Loyalty affects consumption of the very brands people are investing in

(image created by AI)

An interesting study by the New Columbia Business School finds that owning stock of popular brands can increase day-to-day spending to those brands.

Contrary to what investment managers advise their customers: “don’t get emotional about your portfolio”, people actually seem to do. The researchers prove a direct and reasonably strong relationship between investments and consumption. The brands consumers own stock of are the brands they spend more on, and that is good news for publicly traded brands and retailers.

The study (The Effect of Stock Ownership on Individual Spending and Loyalty) used transaction-level data from a brokerage app that rewards buyers with stocks from the brands and stores they buy from. Weekly spending increased with 40% after people received shares – an average of $23 per week. When users are granted with a brand’s stock upfront, their weekly spending at those brands increases by 100%.

Impressive results which demonstrate that rewards deliver direct results in influencing spending patterns. The conclusion drawn by the researchers relates familiarity and loyalty heavily to spending. Something we at VEMT already knew, but is reaffirmed through this route again.

If you want to make use of a reward program to increase your spend, contact us here. If you are interested to use shares as a vehicle for that: we have some great tools to launch that quickly.

Question 1:
How can brands effectively integrate stock-based rewards into their existing loyalty programs without diluting the perceived value of traditional rewards?

Answer:
Brands can create a loyalty program where stock-based rewards are positioned as a premium or exclusive feature, available to high-spending or long-term customers. This approach maintains the attractiveness of traditional rewards for the broader customer base while adding an innovative option for those more engaged or invested in the brand. Additionally, offering educational resources about stock ownership and its benefits can enhance the perceived value of these rewards. Implementing a system that allows customers to choose between traditional rewards and stock-based incentives based on their preferences can also ensure the appeal of the program across different customer segments.

Question 2:
What are the potential regulatory and logistical challenges brands might face when implementing stock-based rewards, and how can they navigate these challenges?

Answer:
Implementing stock-based rewards involves navigating financial regulations, tax implications and ensuring compliance with securities laws. Brands should consult with legal and financial experts to understand the regulatory landscape and develop a compliant program structure. This may include partnering with a brokerage firm to handle the stock transactions and ensuring that rewards programs are transparent about the terms and conditions of stock rewards. Logistically, brands need to integrate technology solutions that can manage the allocation and tracking of stock rewards, ensuring a seamless experience for customers. Clear communication with customers about how the program works and any potential tax obligations they may incur is also crucial.

Question 3:
Considering the impact of stock ownership on brand loyalty and spending, how can publicly traded brands leverage this insight to enhance their marketing strategies beyond loyalty programs?

Answer:
Publicly traded brands can leverage the insight that stock ownership increases loyalty and spending by incorporating investment opportunities into their broader marketing and engagement strategies. This could include creating marketing campaigns that highlight the dual benefits of being a customer and a shareholder, encouraging customers to invest in the brand they love. Brands can also host exclusive events or provide special content for their shareholder-customers, further blurring the lines between being a consumer and an investor. Additionally, leveraging social media and digital platforms to share success stories of customer-shareholders can amplify the message that investing in the brand is not only a financial decision but also a deeper engagement with the brand’s ecosystem.