All-In – The New Customer Loyalty Mindset For Retail Success

By Johan Liljeros, Avensia

Customer loyalty has a tremendous impact on retailers’ bottom lines -- increasing customer retention rates by 5 percent and increasing profits by 25 to 95 percent, according to research by Bain & Company.

Today, loyalty is a conscious consumer choice. Customers want more than points and discounts; they’re increasingly choosing to spend more with businesses they have an emotional connection with.

Because loyalty today is based on this emotional connection and trust, retailers need to actively make loyalty an organization-wide priority. This is what’s called loyalty-driven commerce. It’s an approach and mindset that will make customer loyalty a top priority for the entire C-suite and a way to future-proof the retail commerce business.

Everyone Has A Stake In Customer Loyalty

For retailers to become more customer-centric, they must shift their thinking. In many businesses, the CMO is customer loyalty’s classic ‘owner’. But every member of the C-suite should care about, and commit to, a loyalty-driven approach.

After all, customer loyalty drives company finances which is the core focus of the CFO. Supply chain issues are one of the fastest ways to drive customers to your competitors -- and the supply chain is the COO’s realm.

Staff recruitment and training, notably for customer-facing roles such as store staff and customer service, has a huge effect on the customer experience and loyalty, which is another part of the COO’s remit.

Data-driven insights from loyalty programs do more than boost customer lifetime value, they inform and future-proof business strategy. This means the CIO has a critical interest in loyalty. And, of course, any loyalty program today also will utilize great tech and connect across consumer channels.

Ultimately, without customer loyalty, the CEO will be unable to meet their objectives.

Organizations Are Re-Envisioning Loyalty Programs

As the holiday shopping season quickly approaches, now is the time to re-envision loyalty programs. Winning and well-architected loyalty programs are essential when consumers and retailers alike are struggling financially.

According to Bankrate’s 2022 Winter Holiday Shopping Survey, of those planning to do holiday shopping, 40 percent said inflation will impact their holiday shopping decisions. The survey also noted that 95 percent of holiday shoppers are actively looking for ways they can save money. Nearly three in five (59 percent) plan to buy fewer items, and 52 percent are pursuing more coupons, discounts, and sales.

A strategic loyalty program design can incentivize customers to adopt “new normal” shopping behaviors such as ordering online, and picking up in-store or curbside when shipping costs are high.

Additionally, stricter privacy laws and the moving away from third-party cookies are necessitating that retailers shift and think creatively about ways to collect first- and zero-party data. Owning your customer data is crucial now that third-party cookie data is scarce. Google has said it will stop supporting third-party cookies from 2023, which means brands need new data sources.

Loyalty programs can serve an important objective of collecting customer data and preferences that can then be used to personalize offers for this year’s holiday shopping season and throughout the year ahead.

This zero-party data from loyalty programs are especially valuable for retailers as it’s indicative of customers who are most interested in forming a relationship with the brand since the information given is done so voluntarily.

The 3 Levels Of Customer Loyalty

The concept of loyalty can be different for different companies and the definition has evolved.

Typically, we talk about three levels of loyalty – traditional, membership, and natural loyalty. Each approach has been proven to work and deliver a significant return on investment. Each business needs to decide what is the right approach, based on its situation and appetite for change.

Traditional Loyalty: A traditional loyalty program is a cost-effective way for companies to understand customer behavior, collect data and personalize the shopping experience. It gives retailers real data about how customers are shopping with you, which is particularly valuable now that many shoppers are moving between channels in their shopping journeys.

A major benefit of traditional loyalty schemes delivered digitally is that they keep customers engaged with brand apps. Research shows that app retention rates hover at about 38 percent. Anything brands can do to boost app engagement will help the company overall.

Membership Loyalty: While traditional loyalty programs are great, customers are becoming more discerning all the time, and an enhanced membership program could help bring customers closer to your brand.

Many different customer actions benefit retailers beyond buying -- for example, leaving a review, sharing a selfie, following your brand on social media, exploring more of the store, attending an event, and more.

Membership-based programs can reward all these behaviors. Typically, rewards translate into perks -- enhanced, exclusive, or VIP brand experiences -- rather than simple discounts. Membership-based programs don’t just bring customers closer to your brand, they keep them interested, too.

These rewards are often free for the brand to deliver, such as first access to the sale or invite to special focus groups, but these perks hold value for customers. This encourages them to spend more time with the brand at every turn, both in earning and redeeming rewards, building an authentic and informed relationship that will ultimately translate into improved advocacy and sales.

Brands must be sure they keep up to date with customer needs so that they offer relevant rewards and services at all times. In fact, the most common reasons for customers to leave loyalty programs are outdated rewards and wrongly used member data in communication.

As retailers prepare for the impending start of the holiday shopping season in an era of inflation, this is more important than ever. According to the Bankrate survey on the 2022 holiday shopping season cited earlier, 17 percent plan to shop at stores where they have loyalty accounts or store-specific credit cards.

Natural Loyalty: Natural loyalty is possibly the easiest thing for a brand to commit to - who doesn’t want to be a great brand? Of course, it’s also the hardest thing to execute, as it’s an all-encompassing, never-ending journey. However, it does lead to the best results. It’s common for brands to lower their operating costs whilst improving their overall customer experience.

Ultimately, natural loyalty is about meeting and exceeding customer expectations. Some even argue that “loyalty is the new brand” meaning that all the efforts you put into the customer promise, offering, and delivery to build that customer loyalty are the foundation for a solid and strong brand.

Natural loyalty may be the most desirable, but it’s easier to obtain if you have traditional or membership-based programs that gather data. This can generate insights to help you understand what customers really want so that you can stay relevant in communication and offerings, which will help you build natural loyalty.

Embracing Customer Loyalty, Gaining Competitive Advantage

Establishing an organization-wide customer experience-first mindset will ensure retailers place customer loyalty at the forefront -- prioritizing activities to remove friction in the buyer journey as well as creating opportunities for dialogues with the customer -- both crucial elements to building solid relationships. In today’s modern commerce world of fierce competition and consumer volatility, customer loyalty can’t be treated as a project or initiative; it must be part of the business DNA and a key driver of all business decisions.

About The Author

Johan Liljeros is General Manager and Senior Commerce Advisor, in North America, at Avensia. Through a combination of technical and strategic business expertise, Avensia helps B2C and B2B customers accelerate their growth and become even more successful in their day-to-day business through next-level digital commerce.