5 steps to build customer loyalty

Humans are adaptive creatures. So it’s no surprise that after the past couple of years, consumers now treat disruption as normal – and adjust their buying habits accordingly quickly.

Amidst rising interest rates, inflation and an impending recession, consumers around the world are re-prioritising what’s important and changing what and how they buy. According to McKinsey, 75% of consumers tried a new shopping behaviour in the last 18 months – and 80% of those intend to continue with new behaviours.

So, what does this mean for brands and customer retention? And how can marketers maintain share of wallet in good times and in uncertainty?

Economic uncertainty creates more fickle customers

As prices rise, shifting consumer priorities significantly impact brand loyalty and customer retention. Affordability and experience are now the two most important, while the significance of brand or label has dropped from the top five according to EY. When it comes to purchase decisions, brand’s influence has dropped from 24% in February 2022 to 17% in June. When a product is out of stock, few wait around for it to come back – 70% switch brands or retailers instead. And during volatile periods like the pandemic, three-quarters of consumers switch stores, products or buying methods.

But it’s not only their habits that are changing. Consumer expectations are also shifting, especially when it comes to personalisation. 71% now expect companies to deliver personalised interactions – and most get frustrated when this doesn’t happen.

While currently this is a challenge to get right for many marketers, it presents a significant opportunity for brands, according to Philip Shelper, ADMA instructor and CEO and Founder of leading loyalty consulting agency, Loyalty & Reward Co.

“I think the next big frontier in marketing is personalisation,” he says. “It's been talked about for a long time, but it's only really now that we're starting to see companies do it really well. And the brands that

manage to deliver omni-channel personalisation – a personalised experience across all of the different channels that a customer can engage with – are the ones that will win over the next decade.” Many are already leaving the competition behind. McKinsey found that “companies that grow faster get 40% more of their revenue from personalisation than their slower counterparts.”

Loyalty enables personalisation – personalisation builds loyalty

Getting to personalisation nirvana requires marketers to overcome a number of challenges. Walled gardens and crumbling cookies make it increasingly difficult to access relevant and useful data. While tighter regulations are restricting how marketers can collect, store and use data. And then there’s what Philip calls “marketing assault”.

“Consumers are generally overwhelmed with brands marketing to them and trying to get them to engage. Everyone's had the experience of signing up for a brand’s comms only to start getting a marketing email once a day, often without any relevance,” he says.

One thing that can help marketers overcome these challenges is loyalty, suggests Philip.

“Loyalty is the single most important discipline in marketing for the next decade. Your loyalty program can become a really good foundation for building out your marketing database and building out data profiles against individuals – everything that you need to delivery omni-channel personalisation.”

And when you can offer 1:1 personalisation, your customers are more likely to stay loyal.

During a recession or economic uncertainty, loyalty programs also help engage members, helping them tap into extra value and offer tailored solutions. And it’s a very cost-effective way to reach and engage audiences.

“A brand without a solid loyalty program has no real capability to reduce their digital marketing costs during times of uncertainty. They need to do a lot of digital and traditional advertising to get through to their existing audience and attract new customers,” Philip says.

“Whereas a company that has members signed up to their loyalty program has a very cost-effective marketing channel, with an engaged audience who are looking for value. If a recession hits, they're in a much stronger position to continue the level of engagement they're currently running with.”

During COVID, Sephora decided to update its loyalty program Beauty Insider in the U.S., to tap into the emotional drivers of its customers and bring personalised experiences to life.

It created a tiered membership, giving customers new benchmarks to reach through their purchases. Along with discounts, the program also gives customers access to exclusive products, one-on-one sessions with industry leaders and free entry to masterclasses run by world-renowned make-up artists.

With 25 million members and a significant portion of sales and growth stemming from its top tier members, Sephora is setting the benchmark for loyalty programs everywhere.

Want to know how to build customer loyalty for your brand?

Learn from Philip Shelper in ADMA’s Loyalty Programs and Consumer Engagement course.

Enrol today.