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3 ways customer loyalty is changing – and what brands can do about it

The customer loyalty landscape has changed significantly over the past decade or so, and many businesses are struggling to keep up. Traditional loyalty programmes aren’t delivering the results brands need in an increasingly competitive and consumer-led environment.

New developments in technology and the rise of millennial shoppers has caused a shift in customer expectations. But loyalty programmes remain popular – businesses are still implementing new schemes and customers continue to sign up.

Whether customer loyalty is a new focus for your business or you’re looking to update your current approach, here are three key changes that should shape your strategy.

1: Experience is essential

Perhaps the biggest change in the realm of customer loyalty is the focus on experiences – both in terms of customers’ interactions with the brand, and the actual rewards the loyalty programme offers.

When it comes to loyalty, many businesses have been too focused on the programme itself, considering it to be a “magic bullet” solution for customer retention. But customer loyalty is much more than that.

Especially now, as the internet makes it ever-easier for customers to find and switch to a new brand, the experience they have is essential to growing and maintaining loyalty. According to one survey, 79% of customers said they would switch to a brand’s competitor within a week of having a negative experience.

In light of this, businesses need to take a more holistic approach to customer loyalty, looking at all aspects of the customer experience. This includes marketing, customer service interactions and in-store experiences, in addition to the loyalty programme itself. A killer loyalty programme won’t save a shoddy customer experience.

That’s not to say that rewards programmes aren’t important – 69% of customers said receiving rewards made them more likely to shop with a particular brand.

But experiences are key to today’s customers – especially millennials. That’s why the nature of the rewards themselves is changing too, from discount-focused to experiential. Whether it’s a VIP event, tickets to a concert or a trip to somewhere exotic, experiential rewards add real value to the relationship and provide something the customer can’t get somewhere else.

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2: Membership doesn’t equal loyalty

This isn’t so much a change as a long-standing truth retailers are beginning to recognise – the loyalty cards crowding consumers’ wallets don’t really represent loyal buying behaviour.

Past studies have found the average number of loyalty cards per household to be somewhere in the range of 20 – 30; although recent research suggests this may have decreased in the last year or two. Still, many shoppers are part of loyalty schemes at several competing businesses, which often means they’re not really loyal to any of them.

And many members have never actually used their loyalty card or redeemed any points. Often this is because programmes are too complicated, points take too long to accrue or the rewards aren’t worth it (back to experience again!).

Businesses need to take into account more than simply the membership of their programme when evaluating customer loyalty.

3: Word of mouth matters

With the rise of social media, what customers say about a brand can have a significant impact on loyalty, for better or worse. Reviews and recommendations have become increasingly important to the buying process for many consumers.

One study found that 54% of online shoppers (and 39% of in-store shoppers) checked reviews before deciding on a product. And in another report, 88% of those who had read reviews said the experiences of other customers influenced their buying decision.

Especially for the new generation of millennial shoppers, the brands that their peers recommend are very often those that win their business.

A recent survey found that one of the top reasons millennial shoppers try a new brand (and one of the key reasons they switch brands) is a recommendation from a friend. And social media has provided the perfect platform for sharing these recommendations and experiences.

Customer experience comes into play here as well. It’s well known that negative interactions and poor service are highly shareable on social media, and can be damaging to a brand’s reputation.

But today’s consumers (with millennials leading the pack) love to have positive experiences they can share with their social media following too. And brands that deliver these experiences – whether it’s a reward or just great service – have a good chance of earning a spot on their social feeds.

Loyalty through experience

You’ve probably noticed that experience keeps coming up as we talk about loyalty – it really has become key for modern consumers. Factors like price and simple convenience do still have an impact, but less so than they used to.

It’s easier than ever for customers to switch brands. With the range of options and information now available, the quality of their interactions with brands play a big role in who they choose to do business with again and again. And great experiences that add real value can beat out lower-price competitors and make customers stick around.

Some commentators take this idea too far, claiming customer loyalty is about nothing more than the ease and effortlessness of doing business with a company. But statistics show there is more to it than that – loyalty programmes are still a key driver of consumer behaviour. Done right, they can increase the value of the brand / customer relationship for both parties.

The key is in finding the right balance between the rewards programme itself and the customer’s experience of interacting with the brand. Rewards are just part of the overall picture – a personalised, one-to-one experience that drives true loyalty.

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