Post-pandemic, customer loyalty has taken a significant hit across the board. A combination of factors – namely the opportunity that consumers were given in lockdown to experiment with new brands, and accelerated digitalisation in all areas of consumers’ lives – has created new challenges for loyalty. With those challenges comes a new opportunity for retailers to take a step back and reimagine how they approach customer loyalty.
Our latest report, The Loyalty Paradox, draws on key emerchantpay research in combination with an array of external findings to paint a comprehensive picture of the state of customer loyalty in 2021. The report also highlights various approaches to building an effective loyalty strategy and, crucially, the ways in which payments can be leveraged to boost retention.
The findings reveal a general shift away from purely transactional rewards like points-based loyalty programmes, towards more experiential benefits. Cross-brand coalitions and paid loyalty programmes are also initiatives worth keeping an eye on. The resounding conclusion is that, in order to avoid low retention rates and potential irrelevance, brands need to act fast and revamp their loyalty strategies in a more holistic way than ever before.
What is the loyalty paradox?
72% of retail executives say that optimising customer loyalty is a top-five priority for senior management at their organisation. However, only 42% believe their organisation’s loyalty strategy is effective. Welcome to the loyalty paradox. To resolve this disparity, retailers will need an in-depth understanding of their customers’ behaviour, wants and needs.
To find out how your potential customers feel about their loyalties to various sectors, we surveyed over 2,000 consumers in the United Kingdom. The results showed that respondents across all age groups were most likely to be loyal to brands in the food, drink and supermarket industry (49%), to which Baby Boomers were the most vehemently loyal (57%). Interestingly, more than 1 in 10 (13%) consumers claimed not to be loyal to any brands.
These changes put brands under greater pressure to reiterate their approach to retention. Enter the loyalty loop, where customer loyalty is perceived as a loop rather than part of a linear customer journey. What happens post-sale becomes more critical than ever because this experience can build brand allegiance and repeat custom for consumers.
Payments play a starring role in multiple stages of the loyalty loop. In the consideration and purchase phases, potential customers may check that their preferred payment method is available. What follows is even more critical: the post-purchase experience (receipts, returns and refunds in tandem with excellent customer service). When retailers overlook this stage of the buying cycle, they miss an important opportunity.
Some brands go a step further by implementing a paid loyalty programme, embracing the post-purchase experience to include features and benefits above and beyond the expected – for a price, of course. Fortuitously, research in the report shows that not only are consumers willing to pay for a premium experience, but members of PLPs are 60% more likely to spend more on a brand, compared to members of free loyalty programmes who are only 30% more likely.
Balancing personalised campaigns with concerns over data privacy
Using big data, brands can now target their audiences at far higher levels of personalisation than previously possible. But concerns around privacy and marketing “overkill” are rife among consumers; our report highlights that three out of four consumers say they receive too many email promotions from brands. Promotions, it turns out, are valuable real estate.
So how do retailers square the circle in the age of hyper-personalisation?
In The Loyalty Paradox, we’ve told the story in numbers. 35% of consumers don’t want brands to know their browsing history, yet 57% expect brands to know their customer service history. These findings point to the fact that launching personalised marketing campaigns requires a degree of sensitivity – view your campaign through the lens of consumer trust.
Starbucks is a great example. Since the early 2000s, Starbucks has been known for writing customers’ names on the side of their cups – this is pre-digital hyper-personalisation if we’ve ever seen it. Now, Starbucks is adapting its ‘name campaign’ to the digital age. A large-scale hyper-personalised messaging campaign, called the Digital Flywheel strategy, saw incredible results - incremental revenue via offer redemptions increased three-fold.
Payments are a key driver of loyalty
In the face of growing demands for ultra-streamlined services from digital natives and their older, more recently digitalised peers, retailers can no longer afford to view the payment stage as their end objective. Instead, they must look at it as the beginning of a long and nurturing relationship.
Svetlio Todorov, Managing Director at emerchantpay, says, “The paradox is that, even though payments are essential to customer experience, some retailers are failing to see them as part of their loyalty strategies.”
We wanted to know how payments leaders – the top-tier individuals who are ultimately responsible for payments within their respective companies – perceive the success of their payments strategies in relation to loyalty. Our research found that just 14% of payment leaders have personal and team KPIs that are fully aligned with their company’s wider business goals.
As a payments services provider, we help brands leverage their payment infrastructure to boost their overall business performance, offer a sleek customer journey end-to-end and, by extension, increase their retention rates. Payments should be the beginning of a long and fruitful relationship, not an afterthought.
Overwhelmingly, the majority of consumers value simplicity and speed the most when it comes to making payments in-store (66%) and online (36.3%). That’s why an effectively optimised payments process produces results. This means adopting the payment methods that consumers care about – Buy Now, Pay Later, for example, is highly valued by more than half (55.35%) of UK consumers.
During a busy shopping period such as Christmas, ease of purchase, customer service pre- and post-purchase, quality of goods and the ability to return, exchange, receive a refund and add complementary items are crucial. Adopting a unified commerce strategy can help retailers craft a more value-adding loyalty strategy. When sales channels are supported by a single platform, retailers get a single view of their customers’ data across all channels and touchpoints. That rings especially true today when more shoppers than ever are using services such as click and collect or are buying online and returning in-store.
Are you ready to think different?
Download your copy of The Loyalty Paradox today and learn about the key factors influencing brand loyalty today, the attitudes and strategies that work and the many ways in which payments can be leveraged to improve customer loyalty across the board.
Get in touch to discuss how you can adapt your payment strategy to 'the new normal' and design a seamless payment journey, both online and in-store.