Many brands fail to recognize that loyalty isn’t a single concept.
With Christmas seeming like a distant memory, marketers around the world are working flat out to keep hold of the customers they gained at the end of last year. With belts tightening and the cost of living rising, maintaining regular, loyal customers is set to be a major challenge for retailers and brands.
by Sara Richter
At times when money is tight and consumers become harder to engage, marketers must put loyalty at the heart of every campaign, turning one-time bargain hunters into returning customers. But that doesn’t just mean offering coupons, discounts or deals.
The truth is that “incentivized loyalty” (inspired by discounts or rewards) is only one factor in encouraging repeat purchases. In many ways, it’s also the least sophisticated.
Many brands fail to recognize that loyalty isn’t a single concept, that there are many different types of loyalty, all of which will have an impact on customers.
According to an Emarsys study, almost half (45%) of customers only stay loyal to brands due to regular discounts, points or rewards. This is “incentivized loyalty”.
One of the most recognizable use-cases of this is among coffee shops such as Starbucks, whose points scheme Investopedia cites as the “default case study of how a brand can retain customers through interactive offers.”
This form of loyalty is common during the sales season, with customers signing up to brands in exchange for money off, free gifts or other rewards. It’s important to manage these programs carefully — there are new customers who join a loyalty program for a discount on a one-time purchase, but never return. Similarly, regular customers with high lifetime value might not be members of the loyalty program at all.
Brands need a program which personalizes deals and tailors offerings to each customer, new and old. This maximizes the long-term value of the loyalty program, and lifetime value of all customers.
While many businesses sell their own branded products exclusively, there are retailers (like department stores) that sell products from a range of brands. For these brands, there is a great opportunity to deliver “inherited loyalty”, securing loyal customers through your store’s association with their favorite brands. This type of consumer loyalty is effectively piggy-backing on what is otherwise defined as “brand loyalty”, which is rooted in the quality of the product and reputation of the brand.
This provides a great opportunity for retailers to position their store as the “go-to” seller of a customers’ favorite brands. To achieve this, marketers require the right data. A carefully targeted personalization campaign can ensure that a customer’s favorite brand remains front and center in promotional efforts. Managed correctly, this association can drive inherited loyalty, making your retail brand the “go-to” destination for future shoppers.
Some retailers will have customers willing to wear their loyalty on their sleeve — literally, in the case of fashion brands. At the other end of the spectrum, a quarter (24%) of customers admit to shopping with retailers that they wouldn’t endorse in public. 15% go even further, admitting to being loyal to retailers they’re actually ashamed of buying from. These stats highlight “silent loyalty”, in which customers are faithful to brands without openly advocating them.
The question of how to respond to this type of loyalty depends on whether market reputation is important to a brand. If it isn’t, then silently loyal customers pose little issue. However, for a brand seeking to build reputation or create brand advocates, it may be worthwhile to convert muted fans into vocal supporters through promotions in owned communities and channels. For example, Zendesk emphasizes the importance of keeping a communication channel open for ‘silent customers’, who need to be contacted proactively for feedback so that they feel listened to and valued.
In 2021, we’re all familiar with businesses espousing ethical values and lofty ‘brand purpose’ statements. While this is no bad thing, Emarsys’ research shows the desire to project strong ethics has little impact on customer loyalty. Less than a quarter (23%) of consumers say they are loyal to brands because of their ethics.
In fact, more consumers (27%) regularly buy from retailers despite disagreeing with their ethics. Now, this isn’t a call for businesses to drop their morals and thumb their nose at CSR — merely that marketing rooted in ethics moves the dial very little for loyalty. Even the most ethical brands will still need to put in the legwork when it comes to running intelligent, personalized and data-driven campaigns this year. That being said, what is true now may not be true in a few years time. Research conducted by Marketing Me suggests that almost half (48%) of 18-24 year olds considering ethics such as a brand’s environmental credentials as very important — indicating that ethical loyalty may well increase in prominence in coming years.
This is the big one, the one that all marketers aspire to and that is most likely to keep customers coming back all year round.
The most fortunate businesses enjoy genuine fans — the two-thirds (66%) of consumers who attest to genuinely “loving” their favorite brands. This is true loyalty.
Not easily established, nor easy to measure, but very durable. In fact, one in five consumers (20%) claim they would never switch from their favorite brands, even if cheaper alternatives came along.
Naturally this is also the most cost-effective loyalty for businesses. Acquiring new customers can cost up to five times more than satisfying and retaining current customers, according to Forrester. So the best type of loyal customer is one that requires little maintenance: they just love you, for you.
While many brands that take advantage of regular sales cultivate this type of loyalty, a truly omnichannel marketing approach has to last the entire year. Carefully crafted customer journeys, personalized targeting, data-driven marketing, post-sale support, all these elements play a role in developing true loyalty.
Of course, these things take time, budget and data. As marketers we must stop chasing short-term sales spikes, instead focusing on empowering teams for long-term success, providing them with the tools needed to drive meaningful business outcomes.
Sara Richter is CMO at Emarsys.