The Loyalty Divide

Retailer and Consumer Perspectives

Retail 2018
Methodology
The research cited in this paper
was conducted in February 2018 with
over 13,000 consumers globally and
500 businesses across retail, hotels
and restaurants in 9 countries across
North America, Europe, Latin America
and Asia-Pacific: Australia, Brazil,
China, France, Germany, India,
Mexico, UK and USA.

Independent research and creative

consultancy, Morar HPI, conducted
the survey which explores consumer
and business attitudes towards
loyalty and advocacy today and
in the future. This report is based
on the findings from the study.
Introduction
For retailers, winning customer loyalty is an ongoing quest that they will turn themselves
inside out for, measuring and assessing customer behavior in the hope that it will lead
them to the holy grail of gaining someone’s life-long fidelity. Which is why ever-evolving
We’ve uncovered a
significant divide in
customer loyalty programs offering consumers rewards points, cashback, giveaways and
discounts form the cornerstone of so many retailers’ business strategies. For a retailer a
loyal customer is a win-win situation as they spend more, return for repeat business and
provide word-of-mouth marketing that is far more effective than any branded content

perception, which
and advertising. But in this hunt to win over customers, are retailers deploying the best
tactics? We’ve uncovered a divide in perception between how businesses view their loyalty
programs and what their customers actually think, which questions what loyalty is going
to look like in the future.

questions what the

future of loyalty will
look like.

As increasingly sophisticated algorithms enable
retailers to target and personalize their offers
more effectively, are consumers forming stronger
connections with brands? Or is the role of social
media, in particular influencers, blazing a trail
for a kind of loyalty that is far more difficult
for businesses to harness? In this new loyalty
landscape, we have identified four behavioral
types – The Broadcaster, The Enthusiast, The
Lazy Loyal and The Seeker – typologies that most
people shift between depending on what they’re
purchasing, creating even greater complexity for
retailers hoping to win them over. On the flip side,
if retailers can tap into these behavior patterns
and create more tailored loyalty programs, then
the opportunity for gaining new and, more
importantly, loyal customers is huge.
The Great Divide

Misconception 1 - offers are relevant

Retailers say they offer Consumers say most offers

consumers relevant rewards and rewards from retailers
aren’t relevant to them

4%
offers are rarely 22%
relevant offers are rarely
relevant

38%
offers are
sometimes
relevant

When it comes to loyalty,

our data reveals a significant 45%
offers are
sometimes

split in the perception of relevant

retailers and consumers.

Retailers are heavily invested in loyalty programs
with ever-increasingly ubiquitous point collection
incentives, tier-based loyalty programs, social
media engagement rewards, even paid programs
a la Amazon Prime. In a drive to grow customer
bases, and then retain those customers, retailers
utilize loyalty programs to offer what they think are
relevant and incentivizing promotions and rewards
– discounts, free gifts, upgrades, points, access
to exclusive shopping events, even cash back.
Consumers, however, are far less engaged in the
promotions than retailers realize. Rather than
having an open attitude, our consumer research
bears out a far more selective approach, as well as
a widespread feeling that the offers on the table
don’t always feel relevant. While retailers believe
53% of their customers are more loyal now than
they were five years ago, only 37% of consumers
actually said they were. And while 58% of business 58%
offers are 32%
respondents believe consumers will sign up to
mostly relevant offers are
every loyalty scheme offered, in reality less than
mostly relevant
a third of consumers do, with a significant 63%
only using one to three loyalty programs regularly.
Relevancy of offers and rewards is another area
that throws up a large discrepancy: less than a
third of consumers think the rewards and offers
they receive are relevant to them most of the time;
58% of retailers think they are. It’s clear that if
retailers want loyalty schemes to be successful,
a new strategy is required. At the moment, over
half of retailers don’t engage influencers or brand
ambassadors despite the fact that consumers tend
to be more trustworthy of brands that are
mentioned online by third parties.
 Misconception 2 - consumers are very engaged with loyalty

Retailers Consumers
4%
say consumers
rarely join loyalty 19%
programs rarely join loyaly
programs

38%
say consumers
only sign up to
select, relevant

50%
only sign up to
select, relevant
programs

58%
say consumers 32%
sign up to every sign up to every
loyalty program loyalty program

Misconception 3 - loyalty is a consumer / retailer only relationship

Retailers Consumers more

collaborating likely to trust
with influencers brands reviewed
by YouTubers
22%
disagree

55%
30%
do not do
neutral
this

45%
currently 48%
do this agree
The Future of Loyalty Consumers are less loyal than retailers think

Baby boomers (the demographic with the most
disposable income) report the largest waning in
loyalty, with only 19% of them saying they are
more loyal than they were five years ago. This
is in stark contrast with the 53% of retailers who
believe customers overall are more loyal. However,
the outlook is less bleak among the younger
age groups who have a propensity to join loyalty
programs and say their loyalty is growing. Which
loyalty by measuring data such as increased visits Less loyal than before
to their sites, higher spend and active engagement As loyal as before
More loyal than before
with loyalty programs. These activity measures,
while obviously important, don’t take into account
the impact of word-of-mouth marketing and the
growing role of social advocacy, which can be 12% 14% 16% 17%
seen as behavioral measures. These two sides
to brand loyalty are gradually coming into balance
in terms of their importance, with consumers

53%
is good news for businesses as they are heavily increasingly recommending brands to friends, 45% 42%
invested in the programs. A massive 72% measure following brands’ online activity and posting 52%
their loyalty reward programs in the context of reviews online. However only a few retailers 64%
commercial objectives - and for 62% the programs are measuring behavioral benefits – only a of retailers think
are seen as a commercial imperative. However, third monitoring online reviews and social consumers are
over one in four retailers are only recognizing media posts. more loyal
43% 44%
32%
19%

Younger age groups in particular have

Pre-millennial Millennial Gen X Baby boomer
a propensity to join loyalty programs (18-24) (25-34) (35-54) (55+)

and say their loyalty is growing.

Consumers demonstrate their loyalty to retailers in terms of both activity and behavior However, nearly a third of retailers will only take into account activity measures of loyalty

Activity 34% 31% 25%

visit these brands spend more with become loyalty
more frequently these brands than card members
than others others

28%
Behavior 31% 20% 14% activity only

recommend these follow brand post reviews about

brands to friends activity online the brand online

Question: Thinking about the retail brands you are most loyal to, why would you say you are loyal to them?
The Rise of Social Advocacy

Social media has become a massive player in building brand

awareness as well as brand loyalty. As consumers increasingly
interact through social media channels and look to influencers
and YouTubers for unbiased opinions, so the influence of these
channels on their choices grows, with consumers across all age
groups increasingly willing to share retailer and brand-related Consumers think
content through their own social channels. Consumers think
it’s essential for retailers to have a presence on social media and
will trust YouTubers and influencers over and above traditional
YouTubers and influencers
are more trustworthy than
advertising. Around half of all respondents said they are likely
to research brands on social media before buying, save ideas
on social media about products or retailers, share photos of
retail experiences and products and follow influencers who
post about favorite retail brands. traditional advertising or
celebrity endorsements.
53% 46% 43% 43%
are likely to are likely to save are likely to are likely to
research brands ideas on social share photos of follow influencers
on social media media about retail experiences / who post about
before buying products or products on social favorite retail
retailers media brands

21%
25%
31%

38%
38%
35%

Disagree
Neutral
Agree 41% 37% 34%

YouTube reviews are Retailers used and Social media

more trustworthy than recommended by social influencers are more
branded advertising or media influencers are trustworthy than
communications more trustworthy than generic customer
those recommended reviews
by celebrities
Personalization: Connected and Immediate Connected is being recognized
as an individual. Immediate
is about compelling offers
and instant gratification.

Connected 69% 66% 58%

think personalized think personalized think personalized
offers based on their offers based on content and
stated preferences purchase history communications
are appealing are appealing is appealing

Immediate 82% 74% 72%

think store proximity think immediate think an effortless
is most important in benefits are more loyalty program
driving loyalty appealing than with automatic
accumulating points offers is appealing

Loyalty programs that are truly

personalized are very engaging
for consumers.

For loyalty programs to

remain relevant, retailers
A personalized experience where retailers automatically suggest,
order or recommend products that best suit personal preferences 85%
find appealing

need to aim for a level of

personalization that feels Receive intelligent recommendations of places to stop off on a route
from navigation apps based on previous behavior or preferences 79%
niche, not mass. find appealing

When it comes to retail experiences, for consumers,
personalization is about being recognized as an
individual, with a level of service that goes beyond
a traditional brand experience – and it very much
centers around two core ideas: connection and
immediacy. The former is perceived by consumers
to be a service that is valuable or relevant to them
66%
personally – they do not want to receive
generic, cookie-cutter offerings; they want their
uniqueness to be recognized. Immediacy is pretty
An effortless loyalty program where
offers are automatically redeemed
72% Personalized offers based
on my purchase history
find appealing
much what it says on the tin – how can a service find appealing
make everything about the consumer’s whole
experience fast and easy.
The Right to Data and There is recognition
the Role of Technology from both consumers
and retailers that there
needs to be a balance
As new legislations, such as the General Data Protection Regulation between anonymity
(GDPR), come into effect and consumers’ concerns around privacy, and personalization.
security and anonymity grow, traditional approaches to segmentation
and promotional targeting will become obsolete. Understanding 87% 81%
consumer behavior and the role of influencers in predicting a of retailers say GDPR will of consumers say they’d
consumer’s next action will be key in landing offers that consumers have an impact on their consider removing their
want to receive and, in turn, act on. organization personal information if
they could

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52% 53%
of retailers think consumers of consumers are concerned
are concerned about data that their data is being
being passed on to third passed onto third parties
parties

But retailers may not ||

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Get the formula right and retailers will ultimately

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offer consumers the

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drive increased loyalty, which consumers will express

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concerns around through actions and behaviors. However, as more transparency they
and more stories around misuse of data hit the desire.

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privacy, security

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headlines, and consumers grow wary of sharing

and anonymity
their personal information, retailers will be challenged
to find new ways to relate and reach customers with
offers that are relevant to someone who wishes to
32% 72%
are growing. remain anonymous. This is where technology and
of retailers offer a fully
transparent loyalty
of consumers want
fully transparent loyalty
advanced applications in machine learning and program programs
artificial intelligence will close the loyalty gap
between brand and consumer, and widen the
competitive advantage for savvy retailers.
 The Four Loyalty Typologies 2.The Enthusiast The Enthusiast is an engaged retail brand
‘follower’ who is loyal but not loud.

The research uncovered four main types of shoppers: for fashion, an Enthusiast when purchasing artisan If this shopper were a pet, he would be a dog – he is about the offer and competition. He’s not looking to
The Broadcaster, The Enthusiast, The Lazy Loyal foodstuff, a Lazy Loyal when it comes to technology loyalty personified. He won’t shout about it on social be let down and it would take something big to lose
and The Seeker, which people will flip between and a Seeker when replacing appliances. In today’s media, but once you’ve gained his trust, he will stick his loyalty. So how to gain it in the first place? What The
depending on what they’re buying, so the same complex, 24/7 world, we’re all shape shifters as we with you faithfully. So while he may not post about the Enthusiast is looking for is high product quality and
great 20% discount his favorite independent gin distiller an enjoyable shopping experience. For him, a favorite
person might be a Broadcaster when they shop navigate the retail landscape.
or sportswear brand is offering or the competition his brand is like a friend – he’ll follow all their social channels,
go-to clothes store is running, he’ll retweet the tweets, stay loyal even in the face of new competition, and if
like and share the Facebook and Instagram posts, you can pique his interest with new and exciting
comment on them and enthusiastically tell his friends products he’ll be with you for life.

This shopper can be your greatest advocator – or your

71% 51% 43% 20%
say product say it’s important of consumers are will follow their
biggest detractor. With social media channels as her quality and 59% say that they can engage most loyal to brands favorite brands on
loudspeaker, she is brand neutral but an avid sharer of an enjoyable shopping with new and exciting that they have a high social media
the experiences that spark her passion, good or bad. experience are most products from brands opinion of
So, while that new trash can she bought is unlikely to important to them they are loyal to
find its way onto her Instagram feed (unless it breaks
after a week), those eco-friendly, leopard-skin leggings
by Yoga Democracy definitely will. The photos will be
flattering and the praise effusive as she aligns herself
with the brand’s style kudos and ethical position.
As well as being driven by a desire to tell the world
about a great buy, The Broadcaster wants to set out her
own stall. Practices yoga, check; has an eye for fashion,
check; is interested in saving the planet, check. And
while she’s aligning herself in a positive way to a brand,
well, that brand is having fairy dust sprinkled all over it.

1.The Broadcaster
In today’s world, keep The Broadcaster happy and her
evangelizing will work harder for you than any ad
campaign Madison Avenue could ever dream up.
But, be warned, to keep her loyal you need to keep
The Broadcaster may flit between retailers but her interested because if you don’t you’ll lose her to the
shouts about their experiences, good or bad. next best thing, which she’s always on the lookout for.

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31% 43% 47% 42%

consumers will would share photos on would feature the would submit a product
recommend to others social media of great retailer or its products review through YouTube
the retailers they are retail experiences in on their social media in exchange for an offer
most loyal to exchange for rewards accounts in exchange for / reward
offers / rewards
3. The Lazy Loyal
Once this shopper finds the right fit for her, she
just wants to forget about the hunt and sit back
and relax in the knowledge that her choice of cell
phone and laptop, sneakers and bicycle is perfect.
She doesn’t want to shop around and often her
choices are made around convenience. The bike
store is around the corner, it stocks the brand
she likes and the customer service is good.
The Lazy Loyal is typically unengaged but tends
to be loyal to retailers because it’s easy to be.
Why would she go looking for something new?
It takes a lot to budge The Lazy Loyal from her
preferred brands. For this shopper, when it
comes to loyalty programs, the easier the better, so
schemes where points are automatically redeemed
are a winner. The key driver for The Lazy Loyal is
convenience so keep making things easy or make
them even easier for her and she’ll stick with you.
4.The Seeker For The Seeker, the meat in the sandwich
is always the deal never the brand. This is
a shopper who holds little or no affinity for
The Seeker likes to shop around for the
retail brands – he isn’t moved by aspirational
marketing, brand loyalty, social alignment
best value offers and holds little affinity
or distracting ad campaigns. This a shopper
to retail brands.
who is driven by the best value offers, the
most competitive prices and compelling
promotions. He’s not just on the hunt for
the cheapest deal, he wants the best deal.
So while one cell phone contract might be
more expensive than a competitor’s, if it
comes with great value add-ons, then he’ll
opt for that. He’s an inveterate deal seeker and
rarely signs up to retailer loyalty programs –
why would he when he might find a better
deal with a competitor? But he would be
willing to divulge his personal details in
exchange for a personalized offer or
promotion. Just don’t expect him to come
back to you next time – unless, that is, your
deal trumps everyone else’s. Then you have
a good chance of hooking him.

72% 27%
think an effortless
58% 40% of consumers
would not find a loyalty
loyalty program where say convenient store will typically stick to the program that could be
points are automatically locations are most brands they like rather used across multiple
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66% 56%

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choose a retailer because of would exchange personal details
competitive prices / promotions in exchange for a personalized
offer or promotion

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53% 19%

of consumers would would rarely sign up to retailer

always ‘shop around’ for loyalty programs
different retailers to shop with
 Create the Moment. Cultivate Affinity.
Captivate your Customers.

Oracle provides retailers with a complete, open, and integrated suite

of best-of-breed business applications, cloud services, and hardware

that are engineered to work together and empower commerce. Leading

fashion, grocery, and specialty retailers use Oracle solutions to

anticipate market changes, simplify operations and inspire authentic

brand interactions.

For more information, visit our website at www.oracle.com/retail.

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