How customer loyalty in retail is changing

Loyalty doesn't exist anymore.

Well, not in the traditional sense. In this consumerist world, convenience is king.

We don't really care how many points you give us or how many free coffees we get. We care about how good your product or service is, how quick you can deliver, how close you are to our home or work, and how effortless our experiences are.

Most retailers have a loyalty scheme; it's no longer enough to do "what everyone else does". In order to attract and keep customers, you need to provide the most seamless experiences at a time that suits them.

Don’t take my word for it. According to Deloitte, the basics like value for money, quality, customer service and convenience would all sway a customer to be loyal to your brand over a loyalty scheme, highlighting how critical it is to get this right.

Retailers seem blinkered by this fact. Surely, your stats show you have many loyal customers who return time after time? But guess what, they're cheating on you.

The average person is enrolled in 14.3 loyalty programmes. They're not loyal to your brand alone, and they'd certainly switch to another brand entirely if your product or service didn’t keep up. McKinsey’s study on loyalty found that a whopping 87% of consumers shop around before purchasing, with 58% tempted away.

What is customer loyalty anyway?

An excellent question. Typically in retail, a loyal customer is one who spends money on repeat purchases over a given period of time. Often this will be measured in the following ways:

• Recency: when was the last time the customer spent money with you?
• Frequency: how often do they spend money with you?
• Volume: how much do they spend in a single transaction?

There are also other measures, for example, how many new customers they create through referrals but in truth, very few customers behave like this. However, these metrics only tell part of the story.

They don’t tell us anything about the customer or their habits. Are they coming back because they had a positive experience? Because they felt satisfied? Because they got value for money? Or perhaps just because it was on their doorstep?

To understand real brand loyalty, you need to look at how an individual spends across the retail category as a whole, i.e. their whole-wallet spend.

How much do they spend in your category? What % of this spend is with you? What you’ll typically find is that your “most loyal” customers are also spending a lot of money with your competitors.

Who are your customers?

Well, we know they're fickle for one. But do you really know who they are?

Bricks and mortar retailers, you should have this one covered. Access to real customers, coming through your door on a daily basis. No excuses, you should know them like the back of your hand.

We’re not talking about personas here, we’re talking about real people. Have you ever asked to look at what other loyalty cards your customers are carrying? It’s no wonder companies like Stocard and Loopy Loyalty are springing up all over the place - they know how often your customers switch brands and have built successful products around this fact.

You can see why online-only brands, like Amazon and even Google, have created physical spaces. This Christmas, we saw Notonthehighstreet.com pop-up in Waterloo Station and Westfield White City. Not only are these companies driving brand awareness, but they’re finally able to get up close and personal with their customers, and see how they behave.

How can you compete?

If customers don't care about your loyalty programme, what do they care about? Customer experiences. In order to compete, you must focus your efforts on getting to know the customer, and making your experiences better and more convenient.

Let's take grocery shopping as an example; I no longer have to step a foot outside of my front door to eat.

Living in London, the array of options I can have delivered to my doorstep is immense; from Ocado to Deliveroo, from Gousto to Farmdrop. This trend will only continue into other categories.

There's a reason why so many through-your-letter-box subscription services are appearing; from socks to cheese, cassette tapes to "alternative" meats (fancy a zebra steak anyone?). These brands understand convenience, delivered through a subscription mechanism, is a sure-fire way to get customers to return.

Note: if you can do like Amazon and get your customers to pay to be part of your loyalty programme, then you’ve nailed it.

What do customers look for?

Well, convenience, yes - but online, customers will switch stores at the click of a mouse.

• Price doesn’t really need much introduction here.
• The in-store/online brand translation. Might seem a small thing but I don’t want to use a website that doesn’t represent the brand I know
• Website speed and experience. A slow site full of bugs? Different experience on mobile? No thanks.
• Multiple ways to pay. I want to use my Amex so I can collect air miles (OK, I admit I’m a big fan of Amex rewards. Hello British Airways companion voucher). Don't deny me that or I'll shop elsewhere.
• Free delivery online, or at least, a minimum spend for free delivery. However, if this minimum spend is too high, I won't shop with you at all.
• Free, easy returns. I don't expect to have to pay for something I don't want. Don't make me send you an email to get a returns note back and make me print it out. And make sure you give me 30 days return (not exchange) policy.
• Reviews. I want to know what other people think about this product before I buy it.
• Speed of delivery. At least show me the approximate date so I know it’ll arrive before the date I need it.
• Personalisation. You should know me by now, make me more loyal by offering me a tangible benefit I really care about (ahem, like Amex).
• Surprise me. I want to feel special.

The list goes on. There are so many things to think about in this space, it’s a wonder loyalty programmes are so dull and samey. Thinking outside of the box is critical to improving your customer experiences. Read more about aligning your KPIs with this mantra here.

The good news: consumer behaviours are changing.

As new technologies are adopted across the consumer landscape, consumer behaviours will evolve and you need to keep up. The benefit, of course, is that if you’re thinking about these trends now, you’ll leave your competitors in your wake; they won’t be able to evolve as quickly as you - giving you a magnificent window of opportunity. 

Do something different - one-off or gamified experiences, personalised or flexible partner rewards - this is what will turn your customer’s head.

Look at what Marriott did at Coachella, or how IKEA surprised their customers for instance. At the very least, switch up your loyalty programme to include tailored rewards for your customers or tiered benefits. Get this bit right and just maybe, you’ll nail convenience, loyalty and customer experience in one go.

Your customers will continue to cheat on you (but perhaps a little less) for years to come.

Looking to stir things up and do something different for your customers? We’ve helped e-tailers and bricks & mortar icons alike put customers at the heart of their business and create brilliant online experiences. Get in touch.