The Growth of Loyalty Membership Programs

The other day, I received a question from one of the readers of this blog about the number of members in loyalty programs. I was able to access some excellent data and wanted to share it with you.

For background, membership loyalty programs are marketing initiatives to retain and reward customers. They can be offered by major retailers or financial service companies or by your local barber shop. The goal of these programs is to move customers from a transactional relationship to a continuity relationship. Loyalty memberships are cousins to association memberships, sharing many of the same strategies, tactics and analytics.

The source of this data is drawn from The 2009 Colloquy Loyalty Marketing Census.

“For those interested in the bottom line, this report reveals that, from 2006 to 2008, U.S. loyalty program memberships increased from 1.341 billion to 1.807 billion—an adjusted growth rate of nearly 25 percent since our last Census. This number translates into 14.1 loyalty program memberships per U.S. household.”[1]

However, since most loyalty memberships do not require a regular renewal, there is a big difference between the actual number of members and those who are actively engaged with the brand. “The percentage of overall active memberships in the U.S.—those memberships that demonstrate some type of engagement within a 12-month period—remains flat at 43.8 percent, with a blended average of 6.2 active memberships per household.”[2]

The census also provided counts for US membership loyalty programs by sectors. The top five are:

  • Financial Services – 422.0 million

  • Airline – 277.4 million

  • Specialty Retail – 191.3 million

  • Hotel – 161.9 million

  • Grocery – 153.2 million[3]

When I teach about membership marketing, I focus on the five key touch points in the membership lifecycle. Each has its own challenges and opportunities. For many classic membership associations, recruitment is the number one challenge.
Based on this report, the challenge for building loyalty memberships is not so much recruiting new members, but in engaging them and getting them to take advantage of the membership. Using the report’s definition for engagement -- no interaction over the past year -- over 56 percent of the names in a loyalty member database are not active.

If you would like to download a copy of the report, here is the link for registration and download.

[1] Rick Ferguson and Kelly Hlavinka, The 2009 Colloquy Loyalty Marketing Census, Loyalty One, page 1.
[2] Ibid.
[3] Ibid. page 5.


Dan said...

Excellent post, Tony. I like how you call these loyalty strategies a "cousin" of the traditional association membership programs. I've always thought they were similar but lack the substance that membership orgs offer. Yet the one thing that seems to match closely is the engagement levels.

I know that I've signed up to so many of these programs and only use a handful of them regularly. It really comes down to whether I have a need at any given time. It makes me focus more on creating a desire for that need with our members more often.

Thanks for that brain boost.

Tony Rossell said...

Dan -- Thanks for the comment. The data agrees with you that many memberships are not used. But for those that can develop and reward the relationship, there is a bigger share of wallet and longer term loyatly. Tony

Erik's Experts in Membership Marketing said...

Great post, Tony. I just read a post from Don Dea indicating that 2010 will be a flat year for the travel industry, meaning potential savings for consumers. I also believe that we'll see the industry become more 'sensitive' to their loyalty or membership programs and look for ways to be utilize those programs to drive revenue.