41 Customer Loyalty Statistics & 10 Benefits for SMEs [2021 Update]
Satisfied customers are NOT always loyal.
In the words of customer service expert, Shep Hyken:
“There’s a big difference between a satisfied customer & a loyal customer. Never settle for satisfied.”
Your business needs loyal customers, especially if you sell products or services that thrive on repeat purchases. So if you:
- Sell apparel
- Run a café or deli
- Manage a restaurant
- Own a consultancy
- Have a computer, home or office maintenance business
Or any other small to mid-size business, you could benefit from a loyalty program.
Running a loyalty program may have been difficult in the past, but not anymore. Digitization has made things so much easier and managing your loyalty program is as easy as eating cake these days!
In this article, you’ll learn about the loyalty program statistics and benefits that show you just how powerful customer retention can be.
If you’re trying to make the case for adopting a loyalty program at your organization, or have been on the fence about it yourself, this should make the decision much easier.
Here are the Customer Loyalty Statistics you need to know:
20 Loyalty Program Usage Statistics
- Over 90% of companies have some type of loyalty program
- 3.3 billion loyalty memberships are present in the United States alone. Source
- Of consumers in America, 52% will join the loyalty program of a brand they purchase from often. Source
- The majority of consumers, 66%, will change their buying behavior to get the most out of loyalty benefits.
- Only 44% of people who signed up for loyalty programs expressed satisfaction with them.
- On average, a consumer belongs to 14.8 loyalty programs but they actively engage in 6.7 of them. Source(+image credit)
- This statistic is a bit misleading because 49% of consumers only belong to 3 loyalty programs which means the other 51% can be considered power users. Source
- A much smaller percentage, of customers, only 18% are active in all the loyalty programs they join.
- Conversely, 65% of consumers engage with fewer than half of the loyalty programs they join. Source(+image credit)
- Daily usage is growing with 15% of members interacting with their programs daily which is up from 10% of members in 2015. Source
- Out of the consumers surveyed, only 8% say rewards aren’t at all important to their purchase decision. Source
- 57% of loyalty program members in the U.S. have abandoned a program because it took too long to meet the requirements for a reward. Source
- 70% of Millennials, 71% of Generation X, and 63% of Baby Boomers admitted a loyalty program influences the brands they choose to buy from.
- The Silent Generation has second-highest participation in loyalty programs at 62%
- Surprisingly Generation Z only had a 59% participation rate in loyalty programs in 2019 (down from 68% in 2018) Source
- 59% of men and 68% of women were members in at least one loyalty program. Source
- When done properly, personalization can increase loyalty program member satisfaction by up to 6.4 x. Source
- Collecting personal information will make it less likely for 71% of Americans to join a loyalty program. Source
- 43% of people participate in loyalty programs for discounts or offers and 27% participate to earn free offers. Source
- Only 5% of customers sign up for a loyalty program to stay connected to a brand. Source
These loyalty program statistics paint an interesting picture. The overall membership in loyalty programs is increasing but people are only active in less than half.
It’s not enough to get people to register, you also have to engage them.
Incentives are a big part of getting people engaged with 92% of people saying that it matters to them.
Staying connected to a brand isn’t important to loyalty program members with 95% saying it doesn’t matter.
That may be because there are so many channels to do that already.
Older generations seem to be the most engaged with loyalty programs with the participation of Gen Z falling by almost 10% in a single year.
It may be a sign that brands aren’t meeting their needs and don’t deserve their loyalty or a result of youthfulness. Only time will tell.
Collecting personal information will reduce the likelihood of people signing up for your program but personalizing your loyalty program can increase satisfaction by up to 6.4 x.
It’s a fine line to walk because collecting more information makes it easier to personalize.
Instead of collecting everything upfront, consider waiting until your new members are comfortable with your brand then ask for more information gradually.
Alternatively, if you are looking to try something on a larger scale, you could contemplate using machine learning to learn more about your customers.
In the end, though more people than ever are registered with a loyalty program, less than half are satisfied so there’s a lot of room for improvement!
The 11 Stats Behind the Impact of Consumer Loyalty
- 80% of a brand’s future revenue comes from just 20% of its current customers. Source .
- Those who’ve bought from you at least twice in the past are 9 times more likely to buy from you again with a new potential customer.
- Those who’ve bought from you at least once are 5 times as likely to buy from you again as a new potential customer. Source
- Customers who have characterized their relationship with a brand as emotional have a lifetime value that’s 306% higher than average consumers.
- 67.8% of shoppers define brand loyalty as repeat purchases. Source
- 41% of consumers are more likely to do their holiday shopping with a brand they’ve already purchased from.
- 59% of loyal consumers are more willing to refer a brand to their friends and family. source
- 75% of consumers said receiving an incentive increases the likelihood of making another purchase. Source (+image credit)
- After a positive experience with receiving a reward for loyalty, 70% of consumers visit the brand’s retail locations, more than 40% follow the brand on social media, and a little over 30% subscribe to the brand’s newsletter. Source
- An increase in loyalty of just 7% can increase the lifetime profits (when spread out amongst customers) by up to 85%. Source
- After having a great experience, 71% of customers recommend a service or product. Source
The data is clear. When you have loyal customers, they’re more valuable to you. Not just because they spend more but because they tell their network about you.
No matter how small the network, it’s an added benefit because you acquire new customers without spending directly on advertising.
The challenge is understanding what your customers want and knowing if you’re doing a good job providing it.
Test out using customer satisfaction surveys to find areas where you’re dropping the ball or need to improve.
Another option is to regularly communicate with leads and customers through thoughtful email marketing campaigns. At the very least, you’ll be top of mind more often.
When it’s time to make a purchase, your brand will be the first one they think of.
10 Stats About the Cost of a Failing to Generate Customer Loyalty
- It’s estimated that $1.6 trillion is lost to poor customer service which has a direct correlation with customer loyalty. Source
- If the purchase process is too difficult, 74% of consumers are likely to switch brands. source
- $98 billion in potential revenue is lost by companies who are unable to create simple experiences that encourage customer loyalty Source
- 78% of baby boomers have gotten so frustrated with having to restart conversations with brands on a different channel that they question why they do business with them in the first place. source
- When customers have a frustrating shopping experience, they are 3 times as likely as satisfied customers to not buy from the same brand again. Source
- 69% of shoppers claimed that they wouldn’t shop with the same online store every again is the experience is poor. source
- A whopping 84% of shoppers will refuse to buy from a brand again if they have a poor returns experience. source
- Compared to average brands, the leaders in loyalty programs grow revenue about 2.5 times faster. source
- E-commerce brands without a loyalty program are missing out on increased average-order-value by up to 319%. Source
- 39% of customers who consider themselves loyal have less price sensitivity and are willing to spend more on a brand’s product even if there are cheaper alternatives. Source
The data doesn’t lie. There’s real money on the line when you’re not able to instill loyalty in customers. Even when you have a bit of loyalty, it can be lost if you drop the ball.
Something like a poor returns experience turns off almost every single shopper and $98 billion in potential revenue is lost by failing to create simple experiences.
The 10 Most Important Benefits of a Loyalty Program
Out of the 41 statistics mentioned above, the following ones are the most important for you to know before you launch a loyalty program.
1. Boosts Customer Spend
In a joint study published by Manta and BIA/Kelsey, 61 percent of SMBs say that repeat customers drive more than 50 percent of their sales. Meanwhile, only 34 percent of these small businesses have a loyalty program in place.
The study also found out that repeat customers spend 67% more than new ones. But the Manta study isn’t alone in this finding.
Although Amazon isn’t a small business, buyer psychology is often the same across platforms they trust. While Amazon Prime users spend an average of $1,500 a year on Amazon, non-Prime users spend only $625 a year.
In other words, Prime customers spend 140% more!
It helps that customers love loyalty programs. According to a Visa sponsored Loyalty Report study, 81% of customers say that loyalty programs encourage them to keep buying from a brand.
More than 39% of customers in a loyalty program would spend more on your product even if they have cheaper alternatives.
2. Boosts Customer Spend Frequency
Top marketing consultants believe that customers who use loyalty programs are five times more likely to commit to buying from only one brand.
But it doesn’t stop there, those customers’ frequency of buying is 90% higher than others.
When customers attach their purchase to winning a reward, they tend to buy more to earn that reward.
The Journal of Marketing Research says that the closer a customer is to a bonus, the more they buy.
3. Encourages Word of Mouth Marketing
Loyalty program customers often feel good about the rewards they receive from a business. So they end up telling their friends and family about the brand.
In the Loyalty Report study that we cited earlier, 73% of customers on your loyalty rewards program are more likely to recommend your brand.
As you probably know, customer-to-customer recommendations have many benefits on their own. HubSpot says that 81% of customers trust recommendations from their friends and family.
McKinsey reports that 20% to 50% of all buying decisions come from word of mouth. Here are some benefits of word of mouth marketing:
- It’s free promotion for your business
- People trust it more
- Customers acquired via word of mouth spend more
- It has 50 times more chance to lead to a purchase
- Customers gained by word of mouth are more likely to recommend you to others
A different study by Bain & Company supports these McKinsey findings. Customers who’ve shopped ten or more times refer 50% more people than one-time buyers.
4. Loyalty Programs Lower Customer Acquisition Costs
It is easier to convince an existing customer to buy more than it is to ask a new customer to buy more. Customer acquisition costs six to seven times more than customer retention.
Businesses spend a lot of money on marketing and customer acquisition is a big part of that spending. But stores that focus on customer retention notice significant profit boosts.
A mere 2% increase in customer retention would have the same effect as cutting costs by 10%.
In another report, a 5% boost in customer retention rate translates into a 25% increase in profit.
Here’s the exciting part:
Depending on your industry, increasing your customer retention by 5% could earn you a 125% boost in profits.
Meanwhile, acquiring new customers instead of building a customer loyalty program costs 5 to 25 times more.
So the more loyal customers you have, the lower your cost per customer you acquire.
5. Stores with Loyalty Programs Attract More Customers
In a study by Technology Advice, more than 82% of shoppers say they’ll opt for a business with a loyalty program over a store that doesn’t have one.
But a loyalty program only works if your users are engaging with your program. So you want to know your users’ motivations and habits.
The Technology Advice study points out three core motivations for why users favor SMBs that have loyalty programs. These drivers include:
- Saving money
- Receiving rewards
- Earning rewards
You might think that earning rewards is the same as receiving them. But the two experiences are quite different.
According to the Loyalty Report I cited earlier,
“the redemption experience—the anticipation of reward, as well as ease of redemption—is more important than the actual reward.”
Another report, from 2019, echoed this and found that the build up to the reward was more important than the reward itself and states that “Brands must evolve their programs by focusing on the redemption experience, not just on the reward”.
6. Customers on Loyalty Programs Have a High Lifetime Value
Businesses with high customer acquisition costs may need to rely on a good customer lifetime value to turn in profits.
According to Bain & Company, e-Commerce customer acquisition cost is high. So most retailers must get shoppers to visit multiple times to make a profit.
To get customers to visit multiple times, retailers rely on loyalty programs.
In the example below, you can see the customer lifetime value over time.
It helps that a customer who joins your loyalty program is worth ten times the value of their first purchase.
7. Customer Loyalty is Easier than Acquisition
About 63% of businesses think that customer acquisition is their most important advertising goal.
But over the years, more businesses have come to agree that keeping their customers loyal is easier to execute than acquiring new ones.
The number of businesses that consider customer retention easier moved from 70% to 80% in one year.
So apart from being very profitable, customer loyalty is also easier to execute than customer acquisition.
8. Loyal Customers Help Businesses Beat Recession
One of the most powerful attributes of a customer loyalty program is that it’s recession-proof.
According to Adobe Digital Index, “Repeat purchasers also deliver more during economic difficulties”. The study showed that the revenue share from repeat buyers in Europe increased by 3%, and fell only by 1% in the US.
9. Seasonal Sales Do Better with Repeat Buyers
The Adobe study also showed that loyalty program customers bought 25% more per purchase during holidays and other seasonal sales. Meanwhile, first-time buyers only bought 4% to 17% more per purchase.
10. Loyalty Program Customers Convert Better
If your business or brand ever introduces a new product who do you tell first?
They convert better and faster than new or repeat customers who have bought from you only twice.
In the Adobe Digital Index report, loyal customers could convert at 24% where new customers only convert at 6%.
In terms of revenue per visitor (RPV), one returning customer equals five first-time shoppers in value. Whereas, one loyal buyer equals nine first-time shoppers.
The truth of the matter is that customer loyalty – and customer retention – should be one of your top priorities.
You improve it by implementing a strong loyalty program but more importantly, you do it by creating a great experience for your customers.
Even a loyalty program can’t make up for a poorly trained customer service rep or trying to get people to do more work than is necessary to a purchase.
These loyalty program stats are here to give you a clear picture of the impact customer loyalty has on your business and what improves it.
Trillions of dollars are lost every year by various brands because they’re unable to meet the expectations of consumers.
Even though loyalty program membership is on the rise, few people are active in all the programs they’re registered with.
This presents an opportunity and a challenge: You can get people to register for your program but it takes added effort and an exceptional experience to satisfy them.
Author Bio: Daniel Ndukwu is the founder of KyLeads. There, he helps small businesses and publishers understand their audience and grow their email lists using smart popups and quizzes.
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