How Brands are Building Lifecycle Loyalty
Sustainability, subscriptions, community-building — the many ways that brands are fostering long-term relationships with customers
In this year’s Outlook, we identified Lifecycle Loyalty as one of the key trends that would impact consumer behavior in the coming years. As we returned to the topic last month and considered what consumer loyalty looks like in a “post-Covid” retail landscape, sustainability and community appeared as clear throughlines. The brands with the most compelling loyalty stories were grounded in one or both of those themes.
In retail, there are convenience-driven loyalty benefits, offering utility and appealing to rationality, and value-driven loyalty benefits that appeal to emotion. At a time when people are constantly carrying a device that gives them access to a near-infinite number of online shops, brands can stand out by reaching consumers emotionally. Discounts are now less effective than rewards that appeal to consumers’ emotions; CapGemini found that 86% of consumers with high emotional engagement say they always think of the brands they are loyal to when they need something, and 82% always buy the brand when they need something.
Additionally, when it comes to our consumption habits, we are in the height of tension between awareness and action. This tension is particularly clear in the fashion industry, with many a headline calling out the contradiction between Gen Z’s sustainability values and their continued support of fast fashion brands. According to ThredUp’s 2022 Resale Report, 2 in 3 consumers who shop fast fashion say they aspire to buy more secondhand fashion, and 43% of consumers who buy fast fashion say they feel guilty for wearing or purchasing it.
The loyalty playbook is being rewritten in the digital age, and smart brands would know how to leverage new touchpoints and tactics for engaging consumers past the point of purchase and build a long-term relationship with their best customers. Here’s what brands should know about how to build lifecycle loyalty from the results of our 2022 Futurecaster survey.
Product Subscriptions: Keep ’Em Coming Back for More
We recently covered the subscription economy and how subscription models across the service industry promise new forms of brand loyalty; our own Futurecaster data suggests a broader openness to these new forms of loyalty and ownership. Comparing this year’s Futurecaster data to last year’s tells a compelling story for product subscriptions; the percent of respondents indicating they “currently subscribe” to a product subscription service increased 75% year-over-year, from 9% to 16%. Intent to subscribe in the next month ticked up from 12% to 13%, while intent to unsubscribe or cancel dropped to nearly zero (down from 1% in 2021). Looks like the lock-in effect is going strong for subscription services.
Beyond the “surprise and delight” aspect of the subscription boxes that have been around for a decade at this point, new brands have entered the space and introduced innovative subscriptions grounded in their — and their consumers — values. Swiss shoe brand On, for example, announced its Cyclon subscription service in September 2020, ahead of the launch of its first fully-recyclable, plant-based road shoe, called Cloudneo. Cyclon allows On’s customers to pay $30 per month to receive a new pair of shoes, and when they’re worn out, they can request a new pair and send back the old ones to be recycled into new shoes, ad infinitum.
On has bet smartly that the running community is not so much attached to owning their specific pair of shoes, and that the circular model would draw sustainability-minded consumers into its service. So far, it’s worked; On garnered 5,000 subscribers within a week of announcing the launch of the service, and down payments generated around $300,000 in upfront capital. This is all ahead of the Cloudneo’s actual launch, which is slated for this month; when the shoes finally ship, the company will also start receiving the monthly fees. With On’s goal of having 50,000 subscribers in the first year, that would amount to monthly revenue of $1.5 million from Cyclon alone.
Looking beyond fashion, Israeli startup TULU offers a hyper-local alternative to ownership of household essentials. TULU works with brands, landlords, and building management companies across the US, UK, Netherlands, Ireland, and Israel to offer tenants on-demand access to products like printers, vacuum cleaners, electric scooters, etc., all within their apartment lobby. This service caters to younger audiences who are increasingly open to these evolving forms of product ownership, and who left 2020 more highly valuing their local communities. As such, the company found that 78% of residents rated TULU as their favorite amenity. For TULU, this consumer mindset has helped drive a $20 million Series A round, which reflects a clear opportunity for brands to reach their target consumers and allow them to trial their products in a contained environment.
Secondhand is the New Black
The secondhand market is also a critical component of Lifecycle Loyalty, and our Futurecaster data indicates a growing portion of the population is actively engaging in buying and/or selling secondhand products online. While the percent of respondents who have bought or sold secondhand goods recently or plan to do so soon has stayed consistent around 22%, more people reported in 2022 that they’ve done so in the past, and plan to do so again in the next 12 months, compared to last year.
This suggests that some of our respondents engaged with the secondhand market for the first time in 2021, and that they’re increasingly open to doing so again in the future. While younger audiences’ infatuation with resale and the secondhand market is very well-documented, just 34% of this year’s Futurecaster respondents were aged 16 to 34. We’re encouraged by what these results suggest about the other 66% of respondents (ages 35–74) and their openness to shopping secondhand.
With that said, Gen Z is certainly leading the charge in changing our perceptions of shopping pre-owned, with the stigma of wearing secondhand clothes all but disappearing and instead serving as a source of pride. As such, several savvy 20-somethings with ardent TikTok followings have expanded beyond Depop and set up brick and mortar stores, where they offer curated secondhand goods and a sense of community. For example, 26-year-old Emma Rogue, a Depop super-seller and TikTok star, recently opened an eponymous vintage and secondhand shop in Manhattan that also hosts weekly in-store community events. Notably, Rogue has also worked with the creator of now-defunct mall brand It’s Happy Bunny on a pop-up shop of pieces from the brand’s archive after finding a cache of the brand’s deadstock items during product sourcing. While just one example, other brands with a rich archive would do well to build partnerships with similar local sellers, introducing young audiences to the brand (and its heritage) in a sustainable, community-driven way.
Of course, it also behooves brands to offer secondhand products across their own channels, as having a deep knowledge of the product can give the original brand an advantage that third party sellers don’t have. This has been happening for years in fashion, as sustainability-minded brands like Levi’s and Patagonia capture some of the secondhand momentum with their respective resale platforms, and beyond fashion, even IKEA has launched a resale platform, part of its goal to transition to a 100% circular model by 2030.
Given that, there’s been a rise in companies offering resale-as-a-service to brands hoping to enter the space. Online consignment platform ThredUp launched its own RaaS platform in 2018, and since has helped brands like Madewell, Walmart, eBay and Gap introduce resale platforms. In 2021, the platform had expanded its client list by over 30%, and analysts from Wells Fargo estimated that by 2025, the platform would earn up to $300 million and be more lucrative than ThredUp’s own secondhand sales. If secondhand is the new black, then RaaS platforms would ensure it’s always in season.
Trade-In & Degrowth: The Give-and-Take of Brand Loyalty
As we outlined in the Outlook, another important aspect of the Lifecycle Loyalty puzzle is the ability to offer guaranteed trade-in value and/or upgrades, which keep the consumer in the brand’s ecosystem and have the potential to move consumers into higher price points than they’re accustomed to. We introduced a question about this aspect of loyalty in this year’s Futurecaster survey and found that 33% had done so in the past, with 26% planning to do so in the next 12 months. In contrast, when we looked at a smaller window — the past 30 days and the next 30 days — fewer people indicated they had, or would, do so (12% and 13%, respectively). This suggests that people are open to trade-ins and upgrades, but doing so is likely associated with bigger purchases that happen less often, like upgrading to the latest model of phone.
This behavior, in conjunction with the growth in product subscriptions and secondhand buying and selling, indicates a strong opportunity for brands to lean into upgrades and trade-ins. We know that Gen Z shoppers are already considering the resale value of clothing before buying it; what’s missing right now is really that up-front guarantee of trade-in value.
In its New York City flagship store, Canadian performance wear brand Arc’teryx introduced an in-store refurbishment program as part of its ReBird program, which comprises the brand’s circularity initiatives. The ReBird Service Center offers in-store repairs, upcycling, product testing, etc., as well as exclusive ReBird items produced with upcycled materials. Beyond that, the Service Center provides education about how to best take care of Arc’teryx products to ensure they last. While ReBird essentially encourages consumers to wear and use their Arc’teryx gear for as long as possible, if someone does choose to trade-in an item, Arc’teryx will give them 20% of the original retail value of their traded-in item as a gift card, effectively keeping them in the brand.
The next step beyond circularity — and evolving forms of loyalty — is degrowth. In essence, degrowth challenges the idea of unfettered economic expansion and pursues, per Vogue Business, “a managed reduction of the economy to bring it in line with planetary boundaries and meet climate goals.” While at first glance this movement may seem fundamentally at odds with the way most of this planet’s businesses, governments, etc. operate and measure success, degrowth represents a huge opportunity for brands to build deeper connections with their audience, and more importantly, do their part to stave off ecological collapse.
Early Majority, an outerwear brand founded by Joy Howard, a former VP of global marketing at Patagonia, is one such brand attempting to marry the degrowth mindset with selling products. It launched in April with a seven piece collection of technical performance outerwear that’s meant to be modular and versatile, in order to reduce waste and encourage circularity. On each product, there are snap fasteners that hold badges that can be swapped out, allowing people to refresh their garment without buying an entirely new product. On the community front, Early Majority also offers a lifetime membership model, which, in addition to providing members its products at a more accessible price point (non-member pricing skews more luxury), includes benefits like a member badge, newsletter content, and a say in product creation. In the future, Early Majority hopes to expand membership benefits to include events (e.g. self-defense and direct action training), as well as product swaps, pre-orders, and made-to-measure garments.
It will be interesting to see how other brands incorporate aspects of degrowth into their brand and business model. Even if the contradiction between true sustainability and scaling a business seems too daunting to overcome right now, as people grow increasingly aware of the environmental toll that over-consumption has on the environment, we’ll likely see a shift towards brands that ensure the longevity of their product as well as a sense of community and shared values.
Want to Learn More?
Created by the IPG Media Lab, the Futurecaster is a tool based on proprietary research that identifies how our clients’ audiences are currently using, or planning to use, emerging technologies and media channels, providing new ways to reach them on the platforms they’re most passionate about. If you’d like to know how Futurecaster may help you identify the key innovation territories for your audiences, please reach out to our Senior Manager of Strategy, Katy Geisreiter (Katy.Geisreiter@ipglab.com) to start a conversation.
