As recent years have rolled by, it seems that the world is hopping from one crisis to another. Yet again, it seems that consumers are back on the front lines, battling their way through another price war. This time in our gun sites: Ever-increasing inflation and the uncertainty that war brings.
How does loyalty help?
Loyalty programs have been a lifeline for brands during intense economic variation and market uncertainty. Nothing clearly better epitomizes this than the COVID-19 outbreak and following pandemic. It is clear that COVID-19 broke the orthodoxies of customer loyalty and retention. This is due to the fact that many brands themselves saw an increase in their loyalty program utilization and participation. Fueled by the need for digitization, customers sought preferential and memorable consumer experiences that were personified by their unique attributes and exclusivity.
Some of the examples of change that the pandemic brought are as follows:
– Online grocery sales grew 40% year over year in 2020/21
– Hotel companies and airlines saw their business traveler client base (loyalty driven) decrease alarmingly whereby challenging hotel brands such as Marriott to extend premium loyalty status to members and adjust their benefit programs
– The new wave of digital engagement with customers drastically increased, while physical foot traffic slowed to a trickle. This was evident with brands like Chipotle witnessing 134% year-over-year growth in digital orders and increased app-based engagement.
So where does this leave us in our current predicament?
Due to the shifting economy and pressing fears of the future the name of our current enemy is inflation. Within the European Union the annual HICP inflation up to 8.6% in June 2022 up from 1.9% in June 2021 (HICP – Harmonised Index of Consumer Prices). While across the pond, the current U.S. inflation rate running over 8.5%,, the highest in four decades.
This spells disaster for the consumer market as the increase in the cost of goods and services, energy and fuel prices as well as overall accessibility of goods decreases, it seems another recession is on the horizon. Also, this doesn’t take into account the recent Russian invasion of Ukraine compounding the current state of affairs.
I can hear many of you asking if the end is nigh?
In all times of trouble, there is an opportunity for brands to utilize their most powerful tool to keep the economic waltz continuing. That tool is the loyalty of its most loyal customer base.
How can loyalty make a positive impact on your brand?
Loyalty programs and their concept have been around since Roman times when they were further utilized in the epoch of the industrial revolution. But it doesn’t mean they are old and out of fashion. A KPMG survey found that around 96% of millennials agreed that companies should develop new ways to reward loyal customers. Another KPMG survey revealed that 75% of consumers would even switch to a competitor to take advantage of better loyalty rewards.
So this is good news, right!?
Well, as always the answer isn’t as simple as it always first appears.
Many brands across all industries fall into the trap that customers only want a simple loyalty program where they can see their customers as commodities that are to be mined, rather than what they should, that being, of course, their customers. To ensure that doesn’t happen certain steps need to be taken so that brands don’t create lackluster loyalty schemes that end up being a financial burden on the business rather than being a positive ROI.
- Offer financial savings and rewards. It is common knowledge that consumers want a variety of rewards from loyalty programs, but financial rewards (e.g., instant discounts, loyalty points, reward certificates) are the main focus on which consumers base their Maslow-Esque consumer hierarchy of needs. Brands should make a constant effort to inform their customers and let them know what options they have to redeem financial rewards on essential products that are more expensive today.
- Providing unique and exclusive offers. Ensuring customers get value for their money is the key to increasing their loyalty and mitigating inflation concerns. With so many brands offering discounts and loyalty programs, brands must compete to give unique offers and stand out from the crowd. This coupled with introducing limited or exclusive sales events to your loyal customer base, further will drive attraction to your program as well as keep it at the forefront of your customer’s minds.
- Embracing technology while increasing customer experience. Technology is the future of this world, so embracing it is the way to go. Brands need to adopt a transformational approach and create a new, deeper connection with their consumers by providing value that encompasses the price. This coupled with the close proximity you can achieve with your customer through digitization and applications, creates a more personalized customer relationship through the utilization of customer data.
- Retain perceptive customers. Customers’ willingness to engage with new brands is relatively high and coupled with inflation, they won’t be afraid to switch brands if a more competitive and engaging offer is available. Use your loyalty program to engage customers with referrals, gamification, or experiential rewards that mitigate the chance of them breaking up with you.
- Communication and Customer engagement. The name of the game is to emotionally engage customers by building an emotive bond that presents your brand as an overall positive influence. Furthermore, building emotional connections with customers must be at the forefront of your loyalty strategy. Data from a Forrester study shows that when consumers feel appreciated by a brand, 76% of them say they’ll keep continuing to conduct business with the brand. Show your gratitude for your customers through these demanding times with individualized messages and offers to further reflect your desire to benefit your customers’ well-being.
In summary, with these trying times ahead, customer loyalty is at the cutting edge of brand success and economic fortitude. This is a tried and tested modus operandi with several previous economic and pandemic events clearly showing a positive reciprocal relationship in the quality of loyalty programs and their ability to help retain business during uncertain times. If you have any questions about how we at Sparta Loyalty can help your brand attain that next level, feel free to contact and we can discuss how we can take your brand to the next level.
