The revenue multiplier
Even though a customer might spend a lot of money with a specific retailer, there is often still money, or share of wallet, left on the table. We looked at the customer-level yearly spend for each loyalty level and found there are huge gains to be made by moving a customer up the loyalty scale.
Table 1 explained: total yearly spend, averaged across 2019, 2020, and 2021 (including a prediction for Aug-Dec) for each level of loyalty. For example, for the Supermarkets and Groceries category “not loyal” customers spend on average £107 per year with a retailer, whereas “loyal” customers spend £537 per retailer, and “VIP” and “VVIP” customers spend £998 and £2,770, respectively. The deepness of the colour is indicative of the customer’s annual value; the size of each loyalty level is representative of the number of people currently at that level in the market.
As the above figure and table suggests, converting a customer from the “not loyal” level into “VVIP” produces the best increase in revenues. On average, one VVIP customer is worth 22x a “not loyal” customer. The promotion from “not loyal” to “VVIP” yields different monetary rewards, depending on the category; Clothing and Accessories, Coffee Shops, and Fast Food give a ~10x revenue multiplier, whereas for Supermarkets and Groceries the prize could be as high as 27x.
In support of these findings, Pete Markey, CMO at Boots UK comments, “The value of loyal customers here makes sense, as at Boots UK, we know that people with a loyalty card are worth a lot more to us.” He adds that understanding the difference in value between loyal and non-loyal customers is especially important in the digital world. “Being able to see new, existing and lapsed customers and then being able to retarget and move them between the boxes - that is the real value. That’s the power of this application.”