Almost 16% of global brands plan to introduce SCR rewards to help them nudge customers towards sustainability in their loyalty programs
With the 2030 Net Zero target getting ever closer, everyone has a role to play – including your brand and your customers, writes Magdalena Pudelko, Loyalty Solutions Manager at Comarch UK
One thing is sure: public support and involvement are key to reaching the objectives of Net Zero. According to the 2022 Global Market Study carried out by Comarch and Forrester, sustainability is high on organizations’ internal agendas, as is the requirement for their business partners to score high on the SCR (Sustainable Corporate Responsibility or CSR) scale. For almost a quarter of respondents, SCR alignment remains one of the main reasons for choosing a vendor. In this way, the market self-regulates itself by pushing all players towards achieving their sustainability goals.
The great news is that customers’ preferences follow business trends. Deloitte reports that ethical sustainability issues are the main driver for almost a third of consumers. The remaining two-thirds see the barriers to adopting sustainability in a lack of information and the cost associated with switching to more ecological choices.
That very complex landscape raises questions. How can you meet your corporate Net Zero target, ensure your consumers are aware of it and help them become more sustainable themselves? What strategy can help to educate and change the habits of millions of consumers to help your business achieve sustainability goals?
The answer is loyalty – but why?
Although it sounds simple, it is not so obvious, as the primary association of loyalty is that of a transaction-boosting tool. Not everyone realizes that we have come a long way from using simple stamp and card-based mechanics offering benefits after every -nth purchase. Today, loyalty has transitioned way beyond that. It is about creating direct relationships with consumers and helping them develop bonds with the brand. In other words – it has become part of everyday life. Our 2022 Market Study shows that almost 16% of global brands plan to introduce SCR rewards to help them nudge customers towards sustainability in their loyalty programs.
There are voices out there speculating that loyalty is dead because consumers abandoned brands in their droves during the first covid lockdowns. Findings such as the latest report on consumer loyalty from Kin+Carta, which states that more than a quarter (27.4%) of UK and US consumers now show no brand loyalty at all, reflect the pandemic trend of consumers which began swapping brands they had been using until that point. Some, of course, have done so out of convenience, but sustainability concerns were also a significant driver. YouGov reports that over half of consumers in Germany, the UK, the US and Australia are willing to bear additional costs to buy grocery products from sustainable environments. And, with Deloitte reporting that in 2021 28% of consumers in the UK stopped purchasing certain brands or products because they had ethical or sustainability-related concerns about them, it’s clear that the big switch and lack of loyalty were led by the consumers searching for ecological alternatives.
Using the power of incentivization and gamification
Incentives remain the main tool in the loyalty professional’s belt. Their power to generate habits, motivate and educate has long served to boost transactions, cross-sell and reduce churn. An increasing number of brands recognize the influence they have to shape their customers’ choices, and choose to engage with them on a more emotional level instead. These organizations use loyalty tools to educate their customers and reward their sustainable choices.
However, consumers need to know how their chosen brands help them be more ethical. They also need such information to be delivered engagingly. Otherwise, as customers see them as irrelevant, the messages become white noise.
Can the MindSpace framework drive more sustainable behaviors?
So, how can you use loyalty as a tool to deliver change? The best way is to adopt a methodology similar to that used by the UK government’s Behavioral Insights team to fuel social change. The MindSpace and ‘4Es’ framework elements can be adjusted to the loyalty program to drive habitual change: Encourage, Engage, Exemplify, Enable. Let’s break it down below.
- Encourage
A clothing retailer communicates that they have started free recycling of textiles. At this point, customers are informed. Without the immediate need for this service, they will not take advantage of it.
- Engage
To guarantee the uptake of the new service, the retailer engages the attention of their loyal members. Using loyalty mechanics, the brand creates a challenge where a customer can collect a reward for donating X number of goods to recycle. Outcome: the customer has an incentive to act and benefit from not only emptying their wardrobe.
In a world driven by rational customers, this would be a very successful campaign. Yet, because humans are loss-averse, it is not an easy task to encourage customers to part with their goods. The simple trick of re-framing the reward to have both monetary and emotional value to customers can dramatically change the outcome of this promotion. This is where gamification and personalization come into play.
- Exemplify
Presenting a progress tracker to the customer can be a powerful nudge towards reaching a goal. To further boost the feel-good factor of the completed task and encourage competitiveness, the customer gets a recognition badge to share on their social media. We like to share information about ourselves that makes us feel better and shows us as altruistic. That is why recognizing and rewarding ethical behaviors increases the likeliness of repeat participation and word-of-mouth referrals.
- Enable
Interacting with customers through the loyalty program delivers a sea of zero-party data enabling understanding of preferences and, importantly, customers’ intentions.
Our retailer can use this knowledge to target the customers who already make sustainable choices, and encourage them to use the recycling service. Because customers’ interactions within the program provide knowledge of purchases as products and promotion preferences, our retailer can reduce friction and hassle factors by using personalized suggestions of items to recycle and to swap to. The recommendation of an item the customer could give up will nudge them into action. For example, knowing that the customer bought a cardigan two years ago, our retailer can suggest its recycling and money off towards the guilt-free purchase of a new one.
Nudge for good: loyalty programs that incentivize social responsibility
Brands around the globe have used loyalty strategies successfully for many years to build transactional relationships with customers. Today we are in a new, different era, where the customers demand more from the brands in terms of the relationships with them and their ethical commitments. The brands that are winning the sustainability game are those who led years before Net Zero targets were set. By sticking to their commitments in the long term, they became the market leaders with a steady following of eco-conscious consumers. Businesses that have been slower in adopting their agenda are now fighting for market share.
It is also an increasing responsibility of businesses to help their customer to become more aware and change their habits to more sustainable ones. At their disposal, they have a powerful tool and strategy capable of changing people’s habits – loyalty. Recognition and rewards have the power to capture attention and resonate with customers. Modern loyalty tools give marketers the power to create hyper-personalized customer journeys that can generate monetary gains and fuel behavioral changes by nudging customers in the right direction. Let’s see some examples.
Costa Club Loyalty Scheme works in accordance with this mechanism, rewarding customers with an extra “green” bean when they use a reusable cup either in a Costa Coffee store or at a Costa Express machine. Earning four “green” beans means the next drink is free.
Another client of Comarch, a top car manufacturer that is often recognized for leadership in corporate sustainability, has rolled out a rewards program with the use of Comarch Loyalty Management (CLM). It gives drivers access to the largest EV charging network in North America. As part of the program, it also rewards the driving style of a new series of electric and hybrid cars.
Meanwhile, while flying with one of our clients, a European airline, travelers that are EuroBonus members can voluntarily choose to buy biofuel and be rewarded with extra points.
Customers want brands to offer them a more emotional connection and experiences they can relate to. And, as the big brand switch during pandemics has shown, the modern customer will search for the perfect brand match, in terms of products and brand philosophy. Loyalty is a tool that enables truly customer-driven brands to build a better sustainable future together with their clients’ Net Zero goal at a time.
Sources:
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html
https://thedecisionlab.com/insights/environment/nudging-towards-a-sustainable-future
Author: Magdalena Pudelko
Loyalty Solutions Manager at Comarch UK
A challenger helping customers reinvent CX and digital journeys. For the last five years, she has assisted retail and F&B businesses in the use of the latest available technologies to improve relationships with their customers. She is an advocate of gamification and the adoption of behavioral economics principles in loyalty management.