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Topic: Effective Loyalty Segmentation by Age Demographic




Most customer loyalty programs or strategies are designed to appeal to various segments. After all, a 40-year-old accountant may not have a similar buying habit as that of a 19-year-old sophomore in college.

The statistics certainly back up the fact that age segmentation when it comes to customer loyalty and engagement can often be a tricky dance to pull off.

“Consumers aged 18 to 24-years-old are both the least likely age group to sign up for loyalty programs and also the most engaged members once they join,” says Charlie Taylor, the head of U.S. client services at yougov.com.

Taylor says the data they have gathered shows that less than half (43%) of 18 to 24-year-olds are currently subscribed to at least one loyalty program, which is much lower than the 68% of consumers who are aged 35 and older.

Further, he says the lower level of engagement appears to go away once those young consumers mature past the age of 25, when engagement reaches 57%, and continues to trend upwards with each advancing age bracket.

Christian Selchau-Hansen, CEO and co-founder at Formation, which helps brand automate the deployment of individualized offers across both digital and physical channels, says that while there are definitive advantages to segmentation of loyalty programs by age, there are also limitations for retailers who choose segmentation to reach its customers in the first place.

“Using common characteristics like demographics and personas to break customers into smaller groups doesn’t guarantee a brand can appeal to them on an individual level,” Selchau-Hansen says. “It’s true that younger demographics are the least likely to join a loyalty program. But just because they are the least likely to belong, doesn’t mean there’s absolutely zero individuals in that cohort who won’t take advantage of a program and become a loyal, repeat customer.”

Selchau-Hansen suggests that retailers using hyper-personalization backed by AI can ensure they’re viewing their customers holistically, and prevent losing out on a perfect loyalty program candidate.
But here’s the other tricky dance step: although some segmentation factors may stay the same for consumers (such as the town the live in, their careers, and other demographics), one thing that is always changing is their age.

Some retailers do well in targeting specific age groups: for example, fashion retailer H&M runs various segment programs by age that target back-to-school, primary school, and university students.

Some brands have tried to gain access to more age groups by becoming specific in their loyalty programs. American Eagle Outfitters changed its AEO Connected loyalty program to Real Rewards, where members can earn fast, flexible rewards they can use on whatever they want, plus additional perks just for shopping.

“We built Real Rewards in such a way that we can easily flex the program based on the needs of our members,” says Chad Nikola, director of customer retention for AEO. “This gives us the ability to add frequent program enhancements to keep the program fresh and exciting. Members will not have to worry about a stagnant program; instead, we can adapt as our members change.”

Pamela Erlichman, Chief Marketing Officer at Jebbit, says no what the program, it all starts with value. She says retailers should look closely to make sure that their loyalty program provides the types of benefits and rewards that appeal to a younger audience.

“Can they engage with your brand in the ways they prefer?” Erlichman says. “Does your brand stand for something meaningful and relatable to them? We know that younger consumers can’t just be bribed with deals and discounts; they are looking for brands that match their values, their technological savviness and their convenience expectations.”

She says that often requires taking a step back to evaluate the full value proposition of the brand itself.
Klarna, an online retail store with a no-fee installment payment option, recently made news for the launch of its new loyalty program, Vibe, and targeted younger customers and those who don’t want to use credit cards.

“To us, loyalty means establishing and maintaining close customer relationships by consistently delivering a smooth shopping experience, end to end,” says David Sykes, who leads the U.S. office for Swedish-based Klarna. “We have built a hugely engaged and loyal consumer base in the US as they love using our product and features so much, this seemed the next step to give something back to them. We are proud to be the first mover in the buy now, pay later space to offer our customers a loyalty program.”

Selchau-Hansen says the best way to design a loyalty program is to take age out of the equation as a whole, and get to know your customers on an individual level. He says that by using 1:1 personalization at scale, loyalty programs can boost engagement by showing the most relevant offers and promotions, regardless of age.

“It’s intuitive to assume that home-owners may visit a hardware store more so than younger demographics who are renting apartments or homes,” Selchau-Hansen says. “But given quarantine lockdowns, this assumption is flipped upside down as home improvement projects increase — especially among apartment renters who are seeking comfort with more time spent inside.”

Selchau-Hansen says ditching segmentation and adopting hyper-personalization is the best way for retailers to cater to customers of all age demographics, because their needs will be met on an individual level.

Others retailers, such as luxury brands that focus on high-earning individuals, typically won’t target a younger audience. Neiman Marcus’ InCircle loyalty programs works by letting customers work their way up through eight different tiers to earn unique rewards like access to bonus-point events, exclusive publications, as well as the opportunity to select their own bonus point day once a year.

Selchau-Hansen says that, according to Formation’s recent Brand Loyalty 2020 report, 73% of consumers say the brands they engage with the most recognize them on a one-to-one level. He says a great way to achieve this with a loyalty program and appeal to a broad audience is by enabling multi-step offers, which allow brands to move away from transactional offers and instead personalize a journey for individual customers.

“These personal journeys are far more relevant and valuable for each customer,” Selchau-Hansen says. “They recognize a customer’s motivations and preferences, and then improve the experience and increase engagement over time. There’s no doubt that the brands with the most relevant customer journey will stand out against competitors.”


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