3 Ways Retailers Can Optimize Loyalty and Drive Share of Wallet

Everyone and their mother seems to have launched a loyalty program these days. Why? Because loyalty programs work. For over a dozen years, The Bond Loyalty Report has confirmed the value and power of loyalty programs in driving consumer attitudes and behaviors.

In fact, results from the 2024 data set show that loyalty’s influence on consumers’ propensity to advocate for brands, continue to do business with brands, and spend more with brands has never been higher.

As more formal loyalty programs enter the market, the competition for a position in the consumer’s wallet increases and it becomes difficult for brands to stand out from the pack. The ones that will win are the ones that build a loyalty program that's well-designed and feels valued by customers.

Over the past two years, participation in retail programs has grown as members seek to maximize their value and experience in the face of economic pressures. In 2024, the average consumer actively engaged (i.e., earned or burned) with about two high-frequency (e.g., grocery, gas, pharmacy, discount/warehouse, pet) and one mid-frequency (e.g., department, apparel, specialty retail, home retail, health and beauty) retail programs. We anticipate that spend will continue to fragment across all categories as this competition for share of wallet heats up.

The good news? Your loyalty program can help you win with your customers. As expectations continue to rise and spend continues to fragment, here are some tips on how retailers can optimize their loyalty strategies to secure one of three spots in the average consumer’s loyalty wallet:

1. Keep humans at the center. In an increasingly digitized and artificial intelligence-driven world, the role of human connection has become especially important. For the fourth year in a row, "program representatives make me feel special/recognized" was a top driver of loyalty. Yet only 17 percent of retail program members strongly agree that program reps deliver on this promise. Loyalty members increasingly expect an elevated experience, whether through special recognition for their tier or status, going above and beyond to make them feel valued, or even making them feel that they’re part of the brand family. One commonality across these examples is that they require a real, human connection. While AI may be able to help you operationally behind the scenes, customers still seek a human at the center to connect with them, elevate their experience, and forge lasting bonds.
2. Get personal. There's a large payoff to be had for brands with an effective and engaging communications strategy, yet only 22 percent of Americans strongly agree that retail loyalty programs communicate with them at relevant moments in time. Leading programs start with lifecycle communications that focus on the most important communications to members (e.g., welcoming them to the program, acknowledging activity, etc.). The best-in-class programs layer on the simple, yet powerful communications that ensure members get the most out of your program. These include acknowledging their membership anniversary, following up about their experience with benefits, recommending purchases to help them achieve tier status, and sharing how the brand supports their community.
3. Partner up. Shoppers have high expectations that programs will provide them with a range of benefits as they look to maximize value. However, fewer than a quarter of Americans strongly agree that retail programs offer a wide range of benefits. One way to extend benefits and drive greater purchase frequency is with a partnership strategy. For partnerships to be successful, brands must start by identifying the right partner — i.e., brands/programs that align with your objectives, complement your offerings, and share key customer attributes. From there, designing partnership benefits that resonate with your members will require a mix of exclusive access, better customer service, and financial perks at partner brands.

Retailers should harness consumer insights and data to optimize their loyalty program to not only retain customers but grow their share of their hearts and wallets. With the right approach, the retail sector can look forward to a future of sustained growth and lasting customer bonds.

Alie Donnelly is research director at Bond Brand Loyalty, a leading insights-driven customer engagement company.