As a modern consumer, switching brands and picking from a wide array of products has never been easier. As a retailer, it’s becoming increasingly harder to stand out and retain customers, making customer loyalty both harder and yet more important than ever.
How can retailers increase customer loyalty through digital? As the world has tried to adapt to the new norms that the Covid-19 pandemic has set in motion, we’re seeing the companies that haven’t sufficiently invested in their digital strategy lose loyal customers and fall behind. But not all is lost; in this piece, we aim to unpack how retailers can use digital tools to regain their footing and adapt to the next generation of consumer trends.
Problems retailers face today
One of the main problems retailers currently face is a lack of customer loyalty. From the beginnings of consumerism to the internet age, brands competed on price and market share. As the world turned digital, brands also started competing on other factors such as convenience: fewer clicks, mobile apps and chatbots for customer service. But companies can only keep prices so low, and they can only get so convenient – which is why this approach has become somewhat outdated. Lower prices or higher convenience no longer translates into loyal customers, pushing brands to fight harder than ever to retain and acquire customers. Today, loyal consumers are a result of building a strong, mutually beneficial relationship between a retailer and its customers.
Retailers must prioritise personalisation, but this leads to another problem they face: how to personalise. With the advent of certain initiatives such as Open Banking, gathering and analysing customer insights across their multiple financial providers is now becoming more accessible and secure than ever. Yet, 55% of respondents in our recent survey aimed at senior marketing executives spoke about restraints in collecting data and their struggle to choose rewards that they know a customer will like. What is missing is a platform that gives retailers access to rich and real-time customer insights allowing them to provide tailored rewards that will drive loyalty. Figuring out how to access and analyse the correct data and then turn this into effective personalised offers and discounts, is a struggle many retailers face today.
Another concern for retailers is the fact that negative experiences play a much larger role than they used to. According to Accenture, 77% of consumers admit that they retract their loyalty faster than they did 3 years ago, with 32% stating that they would stop shopping with a brand after only one negative experience. Brands have very few chances to get it right, giving them less freedom to experiment with their current customers.
The importance of loyalty programmes post-Covid
Covid-19 has undoubtedly accelerated digital adoption worldwide. With national lockdowns and enforced social distancing, customers have turned to the internet to work, shop and socialise. But retailers are still adapting, with many struggling to meet the increased online demand. Several sources agree that the pandemic has caused an overall decline in customer loyalty, and it is likely that this trend will only continue to worsen. On top of this, the pandemic has levelled the playing field for different sized retailers, with both large and small retailers facing similar covid imposed issues relating to digital. It has now become essential that all retailers have a strong digital offering which must encompass a loyalty play of some sort.
The Harvard Business Review states that it costs approximately seven times as much to gain a new customer rather than to retain an existing one. Loyal customers are essential for business, and yet with the pandemic retailers are losing loyal customers fast. In the digital age, loyalty means advocacy: loyal customers share their purchases and experiences on social media, exponentially multiplying the positive effect of gaining a digital customer.
So what can retailers do? Building and operating an effective loyalty programme is a core part of the solution: according to our recent loyalty survey, 53% of the senior executives we interviewed said loyalty programmes were important to retain customers. That’s because loyalty programmes are one of the best ways to build a customer-brand relationship in the age of the internet; they combine personalisation, customer experience and are incredibly cost-effective.
With the pandemic causing a decline in household income, people are spending more time online searching for deals and bargains; 57% of consumers admit to spending one hour per week searching online. This provides a great opportunity for merchants to build proactive loyalty programmes that offer deals, rewards and discounts to customers, encouraging them to remain loyal to their brand.
Increasing loyalty in the digital age
In order to increase customer loyalty in today’s world, retailers need to shift away from measuring metrics and focus on meeting specific customer needs. The next generation of consumers – the generation Z – demand a personal experience with a brand that values exclusivity, excellent customer service and tailored rewards. Millennials and the Generation Z value experiences over transactions, and brands should be favouring systems that reflect this preference.
Retailers are struggling to increase engagement due to mainly focusing on price point and convenience. The COVID-19 pandemic has only served to demonstrate that it is more important now than ever to focus on building a more personalised, almost one-to-one, relationship with customers. Retailers can’t provide face to face interactions like they used to, but they can offer a personalised digital experience through real-time, hyper customised loyalty programmes. These programmes are what will help retailers tackle customer loyalty in the digital age, build strong customer relationships and truly stand out from the competition.
At Mode, we are developing a next-generation payments and loyalty platform that builds on banking, financial and payment-related insights, allowing businesses to run targeted loyalty campaigns and engage with consumers in new and innovative ways.
Interested? Sign up to our waiting list today and be the first to know when we are ready to launch!