Redefining Customer Loyalty

Introduction

Brands of all sizes know that engaging loyal customers is critical to their business, but how do they know which customers are loyal? Most marketers use first party transaction data to assess how often their customers are shopping or how much they are spending in order to define who their loyal customers are. This approach can lead to an inaccurate view of loyalty because it overlooks whether these customers are spending with competing brands.

Cardlytics has access to $4.7Tn in omni-channel annual card spend, powered by the largest financial institutions in the United States. We have sampled this rich dataset to provide a full-category view of spend that sheds insight on what it really means to be brand-loyal, and how marketers can redefine audiences to make informed, strategic decisions.

Read on to explore the full report (or download it here) and reach out today to get a custom brand-level view of your business’ loyal customers in relation to the category.‍

‍Key Takeaways from the Report

Significant potential exists to grow revenue by boosting customer loyalty and increasing their share of wallet.

• 10% of customers are loyal, spending 62% of their budget with the merchant.
• 90% are not loyal, spending only 9% of their budget with the merchant.
• Brands could benefit from 6.9x customer spend by focusing on the 90% of non-loyal customers

Transaction frequency doesn't equate to loyalty.

• Only 50% of a merchant's top shoppers are loyal.
• 48% of a merchant's top shoppers spend 79% of their budget with competitors.

Customer Loyalty & Share of Wallet

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‍Defining Customer Loyalty

‍Cardlytics defines customer loyalty based on a consumer’s preference for a merchant relative to the competition. In this report, we’ve sampled $160Bn of spend across six large categories to determine what percentage of a merchant’s customers are loyal and how much are those customers spending with the competition as compared to customers that are not loyal.

On average, 10% of a merchant’s customers are loyal (ranging from 5-13% depending on the category). Conversely, 90% of a merchant’s customers are not loyal, on average.

These loyal customers have a share of wallet of 62% (meaning 62% of their category spend is with the merchant). Not loyal customers have a share of wallet of only 9%.

¹ Cardlytics applies the principles of the Wallet Allocation Rule to rank existing customers (that spent during the prior and current periods) based on their share of wallet (which is the percentage of a customer’s total spending in a category that goes to a particular merchant) to assess clear first choice based on the relative rank of that merchant. Full methodology included at the end of this report.

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Top Customer Loyalty & Share of Wallet

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Are Frequent Shoppers Loyal?

‍In the absence of competitive spend data, Marketers leverage transaction frequency to define loyalty (e.g., “the customers who shop the most frequently are my loyal customers”). Cardlytics isolated the top customers (most frequent purchasers), by merchant, to assess whether this is an appropriate proxy for loyalty. For this group of top customers, we analyzed what percentage of them are loyal (have a clear first choice for the merchant) and how much are they spending with the competition.

On average, only 52% of a merchant’s top customers are loyal (with a clear first choice for the brand). In other words, roughly half of a brand’s top (most frequent) customers prefer to shop at competitive brands.

While the top customers that are loyal have a share of wallet of 60%, the remaining top-customers have a share of wallet of only 21%, meaning 79% of their spend goes to competitors.

¹ Cardlytics used a 12 month measurement period for Apparel and Big Box (08/01/23 to 07/31/24) and a 6 month period for all other categories (01/31/24 to 07/31/24) when isolating the top-10% most frequent shoppers. Cardlytics measured the share of wallet ranking for all of these top customers with spend in this period (regardless of whether they were newly acquired by the brand in the period or if they were existing shoppers from the prior period).

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What do these insights mean for you?

Supplementing first party transaction data with category-level spending behavior is essential to understanding and defining which customers are loyal (and which customers are not), thereby enabling more informed marketing strategies that deliver growth.

Reach out to Cardlytics to get a custom brand-level view of your business’ loyal customers in relation to the category. For more information, please submit a request.
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About Cardlytics

Cardlytics is the world's largest bank rewards network, powering offers for more than 20 of the top bank partners globally, including the world’s largest retail brands, representing $4.7T in consumer spend. Cardlytics helps brands determine what loyalty really looks like across their customer base to identify headroom for growth, reach customers deterministically, and drive conversions.

1. Loyal customers are existing customers of a merchant with a clear first choice for that merchant (relative to the category), as evidenced by their share of wallet ranking (note: existing customers are those with spend in the current and prior periods⁴).

2. Includes customers that have spent with a merchant but were either newly acquired or lapsed in the current period⁴, evenly split their category spend between multiple merchants, and/or have a clear preference for competitors.

3. Includes the top-10% of a merchant’s customers based on the number of transactions at the merchant in the trailing 6-12 month period

4. Current period for Apparel and Big Box is 08/01/23 to 07/31/24; current period for all other categories is 01/31/24 to 07/31/24