As high interest rates and the rising cost of goods and services continue to affect purchasing power, American consumers are actively seeking ways to stretch their dollar. One strategy that seems to be on the rise is turning to loyalty program rewards or redemptions to offset the costs of big-ticket, in-demand items like travel.
A survey we conducted in August and September of 2,116 US consumers found that 51% belong to at least three to five loyalty programs, while 19% belong to six or more programs. This number is up by 10% and 7%, respectively, compared with the same survey in 2022. Conversely, the percentage of consumers who belong to only one or two programs dropped by similar margins, confirming that loyalty programs continue to gain popularity.
While signing up new members is vital to loyalty program growth, keeping those members happy, engaged, and spending within the program’s framework is just as important, if not more. Good user experience, excellent customer service, and valuable redemption options are all part of a successful engagement strategy.
Based on our survey of loyalty program managers during the same period, meeting member expectations can be challenging for providers, and a disconnect between what members want and what their loyalty programs currently offer persists.
Our report, The Tipping Point for Travel Loyalty 2023, which used survey data collected in late 2022, examined this disconnect between brands and consumers and the opportunity for loyalty programs to create more value for their members.
Driven by rising prices across every aspect of life, our recent data reveals that value and helping members save money are even more critical today. What consumers want most and feel is missing from their current loyalty programs are options.
Expanding rewards to the entire travel experience
Nearly 90% of consumers in our survey say their loyalty programs offer travel booking capabilities, demonstrating the wide availability of travel booking and rewards redemption platforms. For 49% of these consumers, saving money on travel is what they value most from their travel loyalty program. That number is up six percentage points from 2022, which speaks to the current economic climate and the budgetary constraints of today’s households.
But while many loyalty programs offer reward redemption and discounts on the big three — air, hotel, and car rental — fewer programs offer travel-adjacent redemptions and members-only pricing on items such as dining, live entertainment, and tours and activities. Today’s loyalty member, however, is eager for more redeemable opportunities. Thirty-seven percent of loyalty program members said they would engage more with their programs if they offered a broader selection of rewards, and 27% were also interested in more non-travel rewards.
The same percentage (27%) also said that a wider array of travel options would incentivize them to use their loyalty programs to book travel more frequently and get them to spend more money through their loyalty program to book a trip.
The top lifestyle rewards these consumers desire are:
- Dining (23%)
- Tours and activities (21%)
- Gift cards (17%).
These survey responses indicate that consumers want value across the entire travel experience and are likely to stick with and spend with loyalty providers who can deliver.
Brands, however, seem somewhat out of sync with the demand for more reward options. Only 35% of the companies we surveyed this year plan to invest in redemption and earning capabilities over the next 6-12 months, and just 17% see introducing redemption options as their biggest challenge
Options create stickiness
We recently wrote about how loyalty programs should strive for a combination of retention, engagement, and interaction (i.e., stickiness). Stickiness suggests that a rewards member uses the program frequently, consistently finds value from their participation, and keeps it top-of-mind because the benefits and experience they receive are greater than the sum of their parts.
Our recent survey findings reinforce this idea and demonstrate that given the most suitable options, consumers will continue to redeem points or use cash to purchase ancillary items from the loyalty provider.
About 50% of respondents said they’ve purchased additional products or ancillaries when booking travel online, like tours, activities, and airport lounge passes. Loyalty programs should note this demand and expand their ancillary offerings to improve stickiness and keep members within their loyalty ecosystem, versus forcing them off their platform and onto another.
While today’s consumer is sensitive to spending, 44% of loyalty members would be willing to spend up to 10% more if it would mean getting more benefits and value from their loyalty program.
"Deals” and savings still rule when it comes to what drives consumers to use their loyalty program, while value (as expressed through reward quality and the ability to use or earn points) drives their decision to spend more. Loyalty programs have an untapped opportunity to increase engagement with their members by leaning into their value proposition.
As consumers seek out more strategies to cope with inflation, they’re looking for help from their loyalty programs to better balance their budget, whether that means using their points to pay for lifestyle options like dining and activities while on a trip, having more choices when booking their trip through their loyalty provider, or redeeming points for non-travel rewards that can be used while at home.
Brands would do well to listen to this message from consumers — and offer a robust redemption portfolio.
Learn more about upcoming travel trends, sign up here to receive the Tipping Point for Loyalty Report Series as soon as it is available.
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