Brands must use incentivised loyalty – based on offering discounts and rewards – as a launch pad to build “true loyalty” and brand love or risk going into an ever-lasting spiral of price cuts.
So says the third annual Customer Loyalty Index (CLI) from SAP Emarsys, which conducted research on over 10,000 consumers globally – including over 2,000 in the UK – to examine the differing motivations for customer loyalty.
It reveals that cost is unsurprisingly king for most in the UK. Two thirds of shoppers will switch products if a cheaper alternative becomes available. But, despite this, incentivised loyalty has dropped by 20 percent points this year, from 71% in 2022 to just 51% in 2023.
This is because incentivised loyalty depends on a suspension of ‘normal’ prices. Shoppers switch to find better deals where available; 50% of consumers actively expect exclusive offers in exchange for their loyalty, while 42% state that brands could lose their loyalty if prices increase.
Almost a quarter (23%) simply believe that they can no longer afford to be loyal, happy to follow the lowest price at all times.
So, while incentivised loyalty can be powerful, it is also fleeting – brands need to go beyond offers to secure shoppers for the long term, the report maintains. And, with 21% of consumers stating retailers and brands need to do more to get their loyalty, and 15% believing they have not rewarded them enough, that window can be very short.
The CLI goes on to suggest that the window of opportunity incentivised loyalty creates should be used to drive customers towards “true loyalty”, based purely on a love and connection with brands. It cites Puma, Gibson, and Pizza Hut as prime examples.
With true loyalty increasing by just 1% between 2022 and 2023, it is one of the most reliable types of loyalty once secured, but also one of the hardest to achieve, the report claims.
SAP Emarsys chief marketing officer Sara Richter said: “Incentives are a compelling means of capturing a customer’s attention – but if price is the only factor in a shopper’s loyalty, there’s a time limit on that relationship.
“A value-exchange is essential here. How can the shopping experience be elevated in a way that your customer willingly hands over the data needed to empower marketers to better understand that individual? That could be a VIP experience, early access to new products, or cash back on spending.
“Brands should view offers and rewards as an introduction to that consumer for the long term, and a milestone on the journey towards true loyalty. Your brand wants to be loved for itself, rather than having to lower the cost-of-entry to ensnare a consumer.
“That conversion relies on a genuine understanding of that shopper’s needs, wants, and behaviours, which makes data-driven personalisation non-negotiable, and omnichannel outreach an essential means of keeping up with a customer.”
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