A confluence of factors, both internal and external, have led consumers to be less loyal to retailers and brands. Internally, the pressure on merchants to raise prices, lower product quality, or take a public stance on a divisive social issue, for example, are top reasons why customers abandon a retailer or brand. Externally, macroeconomic challenges (e.g., rising inflation driving up product pricing), supply chain disruptions that are impacting inventory levels and slowing delivery times, and increased online competition are factors causing less repeat purchase activity. Increasingly, loyalty comes down to the experience the customer has shopping with your brand, from product discovery through post-purchase support. Consumers’ expectations of retailers and brands are rising, and if those expectations aren’t met, they’ll simply go somewhere else to shop. Consider the following data:
- two-thirds of consumers are open to switching brands if a competitor offers a better
experience (Forbes); - a third of consumers will abandon a brand if it fails to create a personalized experience;
- the customer retention rate for the retail industry averages 63 percent, indicating there’s
plenty of room for improvement for merchants.
What’s at stake when it comes to customer loyalty? A lot. Not surprising, loyal customers are retailers’ most valuable customers. According to the 2022 Customer Loyalty Data Study from ebbo, 67 percent of consumers say they purchase from their favorite brands at least once a month. And they spend more on those purchases, too. Loyalty program members have a 40 percent higher average annual spend than non-members, and they make repeat purchases 28 percent more often than non-members.
Further heightening the importance of developing loyal customers is the rising cost of acquiring customers online, primarily via search and social. With it costing more to get a shopper to your website — and with no guarantee that they’re going to convert — oftentimes retailers must get that shopper to make multiple purchases before they’re profitable to the company. Merchants lose, on average, $29 for every new customer acquired, a 222 percent rise in the last eight years. Given that math, it’s easy to see why developing loyal, long-term customers is critical to a retailer’s future viability.
One of the primary tools that retailers are leveraging to develop long-term customer relationships is loyalty programs. And they’re popular among consumers, too. Seventy-eight percent of consumers belong to a loyalty program, according to an ebbo™ study of 2,500 consumers. That’s the highest rate since 2019 and a 7 percent increase from last year.
However, member engagement within those loyalty programs is lagging. Seventy percent of respondents used 50 percent or less of loyalty program memberships monthly. This tells us that while retailers are doing a better job at member acquisition, they’re challenged by building loyalty programs that truly engage customers with rewards and experiences (or lack thereof) that they value. For example, according to another ebbo™ data study, less than half of brands’ “loyal” customers have taken the following actions in the last 12 months:
- told their friends about their favorite brand (48 percent);
- provided feedback (e.g., filling out a survey) to their favorite brand (24 percent);
- shared personal data with their favorite brand (19 percent);
- posted to social media about their favorite brand using its hashtag and/or handle (15 percent);
- attended an event hosted or sponsored by their favorite brand (8 percent).
Even though consumers may consider themselves loyal to brands, they’re not behaving in such a manner – at least up to brands’ expectations. Brands can attempt to make their best customers more loyal (i.e., engaged) by offering them incentives to participate in activities such as posting on social media with branded hashtags, attending in-store events, taking post-purchase surveys, etc. There’s no debating the importance of loyalty programs. To help your business optimize the effectiveness of its loyalty program, follow the tips outlined in this report.
TIPS FOR ACQUIRING MORE LOYALTY PROGRAM MEMBERS
- Incorporate loyalty amplifiers to get customers to enroll in your loyalty program. For example, chance-to-win promos, rebates, special offers, etc., can be leveraged to boost loyalty program membership rates. Consider that 85 percent of consumers said they would join a brand’s loyalty program to receive a rebate or a gift with a purchase. Samsung did this effectively with its campaign, “New Year. New Samsung. Free Rewards.” Samsung Rewards members who made a qualifying purchase of a Samsung wearable in the New Year were eligible for 20,000 Samsung Rewards points to be used toward fitness services. For non-members, the ability to earn 20,000 rewards points right away helped convince
shoppers to join the program. - Test co-branded campaigns between retailers and CPG brands. CPG brands selling their products through retail partners can promote special offers (e.g., cash back, gift with purchase, etc.) at the point of sale, requiring customers to sign up through the brand’s loyalty program to receive the offer. Battery brand Energizer tested this approach to great success. It offered customers the opportunity to earn a $5 rebate if they purchased at least $15 worth of any Energizer brand battery or lighting product in a single transaction at any participating retail partner. Then, consumers were asked
to take a photo of their receipt and visit a link to submit it and redeem the rebate. To submit receipts, participants were required to be members of the Energizer Go Rewards loyalty program. - Use incentives to drive customer referrals. A brand’s most loyal customers can also be its best and most trusted advocates. According to ebbo™ data, the opinion of friends and family is the No. 1 factor that influences a customer’s loyalty to a brand. However, customers often need a gentle nudge in the form of an incentive to get them to act when it comes to referrals. Consider offering gift cards, discount codes, chance to win sweepstakes, and other incentives to existing customers for referring new customers to your brand. Seventy-eight percent of consumers would refer a brand’s loyalty program to friends and/or family in exchange for an incentive (e.g., the chance to win a prize, receive a
discount or get bonus points). Those incentives can be fulfilled after the referred customer has made their first purchase. This tactic grows your customer base while also providing a positive experience for an existing customer, leading to further engagement and loyalty.
TIPS FOR CREATING MORE ENGAGED LOYALTY PROGRAM MEMBERS
- Leverage user-generated content (UGC) to promote the value of loyalty program membership. Call upon your company’s most valuable asset, its customers, to help spread awareness and appreciation for your loyalty program. Studies have proven that consumers trust their peers, most importantly family and friends, more than they trust messaging coming from brands. In fact, more than three-quarters of consumers (76 percent) said the opinion of family and friends impacts their loyalty to a brand, significantly higher than 44 percent who said the same of paid celebrity /influencer endorsements. As such, motivate your customers to become advocates by incentivizing them to create and post original content. Turn your best customers into brand advocates by offering them more incentives to engage with you and create their own content, whether that’s through in-store events, email, experiential benefits, or social media sharing.
- Think beyond just transactions when rewarding customers. Yes, getting customers to spend money with your brand is the ultimate goal for any retail business. However, that’s only a part of the customer relationship with your brand. Use incentives such as rewards, special offers, etc., to get customers to take desired actions that benefit your brand in some way. For example, reward them for signing up for your email program, posting a customer review, watching a product video, posting on social media, etc. Seventy-seven percent of consumers are likely to provide a brand/product testimonial or review if doing so rewarded them with an incentive (e.g., the chance to win a prize, receive a discount or get bonus points). And more than one out of four consumers is very likely to provide one. Fostering higher levels of customer engagement will yield increased customer lifetime value in the long term.
TIPS FOR SUCCESSFUL LOYALTY PROGRAM EXECUTION
- Provide ongoing education to loyalty program members on all the benefits/perks they can take advantage of. A static loyalty program that doesn’t adapt to consumers’ evolving wants and needs is one doomed for failure. Brands should continually be collecting feedback from their customers, both positive and negative, through surveys, quizzes, reviews, etc., to help them optimize future experiences. Keeping your program fresh and relevant by offering different rewards (e.g., discounts, gift cards, sweepstakes, etc.) and experiences (e.g., events, early access to sales and new products) based upon what your members are telling you they want is key to a successful program. When asked by ebbo which incentives would most motivate consumers to learn about new products and/ or loyalty program benefits, 69 percent said product samples, 52 percent said product rebates, 49 percent said the chance to win a prize, and 48 percent said bonus points. Therefore, brands should provide ongoing education and communication to members and nonmembers alike outlining the benefits of loyalty program membership. This can be done through your website, social channels, email and SMS messages, store signage — all touchpoints that you’re engaging your customers in. The more active loyalty program members are, the more valuable they are to your retail organization.
- Make your loyalty program omnichannel, easily discoverable, and clearly defined. Consumers’ shopping experiences are nonlinear; they’re going back and forth between channels, including digital and physical, during their purchase journeys. Retailers must design their loyalty programs with this consumer behavior in mind. That means allowing for members to earn and redeem loyalty benefits across channels. Furthermore, make it easy to find loyalty program information across customer touchpoints, most notably your website and mobile app. Include it on the homepage and have a clean and aesthetically pleasing landing page. Creating a frictionless experience for members can boost engagement levels, while at the same time helping to drive enrollment for nonmembers. Furthermore, make it easy to sign up for your loyalty program, whether in-store, online or mobile. The less barriers to entry the better.
- Market your loyalty program to create consumer awareness and promote its membership benefits. After you’ve done all the work to build a loyalty program that provides customers value while also driving a positive impact to your company’s bottom line, it’s time to invest in marketing the program. This includes utilizing retailers’ owned media channels (e.g., website, email, blog, social pages) as well as paid channels (e.g., paid search). You can have the best loyalty program, but if no one knows about it what good is it? Give prime real estate on your brand’s digital properties (website, app) to your loyalty program, including adding it to the header of the homepage, calling out benefits of the loyalty program on category and product pages, and prompting loyalty program sign-ups at checkout. Similarly, ensure that in-store associates are well educated on your brand’s loyalty program, including its benefits, how to sign up, and how to earn and redeem rewards. Remember, loyalty program members are your brand’s most valuable customers; therefore, it behooves you to do all that you can — in-store and online — to market the program in an attempt to acquire more members.
- Collect, manage and take action on customer data to personalize future interactions with the brand. One of the biggest benefits that retailers realize from having a successful loyalty program is the rich zero-party data that it generates. With the impending deprecation of the third-party cookie in Google’s Chrome browser, retailers are seeking additional ways to collect customer data. That data is the foundation for creating the personalized shopping experiences that today’s consumers expect. Zero-party data is critical to being able to optimize loyalty members’ experiences. As noted previously, your loyalty program must be flexible enough to adapt to members’ evolving needs. You can’t just set it and forget it. However, customers just won’t give away their personal data freely. They expect something in return. In exchange for an incentive, two-thirds of consumers said they’re likely to provide brands with more personal information and preferences to better personalize their loyalty program experience. This includes data like name, gender, age, profession, location, email address, phone number and household income.
CONCLUSION
Creating long-term, profitable customer relationships is imperative in today’s hypercompetitive retail landscape, especially at a time when online customer acquisition costs continue to rise. Having an overall customer engagement strategy, bolstered by a loyalty program, which includes the use of incentives to motivate strategic behaviors can make that goal a reality. While many brands have loyalty programs, and they may even enjoy high membership levels, it takes more than just offering a loyalty program to motivate the loyal behaviors brands want from their customers. Consumers want more than just the ability to earn loyalty points in exchange for purchases. They’re also seeking experiences that are valuable to them as well as receiving immediate benefits for their actions. And those actions extend beyond making purchases. Merchants would be wise to reward loyalty members for engaging with their brand outside of just purchasing, such as social sharing, taking surveys, watching brand videos, posting product reviews, etc. The bottom line is that merchants need to provide end-to-end customer engagement within their loyalty program(s). In today’s economy of choice, consumers can go anywhere for their shopping needs; merchants must give consumers the option to choose how they want to engage, not the other way around.
Who is ebbo?
ebbo is an all-in-one loyalty company that has helped leading brands build unforgettable customer experiences for over two decades. With our data driven strategy, full-service approach and the unwavering support of the people behind our platform, our dedicated team will work with you to understand your loyalty goals, innovate solutions and help you build customer engagement on repeat. ebbo is headquartered in Rocky Hill, CT, with offices in Michigan and team members all over the U.S. If you’d like to learn more about amplifying customer loyalty, visit ebbo.com.
Who is Napco Research?
NAPCO Research crafts custom data-centric solutions that leverage our highly engaged audiences across the markets in which we operate, our industry subject matter experts and in-house research expertise. We partner with our clients to identify their unique business problem and create solutions that enable deeply informed decision-making. Feel free to contact research@napco.com to talk with an analyst to find out how they can help you with your research needs.
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