maximizing rewards.
And Nordstrom will again host its annual Holiday Private Shopping Party for invited Nordstrom Rewards members, Nov. 30 to Dec. 9.
Seeking more specifics on consumer attitudes about the holidays and loyalty, COLLOQUY recently updated its annual Holiday Loyalty Shopper study, which reached out to 1,000 U.S. shoppers across the various geographical regions. We asked consumers how they plan to use and engage with their retail loyalty programs over the next few months, and we are seeing distinctive changes in their behavior intentions.
Specifically, a consumer’s motivation for choosing certain merchants and loyalty programs appears to be shifting as we approach the holidays. I’ll expand more on that shortly, but here’s a hint: Shoppers prefer cash and hard rewards and tend to overlook more creative soft perks, such as entry into a VIP event, access to contests and other experiential rewards during the noisy holiday season.
Strong reward redemptions anticipated
Surprisingly, a stronger majority of loyalty program members are planning to use loyalty rewards for their holiday shopping this year – six out of 10 respondents indicated they will use rewards for gifting. That represents an 11 percentage-point increase from 2013, a significant jump and one we would have expected to see during a period of greater economic duress, as consumers tend to redeem their rewards more when they are tight on cash.
Considering the amount of money projected to be spent in 2014 – north of $600 billion – that 60% of consumers can generate a lot of redemptions. Marketers who simplify and encourage the redemption experience could see additional foot traffic.
This higher increased stated intention exists across all age groups, with younger audiences more likely to use rewards this season:
One-third plan to maximize rewards
The survey also revealed that more than one-third of shoppers (35%) plan their holiday purchases to maximize their loyalty earnings during the period. Loyalty programs are offering multiple ways for consumers to use their rewards to save money:
- 26% of survey respondents said they watch the timing of loyalty promotions and adjust their purchasing to these time periods;
- 20% of total customers adjust their gift ideas based on which products offer significant bonuses and related rewards; and
- 40% of women and 31% of men surveyed said when doing their holiday shopping this year, they will choose retailers that operate loyalty programs in which they participate.
Considering the promotional volume that erupts each lengthening holiday season, these results make sense, though loyalty operators should size them up against their own particular customer bases. Merchants over the past decade have conditioned consumers to expect big sales and discounts during the holidays, and for many – but not all – that is a hard habit to break.
Loyalty program currencies may provide a bridge out of the promotion commotion by offering shoppers incentives they value and will shift spending to acquire, at more favorable economics to the retailer.
Challenging time for soft benefits
When it comes to earning rewards, not all perks resonate with the holiday shopper. The loyalty promotions most likely to encourage a consumer to shop at a specific store tend to be cash-like incentives:
- Gift cards, coupons and cash-back offers ranked the highest for encouraging shopping with 52%, 49% and 48% respondents, respectively;
- Special promotions, like two-for-one deals, and reward points followed closely, with 46% of respondents each;
- However, only 10% of shoppers indicated that typical soft benefits, such as early access to a product or event, would be a strong incentive during this time of year.
This feels a bit counter to the spirit of the season to me, but in fairness we have to recognize the various pressures consumers face this time of year. These survey results should not discourage retailers from pursuing intangible, or soft, rewards initiatives, but rather serve as a reminder that they will need to cut through a lot of noise to reach their audiences. The idea must be amazing, or it is likely to be an afterthought vs. the impetus of an incremental visit.
So while consumer sentiment indicates that merchants may not realize a great return on experiential approaches during this period of promotional shouting, the behaviors of shopper's past may unwrap other unexpected opportunities.