News

Fee-based loyalty programs embraced by millenials

When it comes to fee-based retail loyalty programs the millennial shopper is the most enthusiastic.

July 9, 2015

When it comes to fee-based retail loyalty programs the millennial shopper is the most engaged, enthusiastic and open minded, according to a new nationwide survey.

The survey, conducted by LoyaltyOne, reveals those between 18 and 35 years old are the most likely to view such programs favorably, and 65 percent of those polled overall would consider joining if a favorite retailer was offering such a program. The number is 75 percent regarding just the millennial population.

Nearly half of those polled, 47 percent, believe rewards in fee-based programs are more valuable than rewards in free programs.

"These results should attract the attention of brands considering a shift to fee-based loyalty programs as marketers look for ways to create competitive differences and lock in customer spend against a backdrop of waning program effectiveness and engagement challenges," LoyaltyOne Consulting Associate Partner Lance Du Chateau said in an announcement.

The survey results come as a few notable retailers are in the midst of launching such new programs, including Amazon and its Prime subscription program and Walmart’s new Shipping Pass fee-based delivery system.

One surprising note of the survey is that just about half of those polled, 49 percent, view all rewards program as being very alike.

"Brands have historically hesitated to explore new loyalty strategies because traditional programs were still novel in most spaces. However this hasn’t been true for years. The perception that only a small minority shoppers will ‘pay to play’ is also a dated viewpoint," said Du Chateau. "42 percent of consumers surveyed have already paid to join a program and 62 percent of respondents said they’d consider joining a fee-based rewards program if their favorite retailer offered one."

Other key findings from the survey are:

• Of the respondents who already participate in fee-based loyalty programs, 69 percent said they were enticed by free shipping, followed closely by special discounts at 67 percent.
• Women (67 percent) are slightly stronger than men (64 percent) in their belief that rewards are worth paying for.
• When asked which category would be most appealing if compelling benefits were available through a fee-based program, respondents ranked grocery and mass merchandise highest (35 percent), followed by credit card rewards (26 percent), specialty retail (13 percent), travel (18 percent) and restaurants (9 percent)
• 32 percent of 18-24 year-olds and 34 percent of 25-34 year-olds said they have never been offered membership in a fee-based program, versus 25 percent of the general population.

"The traditional spend-earn-redeem reward program doesn’t make sense for all companies and customers, and fee-based value propositions increasingly are a topic of conversation,” Du Chateau said. “More marketers should explore this approach."