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What theBritish thinkof loyaltyprogrammesWhat they want from loyaltyprogrammes, who engagesmost, and the impact thatoffering a programmehas on brandsMando-Connect

ContentsIntroduction. 3Who engages, who doesn’t, and how to attract them. 4What do people want from a loyalty programme?. 8Variations in engagement by industry and sector.10The positive impacts of having a loyalty programme. 13How people claim points and rewards. 15What if? Spotlight on supermarkets: using data to get loyalty right . 17Conclusion. 21About the data and approach.22Mando-Connect2

IntroductionThree primary factors are driving the shift in loyalty programmes1Increases in the level of consumerexpectations and demand frombrands and programmesLoyalty programmes are going througha period of great change. The shiftis driven by three primary factors, asexplained to the left.2Improvements in the technicalcapabilities of loyalty platforms3Increased scrutiny and attention fromsenior marketers who see the benefitof loyalty programmes on customervalue and the bottom lineMany people want and expect a brandto reward their loyalty. Almost six in ten(59%) GB adults think all brands shouldoffer a loyalty programme, and overthree quarters (77%) are subscribed toat least one programme – a figure thatrises to 85% among women (vs 70%of men). More than seven in ten (72%)think loyalty programmes are a greatway for brands and businesses toreward their customers.However, the data shows that no one size fits all. Different people havevery different motivations for engaging with loyalty programmes andthere are notable variations by industry, by demographic, and by brand.New programmes can learn a lotfrom the established programmes inthe market. Airline and supermarketprogrammes have high registrationrates and dominate in terms of scale.They offer attractive benefits thatpeople want to use and rate highly,but the experience offered is oftentransactional. These establishedprogrammes can also learn fromnewer entrants which are shaking upthe “rules” of loyalty programmes.Virgin Red uses gamification toengage members, Pets at Home VIPClub talks directly to pets instead ofowners, and Sky VIP rewards tenureabove all else.This paper is a collaboration betweenYouGov and Mando-Connect, aloyalty specialist partnerships andrewards agency.Combining YouGov’s brand trackingand audience segmentation toolswith Mando-Connect’s loyaltyand partnerships expertise, thepaper explores loyalty motivations,attitudes, behaviours and impacts,and how they vary by sector anddemographic — with clear directionfor brands on how to get it right.Mando-Connect3

Who engages, who doesn’t,and how to attract themThere is significant variation in loyalty programme participation by age and gender.Women are far more likely to be a member of a loyalty programme than men,and older age groups are more likely to be a member of a programme.Are you currently a member of a loyalty programme of any type?85%of women are members ofa loyalty programmevs. 70% of men83%of people over 55 aremembers of programmesvs 61% of 18-24s55 83%40-5480%25-3973%18-2461%Mando-Connect4

Who engages, who doesn’t, and how to attract themReaching those who have never subscribedThese differences pose a challenge to the loyaltyindustry. Loyalty programmes are popular witholder demographics and with women, but they arestruggling to engage the consumers of tomorrow.Among 18-24 years olds, nearly three in ten men(29%), and over one in five (22%) women aren’tmembers of a single programme.The reasons behind this are likely to be complex: lifestage and less exposure to loyalty programmes areprobable factors.This group are more likely to be single (33% vs 22%nat rep) and a student than the general population(9% vs 5% nat rep). However, it could be that loyaltyindustry programmes and rewards are less likely tobe designed to appeal to this group.Young men are least likely to be a member of a loyalty programmeAre you currently a member of a loyalty programme of any type?% of those who answered noMen%Women% 10%21%18-2425-3435-4445-5455 0%45-548%55 8%5

Who engages, who doesn’t, and how to attract themReaching those who have never subscribedThese contrasts are despite the fact that disengaged audiences want brands to offer loyalty programmes.18-24year olds73%59%think loyalty programmesare a great way for brandsand businesses to rewardtheir customersMen65%think all brands should offerloyalty programmes54%Attitudes of non-subscribers: beyond demographicsI prefer to use cash whenout shoppingFinancial matters confuse meWell-known brands areusually better thanshop’s own brandsCelebrity endorsementshave an effect onthe things I buyI keep up-to-date withthe latest fashion trendsI can’t resistexpensive productsMando-Connect6

Who engages, who doesn’t, and how to attract themHow to engage the disengagedAlthough the majority (76%) of those who are not currently loyalty scheme members say they won’tsubscribe to one, almost a quarter (23%) say they are likely to sign up in the future.In terms of what would bring this group on board, more than half (52%) say discounts and offers wouldtempt them most followed by reward points (48%), and free products and services (41%).Discounts and offers are most appealing to loyalty non-subscribersWhat would convince you to become a member of a loyalty programme?Discounts and offers52%Points, which translate into some type of reward48%Free products/services/experiences41%Prize draws and competitions28%Special customer treatment14%Who are they and how can you reach them?Almost half (49%) of this group aremen aged 25- 54 and 55% do nothave children. They over-index asbeing semi or unskilled workersand living in greater London (both25%).Compared with the generalpopulation, this group isdisengaged from most forms oftraditional media and advertisingwith the exception of regional orlocal newspapers.a targeted campaign offeringdiscounts or vouchers via postcould convince them to sign up toa brand’s scheme.They are also more likely thanthe public at large to engage withadverts on social media but, inkeeping with the rest of the nation,around 50% say that personalisedads “creep them out” so brandsshould be careful with thisapproach.However, they are much morelikely to say that direct mail caninfluence their purchases, soMando-Connect7

What do people want from aloyalty programme?People want rewards fromloyalty programmes and theyare smart and savvy aboutthe types of rewards that theywant programmes to offer.These desires vary hugely bysector so to get rewards right,brands need to know what reallyappeals.As may be expected, benefittingfrom discounts and offersfrom the brand is the topreason that people are movedto join a loyalty programme(87%). However, the secondmost popular reason is to getdiscounts and rewards frompartner brands (55%). Thesetypes of rewards are moredesirable than free products,services and experiences (52%),being the first to know aboutnews from the brand (23%),better services from the brand(18%) and being part of thecommunity (only 6%).More than half ofloyalty subscribersdo so to getdiscounts andrewards fromother brandsReason for subscribingTo benefit from in-store/online discounts and offers87%To get discounts/rewards to other retailers/brands55%To benefit from free products/services/experiencesTo be among the first to know about the promotions/discounts/news from the brand (e.g. early access)To receive better services(e.g. 24/7 support, faster delivery, etc.)52%23%18%To be part of the community6%Other3%Average across all industry types excluding don’t know and N/AThe high desirability of partnerrewards is great news forloyalty programmes who candevelop partnerships to offerhighly compelling rewards totheir members, often at a lowercost than offering rewards fromthemselves.Mando-ConnectThis insight may be of particularvalue to programmes which onlyoffer their own rewards suchas M&S Sparks, PaperchaseTreat Me, and Sky VIP. Moreestablished programmes withoutpartner rewards such as BootsAdvantage Card, as well as airlineprogrammes solely offeringpoints-based travel rewardscould also benefit.8

What do people want from a loyalty programme?Partner rewards are more appealing in all but two sectorsIn all but two sectors, thispreference for partner rewardsover a brand’s own rewards holdsfirm.Aside from hotels where loyaltymembers value both partnerand the brand’s own rewardsequally (59%), the only sectorwhere a brand’s own rewardshold more sway is beauty salons(62% want partner rewards vs67% who want the brand’s own).In this sector, it’s mostly individualsalons offering experiencebased programmes (e.g. have sixtreatments, get one free). Thesesmaller programmes couldfocus on these rewards, but alsolook to see how partner rewardscould amplify and improve thecore offer.The preference for partnerrewards is most marked (fourpercentage points or more) inairlines, petrol stations, retail,pharmacies and supermarkets.This could be because peopleperceive these types of brandsas offering them products andservices they need, but donot love. For programmes inthese sectors partner rewardscould offer added excitement,emotional engagement, andinspiration.Rewards from a partner brand are nearly always moredesirable than rewards from the brand itselfThose who subscribe to a loyalty scheme to get rewards from a partnerbrand vs those who want rewards from the brand itself %SectorPartner rewardsBrand’s own rewardsBanks63%60%Beauty %Petrol stations57%48%Restaurants/ coffee s45%37%Mando-Connect9

Variations in engagementby industry and sectorThere are significantvariations by sector inloyalty membership.Over three quarters of thepopulation are subscribed to atleast one programme (77%) butthe penetration of membershipvaries considerably by sector.Unsurprisingly the biggest sectoris supermarket loyalty.65%of the populationare signed up with asupermarket loyaltyprogramme.The second biggest sector ispharmacies on 37%, driven by thepopularity of Boots AdvantageCard and Superdrug’s newerHealth & Beautycard.Retail follows behind on 30%. Thissector has seen a recent explosionof new programmes from bigbrands like TK Maxx’s Treasurethrough to small independentbusinesses with stamp cards orsimple app-based programmes.Loyalty membership by sectorLoyalty programmes - currently subscribed toSupermarkets65%Pharmacies37%Retail - shops and online30%Restaurants/coffee shops25%Petrol stations11%Airlines10%Hotels8%Cinemas6%Banks and financial services4%Beauty parlours/salons3%Petrol stations’ programmes (suchas Shell Driver’s Club), airlines andhotels are big traditional players,with 8-11% of the populationclaiming to be members.Cinemas (6%) are a relatively newcontender in the loyalty marketwith Cineworld’s Unlimitedand Odeon’s Limitless offeringrewards beyond the traditional2for1 or ticket package models.Mando-ConnectBanks and financialservices programmesonly have 4%membership but thiscould be becausepeople believe thebenefits offered arepart of the product,rather than a separateloyalty programme.10

Variations in engagement by industry and sectorSector loyalty membership by genderThere are significant variations by gender in loyalty membership.Supermarkets have one of the biggest gender differences – 74% of women are members vs only 57% ofmen. However, this 17 percentage point difference is nothing in comparison to health and beauty retailerssuch as Boots and Superdrug – where there is a 38 percentage point difference. Women are also morelikely than men to be members of retail, and restaurants and coffee shops programmes.The trend is reversed in petrol, airlines, hotels, cinemas and banks – where men are more likely to bemembers of programmes than women, albeit in lower numbers.Membership of loyalty programmes by sector and genderLoyalty programmes currently subscribed toSectorMaleFemaleAllSupermarkets57%74%65%Retail - shops and online25%36%30%Restaurants/coffee shops19%30%25%Pharmacies18%56%37%Petrol as6%6%6%Banks/financial services5%4%4%Beauty parlours/salons1%5%3%Mando-Connect11

Variations in engagement by industry and sectorSector loyalty membership by ageAmong all age groupssupermarkets are again themost commonly held type ofmembership with three quarters(74%) of people aged 55 holdingat least one membership,but only 44% of the youngestgroup (18-24s) saying they are amember.but their appeal has declinedover time. Interestingly, in theairlines, beauty salons andcinema sectors penetrationincreases with age, but declinesamong the over 45s. In banksand restaurants/coffee shopsthe decline starts younger at 35years old.This could be a sign that, whenthey started, these programmeshad high appeal and registration,The only sector to buck thetrend and offer programmesappealing more to a youngerdemographic is retail. This isprobably due to the explosionof new types of programmes inthis sector in recent years – fromdigital disruptors such as AmazonPrime, to subscription models, topropositions like ASOS A-List.Membership of loyalty programmes by age and sectorLoyalty programmes currently subscribed to18-2425-3435-4445-5455 Supermarkets44%58%63%70%74%Retail - shops and online34%33%35%29%25%Restaurants/coffee l %7%9%6%4%Cinemas4%7%9%10%8%Banks and financial services3%5%4%4%5%Beauty parlours/salons2%4%4%3%2%Mando-Connect12

The positiveimpacts of having aloyalty programmeAmong consumers usingloyalty programmes, almosthalf (47%) spend more with thebrand whose programme theyare members of, while four inten (38%) are more likely torecommend a brand whoseprogramme they are a memberof. Almost a third (31%) agree withboth of these statements.Loyalty schemesare good at drivingmembers’ increasedrecommendation andspend, with almosthalf (48%) of loyaltyprogramme subscriberssaying they are moreloyal to brands that theyare a loyalty member of.Only 28% say they feel emotionallyconnected to a brand whoseprogramme they are a member of.However, there is a small group(13% of the nation) which tick allthree boxes, being more likely torecommend, spend more, and feelemotionally connected to a brandwhose loyalty scheme they are amember of.Building an emotional connectionhowever is harder and here thefigures fall significantly.The Loyalty Venn Diagram13% of people spend more, recommend more, and feel moreemotionally connected when they are a member of a loyalty programme.SpendmoreMore likelyto ?But who are these “superloyal” consumers and howcan brands reach them? Mando-Connect13

The positive impacts of having a loyalty programmeReaching the “super-loyal”This group’s loyalty is strongly impacted by loyalty programmes. So what do theyseek from programmes and how can programmes connect with this group?Why do they subscribe to loyalty programmes?This group are more reward savvy – they are far more likely to want rewards than the average member ofthe population; and it’s rewards of all types that motivate this crowd.To engage them programmes should offer a variety of reward types – including better services and makingthem part of a community.Super-loyalsubscribersAll loyaltysubscribersTo receive discount rewards to partner brands51%43%To be among the first to know about promotions/discounts/ news about the brand35%19%To benefit from free products/services/ experiences49%36%To receive better services18%9%To be part of a community11%4%Which loyalty schemes are they morelikely to be a member of than loyaltysubscribers overall?The data backs up the assertion that thesebrands are more successful at building thatelusive emotional connection. In YouGov’s recentrankings of brands with the best impressionamong women – the group most likely to have aloyalty card – Boots came top with a score of 54.2while M&S was in fourth-place with a score of 52.9.Views on advertisingBrands should keep the below in mindwhen deciding on the best channels andthemes to reach this group:33%vs. 24%61%Super-loyalvs. 53%29%vs. 23%vs. all loyalty subscribersI often notice ads in newspapers and magazines71%Advertising helps me choose what to buy)63%I enjoy watching ads with my favourite celebrities56%I wish I could see more ads with families like mine44%Mando-Connect14

How people claimpoints and rewardsThe overwhelming majority (91%) of loyalty programme members say they collectand actively redeem the rewards or points they have earned. But what drivesbehaviour when it comes to reward and point collection and redemption?The data identified three types of loyalty behaviours:Redeeming behaviour of those subscribed to a loyalty scheme %The Collectors44%The most popular reward behaviour – they collect points,to save them up, aiming for a higher value reward.The Regulars27%The next biggest group areregular collectors and redeemers.The Early Redeemers20%The final group are early users, using up pointsat the earliest opportunity.The most popularway to use pointsis to save them upto earn morevaluablerewards.Mando-Connect15

How people claim points and rewardsProfile of an early redeemer**compared with those who save up their pointsTech-savvyIndependent-mindedAlways actively on the lookoutfor new tech devices andservices (10% vs 3%)Interested in video games(33%), websites (47%) andmobile apps (31%)Keen to use new technology products assoon as they enter the market (12% vs 9%)Believes there is a technological solutionto humanity’s problems ( (37% vs 25%)“I don't like being toldwhat to do”"“I don't really care what otherpeople think about me”“I enjoy taking risks”“I would love to start myown business”OptimisticHow to reach themMore likely to think UK society hasbecome better over the last 20 years(19% vs 11%)Brands aiming to engage early redeemerscould look to reach this group throughdigital channels to make the most of theirinterest in technology.Generally feels happywith their life (89% vs 61%)This group are optimistic and not keen onfuss, agreeing with statements like: “Mostpeople don't know what’s good for them.”However, they also say that when they goshopping they stick to a strict budget (60%vs 45% of points savers) so messages thatare too frivolous may not appeal.Mando-Connect16

What if? Spotlight onsupermarkets: usingdata to get loyalty rightSupermarkets have the largest loyalty membership of any industry, but there arewide variations between how different brands in this sector reward loyalty. We’velooked at two supermarkets with very different ways of doing this:Nectar, launched in 2002, was initially set up asa coalition programme, one of the biggest of itskind. It remains one of the UK’s most popularwith millions of active and inactive members.This year Sainsbury’s acquired Nectar in orderto “know its customers better than anyone else.”In light of this, we looked at what partnershipsthe data recommends for the programme as itenters this period of change.ALDI entered the UK in 1990, and is now amajor international player with over 10,000stores in 20 countries. ALDI currently offersno loyalty programme, instead driving loyaltythrough providing customers with maximumvalue. However, should ALDI launch a rewardsscheme and, if they do, how could they do it?Mando-Connect17

What if? Spotlight on supermarkets:using data to get loyalty rightCase study: What rewards could Sainsbury’s offer itscustomers for maximum engagement?Those who say that Sainsbury’s is their main supermarket are big loyalty fans.77%59%Loyalty programmesalso make themmore loyal50% spend more (54%)think loyalty programmesare a great way forbrands and businessesto reward customersthink all brandsshould offerloyalty programmes recommend more (39%) feel more emotionallyconnected (29%)What types of rewards do they really want?To benefit from in-store/online discounts and offers70%To get discounts/rewards to other retailers/brands39%To benefit from free products/services/experiences32%To be among the first to know about the promotions/discounts/news from the brand (e.g., early access)14%To receive better services (e.g. 24/7 support, faster delivery, etc.)7%Mando-Connect18

What if? Spotlight on supermarkets:using data to get loyalty rightCase study: What rewards could Sainsbury’s offer itscustomers for maximum engagement?Aside from discounts from the brand itself, partnerrewards are the next most popular. Here’s what theserewards could look like:For collectors (46% of Sainsbury’s customers):A high end reward to aim forSainsbury’s Nectar card subscribers are more likely thanaverage to like various domestic appliance brands.At the time of writing, this ties in well with Sainsbury’scampaign on the Nectar website encouraging customers to“spruce up your home with 4x points at Sainsbury’s”.Additionally, Sainsbury’s shoppers who say partner rewardsappeal to them are more likely than the general public (50%vs 42%) to state that they’re likely to purchase a consumerelectrical product in the next 12 months.For early redeemers (12% of Sainsbury’s customers):An everyday reward to enjoy nowCurrently, Sainsbury’s customers are more likely than the population asa whole to have recently bought Walkers crisps (68% eat crisps at leastonce per week vs 65% of the general population).Regular Sainsbury's shoppers are much more likely than the nationalaverage to say they would consider purchasing Tyrells and KettleChips. They also have a more positive overall impression and perceptionof the quality of both brands.Therefore this match would go well with their natural buying habits andcould introduce them to a brand they might be considering but may notcurrently buy.Mando-Connect19

What if? Spotlight on supermarkets:using data to get loyalty rightCase study: Should ALDI offer a loyalty programme?Are customers satisfied with ALDI’s current approach — or do theywant more?ALDI is one of the fastest growing supermarkets in the UK. It doesn’tcurrently have a loyalty programme but the data suggests it couldbe well-received by customers.ALDI customers likeloyalty programmes69%think programmes are a greatway for brands and businesses toreward customersOffering a loyaltyprogramme couldpositively impactcustomers’ relationshipand spend with ALDI42%spend more with brandswhen they are a member ofthe loyalty programme41%are more loyal39%recommend more64% of ALDI customersare already membersof other brands’ loyaltyschemes24%are more emotionallyconnected60% think all brandsshould offer loyaltyprogrammesHow could ALDIpilot a programme?If Aldi were to trial a scheme hereis where it could start and thekinds of rewards which would godown well. T rial it in the north westof England 21% of Aldicustomers who have a loyaltycard with anothersupermarket live inthe north west ofEngland O ffer ALDI andpartner rewardsbecause 85% wantinstore discounts,45% want partnerrewards and 36%want free productsand services F or partner rewards, align theapproach to their key interests61% are interested in books,61% in TV, 60% in music, 54%in films45% say they subscribeto loyalty schemeswhenever they aregiven the chance A im for a mix of rewards 41%are collectors, 28% are regularredeemers and 26% are earlyredeemersMando-Connect20

ConclusionIt’s far cheaper to retaincurrent customers thanacquire new ones. Ouranalysis shows thatloyalty programmes havesignificant positive impactson a brand’s relationshipwith its customers.Data helps brandsto understandloyalty programmes,exploring areas suchas what brand andbusiness objectivesloyalty programmescan impact, whichWhen consumers areconsumers to targeta member of a brand’sand how to engageloyalty programme theythem, and what thosespend more, recommendconsumers want andmore, feel moreemotionally connected and are interested in.are more loyal to the brand:Using data effectivelycan also help brands in Almost half say they areother areas, enablingboth more loyal to brandsthem to understandwhere they hold loyaltywhat types of rewardsmembership (48%) andspend more (47%) with them their customers want,which brand partners to Four in ten (38%) are morework with, what types oflikely to recommend themechanics will work —asbrand while over a quarter well as how and where to(28%) say they feel morecommunicate with thoseemotionally connected to it audiences for maximumimpact.This study suggeststhat brands can getthe most out of theirloyalty schemes bybetter understandingwhat their audiencewants. That appliesto programmes newand old, digital andnon and across everysector.Get in touch to findout how our data andunique approach canhelp you understandmore about consumers’loyalty behaviours andexpectations, how to getrewards and partnershipsright, and what channelsare most effective atreaching them.Loyalty matters andinvesting in datacan help brands andprogrammes to get itright.Mando-Connect21

About the data and approachYouGov and Mando-Connect’s unique tools can help youget your loyalty approach right.YouGov's dataPlan and track your loyalty programme — allowing you to identify, describe and target youraudiences, identify the right rewards and brand partners and track and evaluate your loyaltyprogramme and the marketing campaigns to promote it.Identify the key groups of people youwant to engage. Or plug in an ackDescribe those people in unrivalleddepth and detail. Learn what they areinterested in, which other brands theyshop, like and recommend.Track work so you canimprove performance.Evaluate activity.TargetEvaluateTarget the impact of your workwhile it’s in progress.These modules can be used in any order and atany stage of your loyalty programme lifecycle,depending on your needs.Mando-Connect22

About the data and approachYouGov toolsAbout YouGov BrandIndexAbout YouGov ProfilesYouGov BrandIndex involves trackingthe public perception of brands acrossthe world every day. BrandIndex is theauthoritative measure of brand perception,monitoring thousands of brands acrossdozens of sectors. We interview thousandsof consumers every day, yielding over2.5 million interviews a year. BrandIndexoperates at national and international levels,allowing you to track brand perceptionin one country, compare across multiplecountries or monitor a global picture.YouGov Profiles is our segmentation andmedia planning tool for agencies and brands.It is powered by the YouGov connected datavault which holds 190,000 variables collectedfrom the most active 250,000 panellists inthe UK. You can get the profile of your targetaudience across multi-channel data sets withgrater granularity and accuracy than everbefore.The sheer quantity of data that was analysedfor this report makes it impossible to showall of the 1,000s of demographic, attitudinaland behaviour splits that were data mined orthe large number of brand metrics analysed.YouGov has the same connected datasetin the US for over 200,000 panellists with200,000 variables, and also in Germanywith 100,000 data points for over 55,000panellists.Contact us to find out more about the powerof our connected data and solutions:David Ellis, Director 44 20 7012 6216 Email: [email protected] a demonstrationMando-Connect23

About the data and approachMando-Connect tools: The Partnerships EngineTMTurning YouGov and WPP data & insight into actionable Partnerships and Reward insightOur custom-built Partnership EngineTM enables us to create and deliver partnershipsand rewards which are robust, evocative and, most of all, effective. Our process is easy,inspiring and proven. We make partnerships simple. Delivering high returns for youand your brand. We use 3 data sets to get partnerships right.1. Understands what people wantUses robust data from YouGov andWPP to discover what the targetaudience really desires, unlockingthe insights that matter.32. Learns what works bestLeverages Mando's ProNetTM databasewhich contains 20 data points on over3,000 rewards and partnerships, toidentify what will work best.23. Identifies who fits bestAnalyses the Connect Partner BankTM,which contains over 2,000 fullyaudited brand partners to identifywhich partners will be the perfect fit.1Contact us to find out more about the powerof our connected data and solutionsMando-ConnectCharlie Hills, MD & Head of Strategy 44 1296 717900Email: [email protected]

[email protected] 44 (0) 20 7012 co.uk 44 (0) 1296 717900www.mando-connect.co.uk

Virgin Red uses gamification to engage members, Pets at Home VIP Club talks directly to pets instead of owners, and Sky VIP rewards tenure above all else. Introduction This paper is a collaboration between . airlines