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Loyalty is Not Monogamy

Swans are monogamous. So are wolves and coyotes. The American consumer? Not so much. Customers are not committed to shopping with only one brand till death do them part. Customers are loyal, yes –they consistently shop with the same brands. But they’re not monogamous – they spread their dollars around, consistently shopping with more than one brand at a time.

Alliance Data’s 2016 Understanding Customer Loyalty study recently confirmed this. When we surveyed customers, 52% declared themselves loyal to a big-box retailer, but just 35% said they only shop with one big-box retailer.

It makes sense; I know when it comes to grocery stores, my family never shops at just one. My wife and I frequent about four different stores – one has better produce, one has a bigger variety of baby food, and so on. Still, my Predictive Analytics team was intrigued. Customers were honest about shopping with more than one brand – but how much were they actually spending? We decided to dig a little deeper, analyzing customer spending habits to find out how one of our big-box partners compared to its competition. We found that all customer segments were spending just as much or more at comparable retailers. Even the best customers weren’t exclusively loyal, though they were sharing a significant percent of spend with our partner.

Customer segments 12-month spend at big-box partner 12-month spend at competitors Percent of 12-month spend with big-box partner
Top spenders $8,593 $14,682 37%
Mid spenders $1,702 $4,628 27%
Low spenders $1,045 $3,384 24%

*Numbers in this chart have been proportionally altered for this example.

These results surprised our partner, who hadn’t considered that its top spenders could be spending so much with other brands – but they also revealed a profitable opportunity. As you can see, there is untapped buying power within every customer segment above. After reviewing additional data, we found this to be true across industries, not just in big-box retail. Customers are spending money all around – and that gives brands an opportunity to invite that spend to happen in their stores, not the competition’s.

Since we know customers aren’t monogamous, it’s not realistic to believe that one brand could capture all of a customer’s spend. However, as our analysis showed, it’s definitely possible for a brand to capture more spend. But just how much? We often help our brand partners answer this question.

Using our proprietary data assets, we identify the maximum “wallet share” that’s possible for a brand to achieve. Wallet share is a customer’s spend at a brand divided by his or her total spend in the brand’s category. Here’s an example of maximum wallet share within a few common industries:

Industry Maximum wallet share
Home-related  44%
Hotel 39%
Airline 38%
Soft good apparel 32%
Food stores 28%
Gas 25%

This chart tells us how much wallet share is attainable from customers in each category. For example, most hotel customers will not concentrate more than 39% of their spend with one single hotel. So a hotel brand shouldn’t try to capture 60% of spend – it’s probably not possible. Instead, the hotel should focus on the customers who aren’t hitting 39%, inviting them to spend more and get closer to that maximum wallet share.

This type of data helps our brand partners identify which customers are achieving maximum wallet share and which to target for increased spend. It gives them a clear and comprehensive view of their customers’ loyalty, while setting the expectation that customer monogamy isn’t possible – and that’s okay.

The key then, in this loyalty vs. monogamy debate, is for brands to understand their customers’ spending habits. Then, they can capitalize on those habits, capturing the greatest possible spend from customers and attaining loyalty that’s consistent and profitable, but not exclusive.




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