Why it’s time to rethink the myths surrounding consumer loyalty
by Adam Stewart — Content Manager at Mentally Friendly
The modern consumer is a fickle one, or at least that’s the narrative we’re used to hearing. But with the very idea of brand loyalty under fire — and an increasing battle between converting new users or retaining existing ones — now’s the time to completely redefine the notion of brand loyalty and how this can be translated to a new wave of digital consumers.
The myth of disloyalty
Contrary to the popular perception that loyalty is diminishing (particularly in the case of millennials), the sun is in actually nowhere near setting on consumer loyalty. In fact, long-term customers are still paramount to a brand’s success, even in this race-to-the-bottom culture. Not only are their purchases more likely to increase in monetary value over time*, but it is roughly 500% more expensive to convert new customers than to keep existing ones**. So it’s clear that retaining consumers is essential, but a traditional stamp or points based loyalty system isn’t meeting current user needs and marketers need to think carefully about how strategies should adapt and evolve for the digital consumer.
*BIA/Kelsey & Manta. 2014
‘Drowning in a sea’ of loyalty cards
The traditional concept of loyalty would see a cycle of purchasing, collecting points, points converting into brand vouchers and repeat. This model was hugely popular for grocery and retail stores to retain custom in an ultra-competitive field, and indeed at one point around a third of the UK adult population had signed up to Tesco’s loyalty card***. However, with only 40% of UK supermarket shopping currently done using such a card, despite 5 out of 6 of the largest supermarkets offering them — it’s clear there is a disconnect.
A study conducted by Neilson found that British retail is “drowning in a sea” of loyalty cards. And while the report showed that British shoppers are the second most likely in the world to have a loyalty card, they’re among the least likely to see or utilise those benefits.
So what exactly can be done to utilise a market that’s already extremely willing to engage in loyalty schemes, but not actually doing so?
Shake up the traditional
Clearly points-based loyalty systems had their purpose, and indeed they should still be integrated into new models where appropriate. But with price-point and convenience valued hugely when it comes to purchase-intent, these schemes should be developed with other such perks in mind. Features such as queue skipping in your local supermarket, pre-ordering in your local coffee joint and being served exclusive content and offers will encourage users to actually engage in these programmes, rather than sitting untouched. Take ASOS for example, who are using exclusivity to promote repeat purchases, with users progressing through a hierarchy of loyalty group until they finally reap the perks from sitting within the ‘a-list’ tier.
Building points and earning rewards gradually over a sustained period of time doesn’t necessarily fit the profile of today’s consumer. Purchasing a product or visiting a retailer may only occur a handful of times each year, so brands should approach loyalty with an element of instant gratification. Rather than slowly acquiring points, consumers could be offered chances to swap their collection for immediate rewards, a complimentary drink for example, or play ‘stick or twist’ with their points for the added gamification affect. Indeed, loyalty schemes such as Virgin’s Red app have employed this method to reward its most prolific users — with each quiz, competition, or completed action equating to instant rewards.
There’s a plethora of touch points on digital for customers to engage with brands and more often than not they’re not being rewarded for this. And with mobile-centric 16-to-24-year-olds actually proving to be the most loyal demographic****, there’s heaps of digital opportunities here. Social media engagement could be channelled into loyalty schemes, with those that use branded hashtags, or produce and interact with content rewarded with prizes and exclusive features. Not to mention the potential for solutions such as beacon tech and social chatbots to learn users’ preferences over time and deliver a highly individualised service for loyalty.
****Direct Marketing Association
It’s evident that UK consumers have a huge propensity for loyalty schemes, but it’s time retailers and brands evolve their tried and tested methods. Points = money off = return visits is a model that needs to be disrupted by brands. Because despite the myths, a new breed of millennial consumers are actually highly-loyal, so reimagining mobile-first solutions that meet their demand for convenience, immediacy and exclusivity will create an new wave of brand loyalty.