Loyalty has always been one of a brand’s biggest concerns. Making a sale is one thing. But making multiple sales to the same customer is another. Brands have banked on being able to turn shoppers into returning customers in order to sustain their businesses.
However, customer loyalty has become an increasingly difficult thing to maintain in recent years – particularly among younger generations of shoppers. In fact, 61% of Gen Z shoppers say they are now less loyal to brands they regularly shop with compared to before the Covid-19 pandemic according to digital experience platform Sitecore. Clearly, brands have their work cut out for them. So, how are they building customer loyalty in a less-loyal world? What’s changing about their approach?
Rewards are a key part of customer loyalty programmes. Often these are in the form of points which customers earn through making purchases. Despite being widely used though, these schemes aren’t necessarily effective. A global survey by KPMG found that only 37% of people said points and rewards are one of the most effective ways to secure their loyalty. One of the problems with these types of loyalty schemes is that they’re too universal.
Whilst this democratised approach may have been what drove the uptake of these programmes initially, today’s shoppers want to be treated as individuals. They want to be recognised for their personal interactions with a brand and their own wants and needs. Should a customer who engages very little with a brand be rewarded in the same way as someone who spends a lot of money and attention?
As such, personalisation is a growing element of loyalty. Brands are taking the data that they have about a specific customer and using it to tailor the offers and rewards they receive. For example, UK grocery retailer Sainsbury’s has just launched My Nectar Prices for customers using its digital SmartShop app in its stores. The scheme sees customers offered a lower price on 10 products which have been individually selected for them based on their purchasing habits.
Product is no longer enough
In the past, loyalty was a purely transactional exchange built around product. Now customers are looking for more reasons to be loyal to a brand. This is because often there is little difference between brands at a purely product level.
What sets them apart is the feeling that a brand is able to give a customer. The best brands tap into emotions, feelings and desires of customers to create a reason for them to buy. The product is how the customer is able to take that feeling away with them.
As such, community is now a huge element of customer loyalty. This can be everything from in-person events and experiences to digital initiatives like classes and Q&As. We’re even now seeing brands launch virtual reality worlds for customers to explore, as well as partnering with other entertainment channels like video games.
Meanwhile, brands from Nike to Cartier are putting VIP spaces into their retail stores which can only be accessed by certain customers. In many cases, these spaces are linked with new membership schemes. These can range from programmes where customers pay a fee to join (think Amazon Prime) to free memberships where customers unlock benefits through their interactions with a brand.
The great thing about membership schemes is that they don’t wholly have to be built around purchasing. This means that customers have reasons to interact with the brand outside of buying something, which increases their connection with the brand and, therefore, the chances that the customer will come to them when they do next make a purchase.
By Cate Trotter, Head of Trends at Insider Trends, London