The State of Loyalty in 2021
No one really anticipated the changes that the pandemic was going to bring. While we have seen extreme growth in the grocery industry, the hospitality and airlines industries have experienced devastating losses. In part, this is due to changes in consumer behavior, as many customers are shopping differently and switching to new brands. In such volatile times, holding on to your existing customers is a significant challenge.
According to consumer psychologist Kit Yarrow, all consumer purchase decisions are “shrouded in emotions, which influence everything we buy, whether we know it or not.” This emotional dimension intensifies in times of crisis, which means buying decisions are also impacted. Consumers do not make decisions in a rational manner. It is very important to acknowledge this and cater to these more emotional and irrational tendencies to continue connecting with consumers today.
Redefining the Approach to Loyalty
What this means is that as marketers, we need to redefine our approach to loyalty. This means understanding that loyalty is more than just a rewards program. We need to move away from a transactional relationship to a more emotional one in order to establish long-term loyalty and retention.
- The pandemic has proven that transparency has become the foundation for maintaining consumer trust going forward. 95 percent of customers are more likely to be loyal to a company they trust, while 92 percent are more likely to purchase additional products and services from them.
- More than 80 percent of customers said the experience a company provides is as important as its products and services. The experience would include every touchpoint that a consumer has with the brand.
Loyalty is More Than a Rewards Program, but Rewards Programs Are Still Very Important
Trust and experience are very important to ensure loyalty, but the reward programs are still very important engagement tools that brands & retailers can leverage. The global loyalty management market stood at $2.47 billion in 2019 and is projected to reach $10.02 billion by 2027, with a compound annual growth rate of 19.9 percent during the forecast period. The success of these programs lies in HOW brands and retailers are going to leverage them.
If It’s Not Digital, It Doesn’t Exist
We have seen accelerated adoption of digital channels during the pandemic. For example, many consumers explored online grocery shopping for the first time during the pandemic. Retailers had to ensure they are engaging their customers/members effectively by giving them avenues online. Some brands even launched loyalty programs during the pandemic to keep connected with their new and existing customers.
Some are relying on Gamification to boost engagement in a contactless world, while others are recognizing the importance of AI/ML technologies to create more personalized product recommendations, for research purposes, and for creating chatbots that will help resolve customer service issues in a matter of seconds.
Consumers Want to Feel Secure
With increased digital adoption also comes an increased need for data and cybersecurity. 84% of consumers are more loyal to companies that have strong security controls. Consumers want to feel secure and safe both in the physical and the virtual world. This is another emotional element that brands and retailers can connect with their customers by being transparent about how they collect, store, and protect important data.
But Human Connection is Needed Even More Today
What is interesting and maybe by now even predictable due to the emotional and irrational mindset of the consumer is that they value human connections even more now as they are overloaded with content in the virtual world. According to a survey, 59% of global customers surveyed felt companies had lost touch with the human element of customer experience while 75% of customers were interested in interacting with a human versus an automated machine. Brands need to be creative and produce new avenues to connect the physical and digital world.
Customers Want the "Power to Choose"...
Customers’ expectations from brands are only getting higher. They always wanted more personalized relevant experiences but now they want the ‘power to choose’. Not only did they express an interest in having brands personalize the way each customer earns points, but they would like to select the benefits and rewards they receive by personalizing their loyalty program based on their specific purchases and individual preferences.
By giving members the power to choose what activities can help them earn points as well as the rewards they receive from doing these activities, brands can take personalization to the next level. This approach is highly customer-centric as it puts the customer’s needs first and can have a huge impact on the lifetime value of a customer (CLV).
… and Are Ready to Pay for It
Not only do customers want the power to choose but they are ready to pay for it. 70% of consumers would join a paid loyalty program if their favorite retailer offered one. Enrollment in premium loyalty programs grew 21% during the pandemic. This has a lot of benefits for the brands/ retailers as 94% of premium loyalty members shop at that program’s retailer at least once a month.
Partnerships are Key to Staying Relevant
The last trend I want to talk about is the importance of strategic partnerships to stay relevant during the pandemic. This trend started picking up in 2019 but is gaining more traction now. We have seen many hospitality and travel brands form strategic partnerships with the likes of food delivery service companies or even meal kit services to tap into the in-homing behavior of the consumer during the pandemic. These forms of alliances aim to be a win-win-win situation where not only the brands involve stand to gain but if formed effectively provides heightened experiential benefits, faster loyalty rewards growth, and more relevance to the consumers.
In the end, I want to leave you with one thought—the key to success during a pandemic is customer-centricity. Brands and retailers would need to keep the needs of the customer as the focal point and make strategic changes to their organization structure, mission statement, business strategies and even brand value. To learn more about connecting with customers on a deeper level with a customer-centric loyalty strategy, please download the whitepaper below.