Working on something special? Don’t forget to enter the International Loyalty Awards before the closing date of February 14, 2022
Loyalty Magazine regularly receives reports claiming that customer loyalty is dead.
While treating these with caution, it is interesting to examine their arguments so let us consider a recent survey from data firm Edit, and digital transformation consultancy Kin + Carta that claims loyalty died in the pandemic. Its justification for the claim is “because 27.4% of customers in the UK and US show no brand loyalty at all”. Surely they are missing the point that a massive three quarters of those questioned DID show loyalty to a brand.
The report, titled ‘The Loyalty Paradox’ asked 2,000 respondents split equally between the UK & USA, multiple-choice questions relating to loyalty, personalisation, and customer experience, across a broad range of sectors.
E-commerce scored particularly poorly, with only 6% of consumers claiming loyalty to brands within that vertical. As the lowest scoring online segment, e-commerce brand loyalty was below that of finance (9%) and offline retail – food and drink (21.5%).
Rob McGowan, joint managing director at Edit comments: “These results suggest that while the e-commerce sector boomed during the pandemic, brands would be wise not to confuse habitual purchasing with perceived loyalty.” Fair point, but how many e-commerce brands actually have customer loyalty propositions? Surely customer loyalty is a two way street, and needs some sort of recognition or reward to make it worthwhile for a customer to stay.
Outside of e-commerce, loyalty towards financial products increases with age and with those who have an income of £75,000 plus, with over 20% of respondents in this income bracket claiming loyalty to brands within the sector. Good news for financial services then, and it shows that the products aimed at the affluent seem to be working.
In a digital-first customer journey, rewards are most likely to drive the sharing of personal data across demographics. 43% of respondents suggested ‘a discount code or incentive’ would persuade them to sign up to brand communications. Just think what even better engagement brands would achieve, if they pro-actively engaged with customers through a customer loyalty programme.
A quarter (25%) would like ‘exclusive products or first opportunity to purchase’, Gen Z consumers saw “exclusivity” as particularly appealing, with nearly a third (30%) interested in ‘first opportunity to purchase’. Loyalty Magazine is looking forward to seeing the entries for the International Loyalty Awards 2022 (close of entries is February 14, 2022) and especially those entries that focus on engagement with Gen Z and the nascent Gen Alpha.
While rewards were seen as an appropriate trade off for sharing personal information, more pragmatic considerations still remain the most important consideration to younger audiences. Operational and customer service communications outweighed rewards as a ‘return factor’ for younger generations. 34% of Gen Z respondents, and 32% of Millennials said that they would be ‘deterred from making another purchase if they cannot contact customer services via their preferred method’. Customer engagement is key, and of course it is essential to ensure that engagement is on channels customers like to use. Not rocket science, but crucially important.
McGowan continued: “Brands cannot rely on loyalty anymore. Brand affinity through emotional connection has weakened to be replaced by habitual ties based on lived and related experience with brands and retailers. Loyalty Magazine has always argued that the definition of loyalty should be as wide as possible and include engagement, connection, experiences and dare we say – incentives. Everything counts towards a good relationship, and a returning customer.
“Brands therefore need to ensure that they look at the individual customer, and how they interact with the business to understand their behaviours and encourage habitual purchasing. Consequently, brands should be looking at the customer journey as a whole, as well as spotting opportunities to innovate through data. Do it right, and there is an opportunity to retain more customers, as well as bringing in new ones.” We couldn’t agree more.
Karl Hampson CTO data & AI at Kin+Carta, said: “Our research shows that brands must not confuse repeat purchasing with “loyalty”. Instead, they should balance repeat transactional activity with how engaged the customer is across all interactions.
“Data will be key to this holistic measure, but equally brands must invest in the capabilities to understand the human behind the data. This means making data more accessible, insights easier to unlock and bringing your customer experience and data teams closer together so a shared understanding and strategy can be achieved.”
So this much we know. It is all about the data, and how well a brand understands, and engages with its customers. Is customer loyalty dead? We don’t think so. Pandemic or no pandemic.
Comments from two loyalty experts on the subject:
Annex Cloud, working with Dr. James Intriligator, Harvard PhD & Professor of Consumer Psychology, to find out exactly which emotional factors influence the buying process found that 70% of emotionally engaged customers spend 2x more on the brand they are loyal to.
Richard Jones, CMO for Cheetah Digital, a recent article said: “Today’s definition of customer loyalty has evolved to encompass all engagement a customer has with a brand whether it be via social media, in-store or online visits. These engagements go beyond driving the customer simply from one purchase to the next.
Today’s consumers demand more from brands. They don’t want to be judged solely by what they buy or how much they spend. Consumers want personalized experiences. They’re willing to hand over their information to brands when they know they’ll get something in return: a value exchange.