Amid the chaos of 2020’s retail marketplace, with shoppers buying whatever staples they could find and also delving deeper into online purchases, many industry leaders wonder how loyal consumers will react to their favorite brands and retailers when life approaches “normal.”
Some retailers have been abandoned by their best customers during the pandemic, but they may have also found some new ones. As a result, retailers across categories are thinking beyond traditional loyalty programs and are looking for new channels and tactics that will help them win, and keep, customer loyalty for the long term.
But first, we should understand the fundamental drivers of loyalty in this new era of retail. They include:
1. The Quest for Value
Some believed a crisis that kept people homebound would have consumers craving familiarity and the comfort of their favorite brands. But that didn’t appear to happen. “Value” was the reason given by consumers who had tried a new brand in the middle of 2020’s stay-at-home summer, according to a survey by McKinsey & Co.
On top of that, a vast majority of consumers shopped in new ways (mobile, BOPIS, curbside pick-up, etc.) and said they intend to keep using those new channels when life is normalized. Add in the capabilities of 5G, with users expected to triple in the US by year’s end, and it points to a new world just ahead for retailers.
The Takeaway: Brands and retailers that aim for the value-shopping consumer need to do more than a one-size-fits-all approach. In some cases, this may mean increasing private-label products for customers shopping for value over brand. It may also mean increasing price points in each category, so consumers feel they have a wider choice in products. Data and analytics companies can help retailers understand consumer needs, behaviors and how they define “value,” so they can tailor their offerings accordingly.
2. Consumers Want Both “Touchless” and a Personal Touch
Touchless transactions have been around for many years, but safety concerns during the pandemic increased both awareness and the use of mobile wallets as well as peer-to-peer payment systems like Zelle and Venmo. One of six shoppers tried a contactless payment system during the pandemic, and nearly a third of consumers increased their use of these systems.
At the same time, consumers continue to desire personalized experiences. Some stores are experimenting with augmented and virtual reality like Kohl’s partnership with Snapchat to create its AR Virtual Closet to “try on” clothes through its app, and Levi’s video app that lets consumers shop with friends virtually.
The Takeaway: Making sure customers can pay in any form they choose is a key part of seamless personalized experiences, and ease of use will likely make card PIN pads and touchscreens at the POS obsolete sooner than later. As 5G technology becomes dominant in mobile, retailers will be eager to roll out livestreaming as well as AR and VR experiences that allow them to hyper-personalize omnichannel experiences.
3. Young Consumers Crave Authenticity
It’s no surprise that Gen Z consumers are the greatest users of social media. What’s interesting is how it affects their brand loyalty. One survey showed that 20% of Gen Z shoppers were turned off by brands if they didn’t like how they were represented on social media.
Gen Z and Millennials don’t seem to be attracted to coupons or loyalty programs. Instead, they want to have confidence that products do what they say they will do. In fact, more than 70% want to see real people using a product in an ad. Most importantly, social consciousness plays a key role for younger customers, with 79% saying they would engage with a brand if it would “help them make a difference.”
The Takeaway: Purpose-driven marketing, which engages consumers with brands that reflect their social views, will continue to be a driver for younger consumers. And although their interaction with brands is mostly through their mobile devices, it’s a mistake to assume that’s the only touchpoint they’re seeking. Gen Z shoppers are also looking for real experiences beyond their devices.
4. Enhanced Loyalty Programs Are Effective
Slightly more than half of consumers say they will join the loyalty program of brands and retailers they like, but they’re not looking for a program that’s catered to your grandma. Consumers want programs that give them different ways to earn and use points.
One concept that may be overlooked is the premium or paid loyalty program. Why would consumers pay for something they normally get for free? Because they want bigger benefits from a brand that’s in tune with their needs. More than 70% say they’d join a paid program from a favorite retailer if the benefits were valuable to them.
The Takeaway: Personalizing rewards so they’re built around a particular customer’s preferences is a great way to enhance the value of loyalty programs. Simplicity is also key. More than a quarter of consumers said they were deterred from signing up for a loyalty program because the process took too long or too much information was requested. Loyalty marketing and program companies can provide retailers with best practices that will help them successfully tailor their programs and initiatives.
At the Retail Innovation Conference & Expo this May, we’ll have several sessions, a dedicated track even, focused on the new rules and realities of customer loyalty. We won’t just dig into how new customer behaviors are shaping loyalty programs, but how they will influence future campaigns and investments. Visit the agenda to see what topics we have up our sleeves!