Questioning the Value of Consumer Loyalty

According to customer loyalty research by San Mateo, Calif.-based FreeMonee, a provider of consumer gift incentives, even the most loyal customers are cheating on them.

For retailers, the final quarter of the calendar year is when sales targets are made or missed. Marketers try every method in the book to entice shoppers into stores, from BOGO (buy-one-get-one) and couponing to Santa’s visits and puppies in the windows and for good reason.

Using its Gift Underwriting Engine, FreeMonee analyzed the spending patterns of more than one million U.S. cardholders over two years, totaling more than 200 million transactions and $8 billion. The analysis included big box retailers like Target, Sears, Macy’s and Kohl’s, among others, and uncovered the following:

• Even the most loyal shoppers cheat: A retailer’s most loyal customers -- those visiting at least nine times per year -- spend $1.44 with competitors for every $1 spent with them.
• The most loyal aren’t necessarily the most valuable: Low frequency visitors -- those visiting 2-3 times per year -- make up on average 26 percent of revenue, higher than the contribution from the most loyal (24 percent). Just one more visit from these less frequent shoppers would fundamentally change revenue numbers.
• Retailers fight for same slice of the wallet: On average, customers spend the same amount per visit at each retailer, regardless of how frequently they shop there. Across a nationally-representative competitive set of retailers, the average spend per visit was the same—whether they shopped at a particular store once or more than nine times each year.

“The retailer with most foot traffic wins; this holiday season, and in general,” said Jim Taschetta, CMO at FreeMonee. “…Retail marketers need new ways to entice their existing customer base—whether frequent or occasional shoppers—to reach revenue goals at this vital time of the year.”

FreeMonee’s Gift Underwriting Engine engages in predictive science to determine what gift amount to give to which potential customer, resulting in increased foot traffic and profitable sales for the merchant.