Never, Light, Heavy & Extreme Types
Users of customer reward programs can be divided into four categories of user: Never, Light, Heavy and Extreme. The following is a description of typical or commonly observed characteristics of each user type:
Never customers are those who are not affected by loyalty programs and their reward incentives in any way. They do not carry points cards, they do not care about gift redemptions, and whether or not a business participates in a loyalty program has no influence on the customer’s decision to patronize a place. This does not necessarily imply that never customers are not affected by sales, special promotions or exceptional services. It simply means that they have no interest in participating and see no value in a membership rewards program. Reasons for this attitude can include price insensitivity, fear or dislike of being part of a customer-tracking database, general apathy, or simply an aversion to having multiple membership cards cluttering up one’s wallet or purse. The never user group is a small but not insignificant minority.
It should be noted that some consumers who “hate” reward programs and claim they won’t have anything to do with them, are actually not “Never” users at all. Ask a person who says they won’t have anything to do with reward programs if they use a credit card; there’s a good chance they do, there’s a good chance it comes with a generous points program, and there’s good chance the person is very loyal to their card. Yes, some people do refuse to participate in reward programs, in many cases because of concerns about privacy; a lot of other people though are 100% loyal to one particular program and don’t even know it. Yes, CIBC’s Aerogold Visa is a reward program credit card; Aeroplan is actually one of the largest and most successful loyalty programs not only in Canada, but the world!
Light Loyalty Users
Light loyalty program users are ones defined as having reward program memberships and being influenced by their incentives, but only moderately. This segment comprises a large range of customers, including those who possess loyalty cards but rarely use them, consumers who make use of their memberships if they shop at a place anyway but do not patronize a place because of the program, and consumers who collect a considerable amount of points but never or rarely redeem them. Reasons for being a light loyalty program user include general apathy toward programs, or perceptions of programs being complicated or more work than the rewards are worth, combined with the attitude of the consumer that he or she might as well collect and redeem points if they shop at a place anyway.
Related to this Light user category, Stone and Field (2001) mention briefly what they call the ‘50 per cent rule,’ where “25 per cent or so [of loyalty program members] are inactive, and another 25 per cent or so are active rarely, usually only when there is a big price promotion.” Also, they note, “there is a rapid decay rate down to the 50 per cent active – in other words, most customers who belong to the 50 per cent inactive arrive there within a year or so”. The Light user category can be said to include this “inactive” or “rarely active” 50 percent of loyalty program members.
Heavy loyalty program users are consumers who are active and highly influenced members of reward programs. They may have divided loyalties, or they may be highly brand loyal in some categories. They may also be either transaction buyers, shopping at a place because the program gives them competitive prices, or relationship buyers, where after being drawn in by a program they become comfortable with the customer-business relationship and the general shopping environment.
Heavy loyalty program users shop at places, at least in part, because the businesses offer loyalty rewards, although the users may also shop at other places for reasons other than loyalty incentives. These shoppers redeem their points for rewards at least with some, but not necessarily all, of their programs. They are also familiar with redemption procedures, types of rewards, and names of merchants participating in a program. They also respond to one-to-one advertising directed at them, like bonus point coupons and supplementary advertising. In many cases, heavy users will be motivated to buy more than they would otherwise, in order to maximize their point accumulation; for example, they might pump slightly more gas at Shell to reach the $20 minimum purchase requirement, or buy a few extra groceries at Safeway so that they qualify for the 100 bonus points for purchases of $100 or more. These users obtain a feeling of satisfaction from receiving rewards or knowing they are getting bonus value for their money. Consumers in this group can tend to be more price sensitive than the average consumer, more susceptible to special offers, and find significant pleasure or satisfaction in their shopping/reward accumulation experience.
Heavy loyalty program users are a significant group, especially in Canada and the UK. They tend to be very committed to their favorite programs, although frequently still have little interest in programs outside their circle of favorites.
And finally, extreme loyalty program users are those consumers who are virtually addicted to or obsessed with loyalty programs. This small (but not insignificant) group generally does not shop at a place without a loyalty program if other options are available. For their favorite programs they redeem all their points, they track their point accumulation and they participate actively in the programs, watching out for special promotions and ways to maximize their point accumulation and incentive benefits. They may have favorite programs they use more than others, but generally they are highly loyal to at least one or two. In many cases they may be more loyal to the program than to each store brand, and they can view reward and point accumulation almost as a strategic game or hobby. Extreme loyalty program users can in some cases be unprofitable customers as they may primarily purchase items with high (and expensive) incentives. Others though may be exceptionally profitable, purchasing things they would not purchase otherwise or spending premium prices because their focus is on the reward. Whichever the case may be, through CRM technology, businesses recognize these consumers as responsive to their programs and their one-to-one marketing initiatives.