Can frictionless checkout beat loyalty programs to win repeat business?

July 19, 2019 Jesse Klein

With so many options at the tip of a customer’s fingers, brands are looking for a secret to creating loyal customers. 

There's a battle brewing between the old standbys and newer innovations. Loyalty programs were the tried-and-true way to encourage a customer to come back, but it seems millennials aren’t as interested in loyalty programs as their parents are. Instead, a convenient and frictionless checkout experience might be the way to get these consumers to buy again and again.

Younger people don’t do loyalty programs

Thirty-six percent of Gen Zers above age 18 reported participating in only one loyalty program. This is quite a drop compared to Gen Xers, baby boomers and the Silent Generation, where 44% reported being part of two or more loyalty programs. Millennials also seem less likely to take part in loyalty programs: Only 22% said they were a part of one rewards program.

“Millennials—and younger consumers more generally—simply haven’t developed many of the household formation habits or reached the points in their careers when loyalty programs make the most sense," eMarketer principal analyst Andrew Lipsman said. 

Backing up Lipsman’s statement, millennials and Gen Zers report a variety of reasons for avoiding loyalty programs.

1.      Programs require too many purchases.

This was the top reason for both Gen Zers (40%) and millennials (45%). Loyalty programs simply aren’t worth their time yet. Millennials are starting their families later in life, and Gen Zers have just entered adulthood. They are only making purchases for themselves, not a family of four or five. That’s when purchases start to add up, and rewards really matter.

2.     The initiation fee is too much of a hurdle. 

Younger generations are still feeling uncertain and stingy with their money. The fee scares off 33% of Gen Zers and 39% of millennials, according to Business Insider. And if they don’t feel their volume of purchases will reap enough rewards to offset the initiation fee, it’s a huge blocker.

3.     Signing up takes too long.

Young consumers won’t even wait for a slow-loading website.  Filling out multiple forms for a loyalty enrollment process is out of the question for 28% of Gen Zers and 34% of millennials.

Brands should start to using this to their advantage as opposed to seeing it as a hurdle. Young consumers want something frictionless—a checkout process that is one-click, made for mobile, and trusted. This is one way you can create loyalty with the next generation of consumers.

Convenience ranks higher than rewards

 A recent study by iVend Retail surveyed consumers worldwide about what they valued most in the shopping experience. Coming in first, 83% of consumers cited  "quick and easy checkout" as the most important, far in front of earning points at 59%.

The Baymard Institute, an independent e-commerce researcher, reported that 1 in 4 shoppers has abandoned a cart due to a “too long / complicated checkout process.” But thankfully there is room to improve: The study found that it’s possible to reduce a standard checkout flow by up to 60% by cutting back on the elements displayed. This can result in a 35.26% increase in conversion rate, the study found.

The research suggests that by investing in a fast and intuitive checkout design, shoppers will likely want to buy more from your brand. Seamless tech may become the biggest driver of loyalty. 

 

About the Author

Jesse Klein

Jesse's background in economics and a passion for writing helps her tackle financial technology. She was born and bred in the Bay Area and has watched as technology companies came to flourish in San Francisco. She is excited to be part of one that focuses on helping people make better financial choices.

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