Looking at some of the headlines in recent months, it would be easy to assume that customer loyalty is in sharp decline. The reality, fortunately, is quite different. Despite the tough times, most retailers (70%) have managed to maintain or even increase their loyal customer base in the past year, and more than half (53%) have seen growth through the use of loyalty programs, Dunnhumby argues in this year’s report, “The Power of Personalised Loyalty.” It should come as no surprise to anyone, then, that loyalty will remain an important part of the strategy of companies not just in the retail industry in the coming year. The outlook – especially for brands that are successively building relationships with their customers – seems promising. In which direction will loyalty programs evolve?
Skillful use of data
Building and developing consumer loyalty today is an entire loyalty ecosystem: planned, developed omnichannel and supported by Artificial Intelligence. Retailers are using predictive analytics and machine learning to offer relevant recommendations and promotions tailored to each customer. The right combination of technology and data enables marketers to optimize performance and achieve greater ROI. Why is this important? According to McKinsey research, personalization is expected by more than 70% of consumers.
- The use of advanced data science methods and Artificial Intelligence algorithms enables systems to self-improve, draw in-depth conclusions based on data, and thus respond to customer needs and behavior almost in real time. In this way, a marketer can act more boldly toward smaller or narrowly defined consumer groups, such as newly opened store locations, or toward customers who are at high risk of leaving for competitors.
- Brands sell hundreds or even thousands of products, while customers tend to be present in the market only at a given moment, when they are looking for a specific product. Artificial Intelligence-based solutions make it easier for brands to appear just then in the path of the customer journey. Better profiling translates into improved personalization and greater customization. This increases conversions by up to an order of magnitude, and using scoring models to personalize communications increases response by up to 3 times.
Consumer convenience and consistency of experience
Consumers are increasingly aware, so they are looking for a quick and easy shopping experience. They want to use smart solutions tailored to their needs, whether they are shopping in a stationary store, an online store or a mobile app. However, a recent Forrester study shows that only 15% of surveyed companies have truly seamless omnichannel strategies. In 2024, retailers will have an opportunity to improve their capabilities. What should they take care of to improve?
- Customers expect convenience and want to feel the same everywhere. This means, among other things, being able to browse, buy and return products through their preferred channel, with consistent pricing and promotions, memorized delivery addresses, or preferred forms of payment. The clubber needs to be identified the same throughout the ecosystem, whether he or she is shopping in a stationary store, online or contacting a hotline.
- If anything goes wrong in the customer service process, loyalty program participants get more upset than non-clubb members. And because they make purchases more often than other customers, the likelihood of such an event steadily increases. Harvard Business Review refers to this as the “boomerang effect,” in which strong brand loyalty can eventually come back to harm a brand if the company fails to deliver on promises made to club members.
Countability and accountability
Pricing policy spends the sleep of many a marketer. Customers take discounts wherever they can, so promotions have become an integral part of most companies’ strategies for good. The continuing high level of inflation further intensifies price wars, especially among discounters. These are competing against each other to see which will offer the cheaper shopping cart. However, excessive price cutting often results in products being sold at unprofitable margins. Weapons in the price war are loyalty programs, which, in addition to offering a more favorable price to the club member, provide quantifiability and accountability of the activities carried out.
- Data analysis allows rational price control. A loyalty program facilitates the implementation of a promotion so that its maximum cost is known even before the start. Among other things, it makes it possible to impose restrictions on the use of the promotion in relation to the consumer.
- Loyalty programs effectively build the perception of saving money. As a result, marketers are becoming bolder and more intense in emphasizing the role of loyalty programs in everyday savings, if only through a special summary of the money saved on a receipt or in a mobile app.
Loyalty in a subscription model
Subscription-based loyalty is gaining popularity. A survey conducted in the second half of 2023 by McKinsey shows that Amazon Prime, despite its lack of a traditional – points or status-based – approach to loyalty, is the favorite of most respondents.
- Using a subscription model guarantees the company a place in the purchase funnel. Research shows that more than 90% of participants in subscription loyalty programs will choose a brand over a competing offer offering a lower price if they are satisfied with the special benefits offered by the brand’s program.
- Users who regularly use a particular retailer’s offerings are looking for convenience and simplicity in the way they make their purchases. Subscription can be one of the elements that complement a loyalty-building strategy to keep the company’s repeat business.
Initiating engaging behaviors
Due to its broad appeal and applicability to various industries, the use of gamification elements is becoming an increasingly popular element of loyalty programs. In this way, the company invites the club member to perform a certain activity, which is very likely to naturally change his behavior, result in a new routine and the realization of actions desired by the brand. How to apply gamification so that customers feel the “wow” effect?
- Uniqueness is the secret weapon of loyalty programs. To make customers want to join in, it is important to have a context that matches the company’s profile. Games of chance add variety to the base mechanics. They also add an element of freshness and are a motivator for daily use of the loyalty program, which at the end of the day translates into more frequent store visits and greater spending.
- Customers crave more of what is exclusive and unavailable. Time-limited activations in a loyalty program are a boost to the challenge. If the reward is only available on a given day or the fun lasts for a short, defined period of time it intensifies club members’ desire to get involved.
Summary
In the digital business landscape, staying competitive requires multitasking. Today, companies are investing in proven techniques that allow them to meet customer needs in tough economic times.