It’s not exactly new news to point out that the pandemic has changed the way we interact with people and the world around us, writes Nat Hester.
On a personal level, lockdown changed the relationships we have with others. Less close relationships have felt harder to maintain remotely, whilst the isolation and distance hasn’t been enough to diminish those relationships we are most emotionally invested in. The loyalty we have for our nearest and dearest is embedded and durable – it’s the kind of engagement and connection brands dream of having with customers.
All loyalty is not equal. More so since the beginning of the pandemic, brands will need to work hard to engage with customers, and go beyond simply providing quality products and services at a good price to truly connect with them as consumers and citizens of the world. Just like a personal relationship, being interested and invested makes a big difference.
Some types of loyalty are more valuable than others
It makes intuitive sense to loyalty professionals that loyal relationships matter, and that they impact business performance. In 2019, research carried out by Motif proved it – we demonstrated a powerful link between loyalty and three critical business outcomes:
- Retention
- Acquisition through recommendation
- Increased revenue per customer
These outcomes are driven by consumer behaviours which are in turn powered by attitudinal loyalty alongside contextual factors such as the ease/ability to switch. In fact, the link for two out of three business outcomes proved to be much stronger for loyalty than NPS, which has been the holy grail for brands seeking to measure progress for years.
These business outcomes are common language in the loyalty industry and well-run reward schemes are seen as an effective way of driving the numbers up. But each one is a very different beast – driven by different levers and of differing commercial value.
Retentionis heavily influenced by habit and passivity and as such, whilst retained customers may stick around, they won’t necessarily increase their spend value or frequency – inertia in the telco industry is a case in point. Meanwhile, acquisitionis often linked with financial or product related inducements which can grab short-term attention but might not translate into established usage – just think of the margin-crunching introductory offers seen in so many sectors. But increased revenue per customer-has all the benefits of retained business alongside the dynamic behaviour-change of acquisition. So, what drives it? Genuine attitudinal loyalty which is based on a connection to the brand.
We identified five building blocks which create loyalty to a brand:
- Quality– of the service or product and the ease of accessing it
- Value– fair prices, value for money
- Sharing– talkability, likelihood to recommend
- Closeness– feeling rewarded, being treated as an individual and listened to
- Magnetism– love for the brand, connection with its values
And the building blocks which are more about relationship with a brand than the products/services it offers (Closenessand Magnetism) proved to have the biggest impact on revenue per customer. Good news for those involved in promoting and managing loyalty schemes, given the potential they provide for gathering customer information, communicating with customers, and rewarding them.
Building loyalty has been tougher during the pandemic, but brands which took action managed it
We’ve recently completed a study of UK consumers during the pandemic – looking at loyalty and business outcomes across a raft of sectors. We have seen significant declines in loyalty compared to last year.
It seems that so much volatility and enforced change to habits has made consumers re-evaluate relationships with brands. This has had a noticeable impact on the proportion of customers who are likely to stay with a brand or encourage others to use.
Of course, there were winners and losers in this scenario – dynamic brands which responded and adapted had the opportunity to steal share from less agile brands which were slower to adapt. In our survey, disruptive brands were far more effective at acquiring new customers (Ocado, HelloFresh, Monzo, Etsy to name a few who outstripped sector rivals). This was further demonstrated in our survey as those brands which took multiple actions enjoyed stronger loyalty.
Maximising Closeness and Magnetism is more critical now than ever
Quality and Value are the fundamentals which inspire usage and keep customers coming back. No surprise then that during the pandemic, these essential functions, which were most tangibly disrupted, suffered most. And the most noted loyalty building actions in the pandemic were those which simply enabled life to continue as near normal as possible. Supermarkets were in the front-line of this effort, implementing social distancing measures to keep stores operating, even when queues and shortages were rife.
But once customers have seen brands pull off that trick, just keeping the lights on is unlikely to be enough to build loyalty. During the initial lockdown, mortgage lenders played to Valueby giving payment holidays, whilst insurance providers gave money back – it seems likely that as the inevitable recession begins to bite, Valuewill grow in importance. But brands will need to do more than throw savings at customers to avoid an unsustainable ‘race to the bottom’ – they’ll need to find ways to build the Closenessand Magnetism which translate into resilient, high-value connections.
The importance of brand Magnetism in a world struggling to deal with Covid is highlighted by the fact that key aspects of Magnetism have risen up consumers’ agendas. Customers look for innovative approaches from brands to adapt to a new way of living – just look at how ubiquitous Zoom usage has become! And the pandemic has brought ideas of community to the forefront, driving a boost in interest in ethics, taking responsibility and doing ‘the right thing’. The same spirit which drove the ‘clap for carers’ has prompted a positive response to brands like BT who gave unlimited data to NHS workers or supermarkets who ring-fenced shopping time for key workers. Brands such as John Lewis in the UK and Audi globally are tapping into this interest in ethics in an attempt to build Magnetism – implementing reinvigorated brand strategies with values at their heart.
Meanwhile, a look at the attitudes of those who’ve started using new brands in the pandemic highlights the short-fall in delivering Closeness– levels of exceeding expectations are below average for all aspects of Closeness. This highlights the importance of making best use of customer data to understand customer behaviour and translate this knowledge into relevant messages, products and services. Of course, done well, loyalty reward schemes can be an effective way to gather this information and provide ongoing, targeted inducements to use the brand more. But, scheme or no scheme, any brand which holds customer data has the potential to go some way to enhancing customer Closeness.
So, what does this all mean? The brands which will emerge in better shape from the pandemic and the consequent economic turbulence will have robust strategies in place which explicitly target increased loyalty. Or course, they’ll make great quality products available at a good price – that’s just the price of entry to the market. But they’ll also develop ways to listen to customers, personalise their offer and rewards in response, and share and reflect the values of their customer base. Through this two-way dialogue with customers, these brands will forge deep, enduring relationships which are more resistant to future market disruption and give more reasons to increase spend. Like any relationship, you get out what you put in and being interested in the other party and not just what you can get from them is fundamental to making a powerful connection.
Nat Hester is head of client value for Motif. www.thisismotif.com
