We have all had the experience of checking out at the grocery store, pharmacy, or bookstore, and having the cashier ask whether we are part of the store’s customer rewards program. If we answer “no,” the next question is, inevitably, whether we want to join. New data from an FGI Research study indicate that over three-quarters of consumers say “yes” to this second question: that’s how many respondents report that they hold some kind of customer loyalty card, whether or not they also use a store-issued credit card.

And it’s no wonder that so many do. More and more companies offer rewards for customer loyalty. Not only retail outlets but hotels, restaurants and airlines use rewards as a way of promoting business and retaining customers. There are even online applications, like SCVNGR, which encourage consumers to build their own rewards programs. The FGI Research study, based on sample from FGI SmartPanel^TM, assesses what it is about customer rewards that attracts consumers. The results illuminate why so many sign up for loyalty cards, notwithstanding concerns about privacy; and why they are nevertheless more reluctant to opt for alternatives, like store-issued (or “private-label”) credit cards.

Shoppers Want to Save
Knowing that 77% of shoppers hold some kind of loyalty card, FGI Research asked why they opted to sign up –and whether they were satisfied with the rewards that they received. Most shoppers (82%) say that rebates, discounts, and overall savings are the foremost advantages of having a loyalty card. The next advantage that users cite is being able to build up bonus points toward some kind of reward or discount, which 41% say is a perk. Meanwhile, 39% of those surveyed say they like being able to get personalized coupons, and 38% enjoy having access to special, members-only sales.

A full third of cardholders say they find no problems whatsoever with their membership, indicating a high level of satisfaction with rewards programs. Among those who have complaints, 64% wish only that they could get more rewards with their cards; the idea of a loyalty card, in itself, still attracts them.

Some aspects of rewards programs don’t register at all with users. Only 7% of respondents indicate that special treatment for members, like waiving the need for a receipt with returns, drew them to get a membership. Donation programs, which, for instance, automatically contribute a fraction of each sale to a charity of the user’s choice, excite a mere 8% of respondents. We can draw a variety of inferences from this body of data, the most important of which is that customers use loyalty cards most often for the savings, sales, and rewards from which they personally benefit. The biggest problem that customers have with loyalty cards is when they feel that these “rewards” are not forthcoming.

“What are the advantages of your customer loyalty card?”

Privacy Concerns a Roadblock
What about shoppers who opt out of customer rewards? Why do 14% of respondents report forgoing the opportunity to save money and enjoy other benefits?  Some say they don’t shop frequently enough at any store to make the card worth having (43%), and others opt out because the programs don’t yield enough rewards to justify signing up (33%).

By far, the most-cited concern is privacy: 9 in 10 non-adopters report reluctance to sign up for the cards due to concerns about information security. Whether they don’t want stores giving out their data to third-parties (39%), don’t like that stores can keep track of their buying habits to create customer profiles (27%), or simply don’t like to issue too much personal information (24%), shoppers who opt out do so in order to protect their privacy.  However, if they had a guarantee of privacy, two-thirds of respondents would be open to the idea of using loyalty cards.

Credit Card?  No Thanks.
While an increasing number of retail outlets are starting to offer store-issued, or private-label, credit cards (like the Target RedCard), consumers avoid them for the most part. Only 40% of those surveyed in the TrendTruth study identify themselves as holders of such cards. As with loyalty cards, security issues deter many customers from using store-issued credit cards. But even were privacy less of an issue, consumers would remain wary: just half of those surveyed said they might be open to using a store-issued credit card under more secure circumstances. That’s because privacy is not the only issue discouraging shoppers from adopting.

ABC News: Risks of Private-Label Credit Cards

Over two-fifths of shoppers say they stay away from store-issued credit cards because the interest rate is too high.  Others say the same about the annual fee (32%) and the financing percentage (31%). In short, many shoppers think the cost of maintaining a private-label credit card outweighs the benefits of having one. Loyalty cards may be more attractive simply because it’s free to sign up –and there are none of the dangers to users’ credit scores that store credit cards pose. In any case, a third of those surveyed say they don’t shop frequently enough at any store offering the service to justify opening a card.

Nevertheless, some shoppers have found the cards useful (as evinced by the forty percent who identify themselves as card-holders). Over half (56%) of these shoppers say they like the cards because of the discounts, savings and rebates that they offer. 46% appreciate having access to special members-only sales and events (46%), and 39% like that the cards have no annual or extra fees (39%). These users clearly think the benefits of having a card outweigh the risks and downsides.

Which Cards, Which Stores?
Private-label credit cards are most popular at department stores. Among those who carry store-issued cards, 62% report having gotten it from a department store. Meanwhile, only 24% got their card from a big-box retailer like Target.  When it comes to non-credit loyalty cards, supermarkets (88%) and pharmacies (59%) rank first and second, while bookstores (31%) come in third.

“For which types of stores do you hold customer loyalty cards?”

How Many Cards?
FGI Research asked how many cards survey respondents held. Almost all (92%) have more than one. Nearly a quarter (22%) have two rewards cards. One fifth (20%) carry three. Slightly fewer (18%) carry four. A handful (17%) report holding over 7 customer loyalty cards. Meanwhile, most (60%) of those who have opened private-label credit cards say they only have one or two such cards.

We identified some possible explanations for the handful of shoppers who hold 7+ rewards cards. It may be that those who enroll in customer loyalty programs fall into one of two groups: either they have cards for the few stores where they shop most often (i.e. their preferred grocer, pharmacy, and bookstore), or they simply have the habit of saying “yes” every time they are asked to join a loyalty program. Those who hold cards to correspond to stores where they shop regularly would not likely carry more than 2-3. Those who say yes to every offer of a rewards card would likely have more than 7. Deeper research could help correlate consumers’ behavior (how many cards they hold) with their motivations (why they sign up for cards in the first place).

Actionable Insights
The results of this study indicate that the vast majority of shoppers use some kind of rewards card, whether that be a free customer loyalty card or a store-issued credit card. Many of those who don’t carry the cards would be more willing to do so if certain conditions, like those surrounding privacy, changed.  Most shoppers remain wary of store-issued credit, largely due to high interest rates and other fees, but also due to dangers that such cards pose to their credit scores. For either type of card, some shoppers don’t adopt simply because they don’t shop frequently enough at any particular store to make signing up worthwhile. Targeted research and analysis could help businesses understand these non-adopters and secure their loyalty.

• Retailers interested in expanding their base of registered cardholders, whether for loyalty or store credit cards, should use an awareness and usage study fielded from their target demographic to understand whether and why their customers are using the cards –and, if they aren’t, why not.
• A survey of customers’ sentiments about each type of card could help retailers, and other businesses, seeking to start up a rewards program pinpoint the type of program that would best serve their objectives.
• Ongoing customer satisfaction tracking is indispensable to ensure that customers feel their rewards cards offer enough rewards and promise enough perceived benefits to warrant the effort it takes to sign up.

Next Steps You Can Take

• Learn more about the results of this study: complimentary access to the data in this report, including cross-tabulated results, is available upon request from FGI Research.
• Contact FGI Research: click here or call us at (919) 929-7759
• Explore FGI Research’s market research solutions, including custom panels, full service research, and our online sample (SmartPanel).
• Join FGI Research’s online panel to participate in future studies.

Survey Methods
Respondents: 400
Date of Survey: July 19-22, 2010
Sample Source: FGI SmartPanel

This nationally-representative sample consists of adults aged 18 and up and is balanced to the US population using recent census data. One can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Consumer Opinion on Social Media
FGI Research has concluded that 51% of Americans believe that Social Media sites, like Twitter, affect the news. National news networks like CNN or FOX news use Twitter regularly to report how the country feels about different topics. Social media is an interactive forum that makes it quick and easy to generate immediate feedback. It is a quick, convenient barometer for the media to interpret the sentiment of a large sample of Americans. What’s more, it is another outlet for media to publicize their content. 29% of all respondents said that they use social media sites, like Twitter, to follow the news; and of those, 46% said that they find the same amount or more news on social media sites than they did last year.

The News Also Impacts Social Media
It’s not a stretch to say that the increased attention in the national news has boosted Twitter’s membership. According to our study, Twitter is growing: 17% of respondents, who are not currently users, say that they plan on creating an account within the next 6 months. This means that, according to our data, Twitter is growing faster than MySpace, YouTube, FriendFeed, LinkedIn, and Flicker. In fact, microblogging is becoming a breakout form for reaching large audiences in an inexpensive way to make updates in real time.

Actionable Insights
What does the relationship between social media and news mean for businesses? As we said, social media offers a quick, free and easy way to reach out to consumers for marketing. It also offers a barometer of consumer opinion. Using advanced research methods and mining tools, companies can trawl social media for insight into consumer opinions –opinions they might not readily share in a survey or even an online community. It is vital to not only talk to consumers through social media but to listen to what they are saying in order to create more effective business and marketing strategies. Social media won’t just have an impact on the news. It will impact the entire market.

Next Steps You Can Take

Survey Methods
Date of Study: 6/29/2009
Total Responders: 315
Sample Source:FGI SmartPanel

How Marketing Impacts Brand Awareness
Our independent study asked consumers about their awareness of smartphone brands and whether they had purchased, or intended to purchase, such a phone. Over 90% of all respondents said that they were familiar with the iPhone brand. In fact, of all people who had purchased a smartphone in the last six months, 24% bought an iPhone.

Apple’s social-media marketing has been especially effective for reaching their ideal audience. The company has a strong presence on the web, including but not limited to personal networking sites like Facebook and Myspace, blogs, and YouTube, where they post tutorial videos. Young professionals, with a taste for new technology, respond well to this kind of corporate communication. With targeted marketing efforts like this, it’s easy to see why Apple is dominating the SmartPhone market in just over two years after releasing their first phone.

Who’s Buying?
The younger set and people with higher income have higher brand awareness when it comes to the iPhone. For respondents between the ages of 18-24 and ages 25-44, awareness is near 94%, whereas for respondents in the age group 45-65+, awareness drops to 87%. In the past 6 months, respondents ages 23-44 purchased three times as many more iPhones than the 45-65+ age group. Likewise, respondents who earn less than 50k have an 87% awareness of the iPhone brand, as opposed to 93% awareness from those who earn more. Respondents who earn more than 50k have purchased 2.5 times the number of iPhones in the past six months than those who earn less.

Actionable Insights
Apple is a case study for effective social-media marketing. The company has seen enormous success in its use of YouTube, Facebook, blogging and microblogging to reach consumers. Yet their success suggests that some companies may have more of an inherent edge in online marketing than others. If your target demographic is young, tech-savvy professionals, they are likely to be on all of the social media sites to begin with; reaching them through those sites is hence second-nature. But for those whose customers are less into online networking, sites like Facebook might not be as meaningful as marketing outlets.

The way to know where your customers spend time is through rigorous market research. Find out where your customers spend time. Ask! They will tell you. A more innovative method is social-media monitoring, which will not only tell you if your customers are talking about you on social media (thereby revealing if it is an effective place to market), but also what they say. Either or both technique will accomplish the desired goal, but no matter what approach you take, you should start asking these questions. The sooner you know if you should be on social media, the faster you can begin to establish your presence.

Next Steps You Can Take

Survey Methods
Date of Study: 6/18/2009
Total Responders: 345
Sample Source: FGI SmartPanel