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Data from Nielsen suggests that we are in an era of disloyalty, with more consumers trying new brands and refraining from developing long-term buying habits. This data should prove valuable to loyalty marketers, as it covers under-explored trends that create brand disloyalty, such as an increased desire to buy local in countries with prominent nationalist movements (Italy, Greece, etc.).
However, Nielsen argues that “as consumers become more brand disloyal, marketers can no longer expect 20 percent of their portfolio to drive 80 percent of their sales,” because “only 8 percent of global consumers are loyal to the brands and products they’ve always bought.”
At the same time, more brands than ever have launched new loyalty programs (or revamped existing ones), and we’ve seen the loyalty space become more varied than ever—traditional, tier-based rewards programs are now one of many varieties, along with surprise-and-delight and experience-driven programs. Are all these brands in error? Is the 80-20 rule a thing of the past?
No and no. It is factual that today’s consumers have more choices than ever and a greater willingness to try them, but it is a bit hasty to suggest that this means that brands should shift resources from retention to acquisition. Rather, the challenge of disloyalty presented by Nielsen ought to be met with stronger than ever efforts to keep customers engaged in loyalty programs. We’ve heard from many brand and vendor representatives that agree.
For example, Bill Finaldi, Senior Director of Channel Sales at Iris Concise, says, “Engagement is the key element when it comes to loyalty programs. A successful loyalty initiative appeals to today’s digitally connected and socially engaged customer. We find that the best loyalty programs focus on creating a deeper connection between the consumer and their brand. Brands that build this deeper, passionate connection command a premium, fully engage customers across all channels, drive advocacy, and are seen as leaders. This all-inclusive approach drives exceptional results.”
Kate Hogenson, Senior Loyalty Consultant at Kobie Marketing, adds, “If a loyalty program is treated as only an incentive delivery mechanism, then it looks like an acquisition offer and can feed into the habitual brand switching that comes from focusing only on acquisition. The loyalty programs that are winning today are the ones that recognize and engage consumers in unique ways that can’t be matched by just another acquisition incentive.”
In addition to this testimony, we’ve seen excellent engagement initiatives from a variety of brands, including Foot Locker, which successfully created its own ecosystem to engage customers while also rewarding them and encouraging repeat purchases. In the airline industry, most airlines have raced toward dynamic pricing and cut back on rewards, but Delta bucked that trend and invested in loyalty, coming out with the strongest growth last quarter.
Loyalty programs that are truly differentiated and articulate a strong value proposition have always been effective, and they remain effective today. Nielsen’s data shows that only 11.6 percent of today’s consumers are “strong loyalists,” but with the right strategies and the right technology solutions, brands do not have to resign themselves to that statistic.
Raj Nijjer, VP of Marketing at Yotpo, expresses a somewhat different opinion. “While Neilsen’s data likely takes all brands into consideration, we find that customer loyalty is tremendously different when it comes to D2C brands and the customers that love them. We conducted a brand loyalty study that found that 90 percent of consumers were just as loyal to the brands they love as they were the previous year. That said, the bar to establish loyalty is very high, with 37 percent of consumers saying it takes 5 or more purchases to consider themselves loyal to a brand. This means that brands need to work harder to be authentic, create a special customer experience, and deliver great customer service that keeps consumers coming back for more.”
Len Covello, CTO at Engage People, concludes, “In an era of increased competition for a consumer’s attention, all loyalty programs need to compete through a combination of technology, ideation, and customer insights, not just to drive the transaction, but to deliver long-term emotional connections and long-term customer value. Technology can help facilitate activity and measure, but core brand values and insights need to shape the activities that drive customer loyalty. Successful brands align activities against a heightened level of understanding and motivation for a loyalty program member. The right technology combined with customer insights ultimately deliver the right strategy and tactics to retain your best and most profitable customers for successful top- and bottom-line growth.”
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