A new report also finds that millennials are the future of loyalty programs.
NEWTON, Mass.—Loyalty programs are linked to an 18-30% increase in visits and spends at restaurants and c-stores, according to Paytronix Systems Annual Loyalty Report 2022. The report also finds that between 5 and 17% of overall business revenue is driven by the most loyal 2 to 3% of customers, and that younger members are driving a generational shift in age and spend across loyalty programs.
Looking at convenience stores, loyalty members annually spend 38% more on average, and the report found fuel visits increased by 8% in 2021 when a customer is a loyalty member. Also, the most loyal c-store customers are visiting businesses one or more times per day.
According to the report, there were 16% less loyalty members in 2021 versus 2019, and the 56+ age segment declined the most in terms of loyalty customers. However, Paytronix found that there are now more members in the 36–45 age segment than in the 46–55 segment.
About a third of c-store loyalty customers are fuel-only purchasers, while 12% only buy in-store items, leaving 55% of loyalty members who buy both. However, Paytronix finds that a small percentage of loyalty members make a big difference. At convenience stores, the top 8-10% of loyalty members visit an average of 32 times a month—more than once a day—and four times as often as the next highest tier. These 8-10% of loyalty members are responsible for about 40% of visits, averaging more than one a day.
Although c-store loyalty members purchased less fuel per visit last year, they bought more fuel overall, showing an increase in store trips. Both their spend per check and spend per year increased across all categories.
Spend per check rose by about 25% from 2020 to 2021, mostly attributed to fuel and in-store product price increases. Fuel-only customers visit c-stores 2-3 times per month, Paytronix found, but they have the highest spend per check at nearly $40. In-store customers, on the other hand, lifted their average spend by about $5 per check. Looking at annual spend, c-store loyalty members increased their spend per year by nearly 40%.
“We are seeing more convenience stores position themselves as a destination for items beyond fuel by
associating their brand with specialty items such as coffee or ice cream,” wrote Lee Barnes, chief data officer at Paytronix, in the report.
Other key takeaways include:
A New Spending Record: In 2021, loyalty spending hit the highest level on record, demonstrating that even with rising inflation, loyalty programs are a valuable source of revenue, says Paytronix. Casual dining, fast-casual, ice cream/snack/coffee and Mexican/sandwich concepts all saw the highest annual spend per guest of any year for which Paytronix has data.
Top-Tier Loyalty Members: Top loyalty guests overwhelmingly represent the highest spenders and the most frequent visitors, and they offer a lifeline during an economic downturn.
Generational Shift in Age and Spend: Millennials (36-55 age range) have an outsized percentage of spend, while the baby boomers (56+ segment) have an outsized percentage of visits. The largest untapped potential lies with Gen Z, (16-35 age range), as this group has the most guests who neither visit nor spend. Both the growth in spend for millennials and the shrinkage in spend for baby boomers indicate that millennials are the future of loyalty programs.
Rise of Snacking: Across all concepts, 2021 saw the highest annual spend per guest of any year for which Paytronix has data. The difference was often minimal, but the ice cream/snack/coffee segment proved an exception, as guests eagerly increased their spend by 20% between 2019 and 2021.
“The Paytronix Annual Loyalty Report shows that the potential of loyalty to build relationships between customers and their favorite brands has never been greater. Between the ongoing generational shift and the critical importance of the top tier of 2-3% of guests, it has become increasingly clear that growing cadres of loyal customers are vital for the health of brands. And the loyalty members of convenience stores who visit daily show the potential of loyalty customers to visit more often,” said Barnes in a statement.
NACS has published a free report on how convenience retailers can build loyalty program affinity beyond rewards and provides insights on c-store loyalty programs, shopper expectations, program engagement, personalization and program access/communication. Download the report: Driving Engagement From Convenience Retail Loyalty Programs.
NACS Magazine dove into loyalty programs and how they can provide convenience retailers with key consumer insights and a competitive edge, while NACS offered a free webinar that shows retailers how to improve their current loyalty program.