While it is too early to say exactly what Brexit truly means for the British economy, retailers are already beginning to worry about the rising costs of importing and exporting and preparing for tighter margins.
In these times of uncertainty, the value of consumer loyalty cannot be overstated. For one, loyal customers provide brands with a steady stream of revenue. Additionally, research suggests that it is six to seven times more expensive for a brand to attract a new customer than it is to retain an existing one. Now more than ever, businesses should, therefore, be looking to reward customers who continue to buy their products and use their services.
A House Of Cards
Companies have traditionally used loyalty cards to reward faithful customers. Fitting comfortably into the customer’s purse or wallet, these cards typically provide benefits such as discounts, store credit and access to exclusive deals.
Most consumer reward programmes continue to rely primarily on loyalty cards, although this situation is changing. Since the financial crisis, brand loyalty has suffered. Where a shopper might once have described themselves as a ‘Sainsbury’s’ customer, they are now more likely to purchase their groceries at whichever store offers the best prices for their favourite products.
The provision of reward cards alone, does not necessarily guarantee customer loyalty Given this shift in consumer behaviour, it is perhaps unsurprising that reward cards seem to have become less effective. While 92% of British consumers have at least one of these cards, with many owning three or four, they are among the least likely in the world to actually use them. Meanwhile, only 57% of UK loyalty scheme members shop more at companies with the schemes than without, compared to a global average of 67%.
For retailers, the message is clear: it is no longer enough to simply throw deals at consumers, and the provision of reward cards alone, does not necessarily guarantee customer loyalty.
With this in mind, brands need to look at ways of revamping their customer loyalty programmes. To do this effectively, however, they first need to understand how consumer behaviour is changing. In recent years, the most dramatic shifts in this area have occurred in two areas: cost and convenience.
Alongside the effects of the financial crisis, technology has played an important part in shaping consumers’ attitudes towards cost. With access to a world of information at the touch of a finger, today’s customer can find the best deal in a matter of seconds. As a result, the average shopper is much less likely to develop an allegiance to a particular brand or product. With deals and discounts becoming a less effective incentive, businesses must look for new ways to encourage consumer loyalty.
Seizing The Initiative
While the digital revolution has reduced consumer loyalty in some cases, it also provides opportunities for businesses looking to reward faithful customers. For example, apps now allow businesses to fulfil customers’ increasing demand for convenience by providing them with easy options for online and mobile shopping, complete with special offers and discounts for repeat customers. If apps like these are well-managed, customers are likely to use them again and again, thereby strengthening the relationship with that particular brand or business.
Many shoppers also like the opportunity to choose their own loyalty rewards online, through dedicated web-based portals that have been designed for this specific purpose. After all, some customers may opt for a free trip to the cinema as a reward, whereas others would rather have a half-price meal in a restaurant. Others may be more excited by a 15% discount on selected groceries. By adopting this more personalised approach and tailoring member communications, retailers will be in a much stronger position to build long-lasting loyalty by giving customers the rewards they value the most.
If businesses take one message from this discussion, it should be this: in an age where stability is a prized asset, companies need to reward those customers who continue to invest in them. Most retailers are already doing this, but not effectively enough.
In order to build and sustain meaningful customer relationships, retailers need to become more proactive in responding to ever-changing consumer interests. Technology and personal engagement are pivotal to achieving this, and loyalty programmes need to make use of both. If this is done successfully, retailers – as well as their customers – will be able to reap the rewards of brand loyalty.