For more than 200 years, customer loyalty has been the holy grail to which businesses aspire. And with good reason! Building loyalty leads to a greater level of customer retention, ultimately resulting in a bump in company profits.
Customer loyalty, however, is by no means a static concept. Rather, it is an ever-evolving creature, constantly changing to satisfy the needs of today’s consumer. In the paragraphs that follow, we will examine just how loyalty has shifted, as well as what the future may look like.
Scheming for loyalty
In the past, companies relied heavily on rewards programs to engender loyalty among their customer base. While these programs still represent a vital component of any customer retention strategy, traditional loyalty schemes are no longer the tour de force they once were. The main reason for this is the shift in customer expectations. Today’s consumer is looking for more than just more points or financial rewards from their loyalty schemes. A recent consumer review by Deloitte provides more insights.
While more than 50% of consumers surveyed indicated that they enjoy points-based loyalty programs, 42% of respondents indicated that they needed more than just loyalty scheme points to frequent a particular brand or company. To further illustrate the waning power of loyalty points, only 47% of respondents indicated that they always redeem their points. This figure is even lower among the 18-24 year old demographic. Other factors, such as overall experience, play a more prominent role when it comes to loyalty programs. As consumers go in search of brands that can offer them the total package, traditional points-based loyalty programs may not be capable of meeting these needs. Many of these programs will need to be re-configured to focus on building and enhancing the overall customer experience. Those that cannot, will soon be left in the dust
What’s driving the customer loyalty vehicle?
Customer loyalty is driven by a variety of factors. According to a recent Deloitte’s study, value for money and brand trust ranked as the top reasons why consumers remain loyal to a brand. The Deloitte research holds a few compelling nuggets:
It is interesting to note that respondents rated ‘overall experience’ as a slightly more important factor than the ‘loyalty scheme’ when it comes to driving loyalty. Once again, this points to the fact that customer loyalty is not simply tied up in a rewards program offering points and financial incentives.
Today’s consumer cares about so much more. As a result, brands need to care more. A customer loyalty strategy needs to incorporate quality products, value for money, great customer service, and a host of other elements in addition to their rewards programs. While the points may initially draw customers in, it is their experience with the brand that gets them to stay.
Getting the customer loyalty mix just right
So, what does a great customer experience look like? Well, to satisfy today’s consumer, businesses need to incorporate the following two elements:
- Personalisation: According to the research: roughly 44% of respondents indicated that they want personalised rewards based on their purchase history. Consumers are no longer interested in generic rewards; they are far more likely to stick with brands that tailor rewards, discounts, and special offers to their specific tastes.
- Relevance: In addition to the personalised touch, consumers are also more likely to use loyalty programs that are relevant to their current situation. Furthermore, 32% of consumers surveyed wanted loyalty programs that better reflected their lifestyles, while a further 32% indicated that they only wished to receive communication from rewards programs that were relevant to them. Consumers do not have the time or patience to sift through mounds of information relating to every company or product they interact with. Bombarding them with irrelevant information can often stop the customer loyalty car before it even gets started.
- Customers today are not interested in simply being another name or number in a company database. And, frankly, who could blame them? We have all experienced those generic offers and discounts, many of which carry little to no significance. What customers want is to be recognised for their interaction with a brand and rewarded according to their specific preferences. Companies who are successfully able to do this go a long way to building lasting loyalty with their customers.
Embracing loyalty in a digital age
Today’s shoppers are turning to the online space at an increasingly rapid rate. Research has shown that more than 80% of consumers research products online before purchasing at the store. The digital arena is a critical aspect of the customer’s purchasing process and businesses would do well to embrace this arena if they are to build customer loyalty. Consider the following:
Mobile apps rank among the most popular preferred technologies, with 24% of respondents indicating that they would be more loyal if a brand had one. Several other studies have also concluded that mobile apps are a wonderful way to boost customer loyalty, as they promote consistent engagement. Social media engagement also appears on this list, with 12% of those surveyed stating that being able to speak to their favourite brands via Facebook, Twitter, Instagram and other social media platforms would help build loyalty.
Customer loyalty remains a massive part of any growing and sustainable business
Studies have shown that boosting customer retention rates by just 5% can lead to an increase in profits of up to 95%. To fully utilise the power of customer loyalty, however, companies are going to need to shift their strategies to meet the changing needs of their patrons. Loyalty programs can no longer merely rely on points or financial rewards but need to provide an incredible customer experience. This experience must incorporate elements of personalisation and relevance. In essence, companies need to start focusing on building customer relationships to enhance their experience. The more that businesses adapt and shape their rewards programs around the consumer’s needs, the easier it becomes to build a loyal following.
For more interesting stats and facts about customer loyalty, and why it matters, read our recent post which has all the numbers who need to know.