The evolution of the digital marketplace, and the rapid transformation of shopping platforms due to ever-changing technologies are not the only reasons customer loyalty programs are changing. Paving a new path to growth is now only possible if your brand meets the needs of demanding digital natives and Millennials. As such, the retail apocalypse has set in for brick-and-mortar stores, but this does not mean customer loyalty is dead. Brand loyalty is alive and thriving, as digital retail marketers realise they cannot win until they satisfy customers.
Customer loyalty is a proven means of sustaining market share and growing it. For mature brands, KPMG research shows over 85 percent of growth comes from their most loyal customers. Individuals enthusiastic about a particular brand are also the top source of referrals and staunch brand advocates. Most retail marketers know that they have to focus on customer loyalty as they transform their business to face new competitors, demanding customers and changing technologies.
- Opportunity for Growth
According to KPMG’s survey in 2016, over 90% of respondents said they were concerned about customer loyalty for their business. For many companies, optimising customer loyalty programs is the way forward. KPMG recently conducted a survey of 700 consumers to understand the changing face of customer loyalty. Research shows loyalty programs may be a major consumer purchase decision influencer and a useful growth tool, but they must be in tune with what the customer wants.
- Catalysts of Change
As cheap capital, low entry barriers and new technologies are paving the way for hi-tech retail business models, ecommerce players are entering the traditional retail space. Technology has further empowered customers with immediate access to more choices and personalised services, and they demand the same from every retailer in the digital marketplace. Digital customers are increasingly controlling the brand narrative through social media platforms and referrals.
The consumer value chain established in the non-digital era has no place in the current market. Now, bespoke loyalty programs appeal to consumers and drive market share. Research by KPMG found 3/4th of the survey respondents said they would provide rave reviews following loyalty incentives and 60 percent even said they would shop at stores with higher prices to earn loyalty program bonuses. Investments in loyalty programs can even be as much as 5 percent of the total sale value! So, loyalty programs must reach the right clients, and follow a viable business model.
- Optimising Loyalty Programs
For loyalty programs to convert leads into loyal customers, companies need to think ahead, take advantage of today’s market and evolve for the next-generation consumer of tomorrow. In a digital, fast-paced, increasingly competitive marketplace, last year’s winner could turn out to be this year’s loser, if the Pathwwway customer loyalty programs are not optimised.
To assess if the loyalty programs are optimised, businesses need to reflect on whether customers are enthusiastic about the program, whether the loyalty programs and schemes can be accessed across multiple channels, and how much of growth and retention can be attributed to the program. Financial returns on the program should be positive, while quantifiable data needs to be in place for meeting the needs of the tech-savvy customer.
- Understanding the Millennial Customer
Much like the generations of customers before them, millennials are positively oriented towards loyalty programs. KPMG highlights how 90 per cent of consumers in one survey belonged to at least more than a single loyalty program. It is important for companies to design customer loyalty programs to match the preferences of the niche they serve. Millennials like to earn experiences. This experiential consumption pattern applies to new-age loyalty programs, too. Millennials are more likely than older counterparts to enjoy programs associated with actually earning points, rather than just simply purchase a product and score a loyalty incentive.
So your customer loyalty program needs to be able to offer mechanics for earning points based entirely on experiences. Gamification remains an important element of brand loyalty as loyalty programs leverage experiential components and add new ones. Loyalty programs and schemes must have an experiential dimension connecting to customer interests if they don’t want to lose out on a major niche or their target audience.
According to YouGov, at least 92 percent of UK adults have at least one loyalty card. As the digital marketplace evolves, brands increasingly encourage customers to stay loyal. But with changing times, loyalty as a concept is also changing. Accenture, in its research on UK consumers, found 34% in one survey alone were loyal to a brand, while 50 percent switched to a new provider in the past year. Customer loyalty was traditionally driven by product, service and price. However, in the fast-paced digital world, customers are moving away from transactional reward schemes to experiential loyalty, where they want to engage with brands and form a relationship.
Accenture found loyalty that drove customer relationships in the Millennial age focused on experience. More customers felt loyal to brands offering personalised gift cards, special offers and discounts. Customers are also loyal to brands that understand them personally and interact with them through preferred communication channels.
Further, brands also succeeded when there was an opportunity to personalise products. Co-creating products or services play an important role in getting consumers to engage in brands providing experiential trade-offs. Multi-sensory experiences like virtual or augmented reality retail offer incredible benefits. Consumers also expect brands to offer the latest products and services as well as new technologies. This presents a wonderful opportunity for firms to rethink the way consumers are rewarded and boost their margins while offering an exceptional customer experience.
- Rethinking Customer Loyalty
Old patterns of customer actions no longer hold true in the current retail marketplace. To thrive, retailers first need to survive. Loyalty programs need to be simple, relevant and appealing for the digital customer, if they seek to drive market share. Investments in customer loyalty programs will only offer ROI, if you understand what your customer finds valuable.
Reward programs have to be flexible, as customer preferences change. A majority of consumers in one KPMG survey said they preferred surprise deals or gift cards to information on sales, special privileges and time-saving opportunities. Modern loyalty programs need to offer more than merely points or cash discounts if they want to build a bigger audience.