Insights report: Redefining customer loyalty | Sponsored Content

Customer loyalty is crucial for brands, yet many marketers define it solely by how frequently a customer shops or how much they spend specifically with the brand, overlooking whether these customers also shop with competitors. Cardlytics, with visibility to $4.7 trillion in annual card spend, provides a more comprehensive view of customer loyalty by analyzing consumer spending across multiple categories, offering insights into true loyalty and how brands can redefine their audience strategies.

Defining customer loyalty

Cardlytics defines customer loyalty by comparing how much a customer spends at a merchant relative to competitors. Analyzing $160 billion in spending across six industry categories, Cardlytics found that, on average, only 10% of a merchant’s customers are truly loyal, spending 62% of their category budget, or share of wallet, with the brand. In contrast, the remaining 90% of total customers are “not loyal” and only have a share of wallet of 9% with the merchant.

Are frequent shoppers loyal?

Marketers often mistake frequent shoppers for loyal customers. Cardlytics assessed whether frequent purchasers are truly loyal by analyzing the spending habits of these top customers. They found that only 52% of frequent shoppers are loyal, while the remaining 48% prefer to spend most of their money with competitors. Loyal frequent shoppers allocate 60% of their category budget to the brand, while nonloyal top shoppers spend 79% of their budget elsewhere.

Key takeaways

1. Loyalty potential: There is significant opportunity for brands to grow revenue by increasing the loyalty of their existing customers. Brands could benefit from 6.9 times customer spend by focusing on the 90% of nonloyal customers and raising their share of wallet from 9% to 62%.
2. Transaction frequency ≠ loyalty: Frequent shoppers are not necessarily loyal. Only half of a merchant’s top customers are loyal, and nearly half (48%) allocate most of their budget to competitors.

Implications for marketers

Understanding customer loyalty requires more than just looking at transaction frequency. By supplementing first-party data with broader spending behavior across categories, marketers can identify which customers are truly loyal and develop informed strategies to drive growth.

To gain a deeper understanding of your brand’s customer loyalty, reach out to Cardlytics for custom analysis.

About Cardlytics’ methodology

Cardlytics operates the world’s largest bank rewards network, powering offers for more than 20 major financial institutions. Analysts at Cardlytics utilize the Wallet Allocation Rule, developed by Timothy Keiningham, to derive loyalty. The original methodology assumes that share of wallet is unknown while brand rank and number of brands shopped are known via survey research conducted by brands.

Because Cardlytics has the ability to see over 1 in 2 card swipes in the US, share of wallet and number of brands shopped become known variables and relative rank becomes the unknown. This allows Cardlytics to calculate a brand’s relative rank and order brands based on that ranking to determine customer preference for a given brand.