Today’s customer is a picky character. They’re brand-fickle, impatient and demand rewards for their loyalty. The entire structure of retail is built around their desire for convenience. As a result, consumers are trained to expect not just instant but constant gratification.
Starbucks is a great example of how a constant gratification model is replacing older models of the loyalty program. Time was, your average chain coffee store rewarded loyalty through a simple stamped card that offered your 8th coffee for free.
Starbucks’ incredibly popular Reward program has steamrollered this model by offering much more immediate rewards, delivered digitally so you don’t need to remember a little piece of stamped cardboard. Instead of patiently awaiting the 8th free cup, customers can enjoy more regular offers and rewards.
Brands need to understand that loyalty is a long-term project but it’s fostered in the short term. Customers expect every touchpoint they have with a brand to be rewarding, not merely adequate at meeting their needs. They aren’t patient for a future pay-off; instead, they want enjoyment now. With hot competition for consumer attention, brands need to be attentive at every encounter or risk the customer being lured away by a rival that offers a more exciting experience.
We know that customers are impatient. Delivery times are a major concern for online shoppers. Click and collect, which offers near-instant gratification, is hugely popular. Customers aren’t going to wait for that free 8th cup of coffee when a rival café can offer them a half-price frappuccino right now.
Impact of the pandemic
The pandemic has accelerated trends that underpin customer impatience. For one thing, it has encouraged people to try online shopping for the first time or use it more often. It’s driven many customers to try convenient, contact-free methods of retail including home food delivery by restaurants or curbside pickup – where restaurants bring the food out to your car.
Customers that once did things in their own time, now expect brands to deliver to them at the time they want.
Customer habits have been disrupted, which may have severed past loyalties. With physical stores closed, consumers may have found other ways to fulfil their needs. Shortages of some goods may have pushed consumers to try other retailers. In many cases, the effect could have been short-lived but there’s also evidence from McKinsey and Ketchum that over 60% of these brand changes could be permanent.
If customers have found a more rewarding, more convenient option then they may have left their old brand for good.
There also seems to be a trend of consumers favouring retailers that can offer them everything they need in one transaction. This is because consumers prefer to minimise the number of physical venues they visit during the pandemic.
If they’re shopping online, they prefer to buy from a single platform that can offer all the goods they need. This favours supermarket retailers and online platforms such as Amazon. As usual, the most convenient option wins.
Despite some disruption to consumer habits, evidence is emerging that consumers are more brand-loyal now than before the pandemic. Consumers are cautious, and favour brands they feel they can trust. They prefer online experiences with brands they feel are reliable and convenient.
Whilst customers preferring convenient brands is not a new trend, customers are now also favouring brands they feel are COVID-secure. This often means bigger brands that are well-organised and can communicate the measures they are taking to protect their customers.
With households feeling uncertain about their financial security, existing brand loyalties are also under scrutiny. Consumers are reassessing their existing loyalty programs to check they are really getting value from participating in them.
Whilst consumers may have eventually dropped out anyway, the pandemic and associated economic turmoil may just have accelerated that decision. Brand loyalty programs are now under more scrutiny than ever before as consumers reassess their household spending as we come out of the pandemic.
Importance of loyalty
Although consumer brand loyalty is at a low ebb, it’s as important as ever for brands to try to maintain customer loyalty. Forbes estimates that a company can expect 80% of its future revenue to come from just 20% of its present consumer base. Most brands are facing intense competitive challenges from all quarters – both online and offline.
There are many opportunities for customers to be lured away. The good news though is that although customers are fickle, they can also be lazy. Customers don’t want to invest effort in switching suppliers unless they have reason to be dissatisfied with their existing ones.
Brands need to be particularly aware of the need to make customers feel valued. When digital consumers feel valued, they are highly likely to say they plan to stay loyal to the brand and to increase their future spending. They’re also highly likely to recommend the brand to others. Making customers feel valued is a core part of generating their loyalty.
There’s striking evidence that consumers favour brand loyalty programs. In fact, 87% of consumers want one, according to research by software company Talech. Programs such as Amazon Prime tend to be highly popular, with younger consumers citing free shipping as a major perk. Starbucks Rewards is popular because of the convenience and free or discounted food and drink benefits.
There’s some generational difference in how consumers approach brand loyalty. Millennials – which is pretty much any adult consumer between the age of 25 and 40 – have been described as the most brand-loyal generation.
Their slightly younger counterparts Generation Z are considered less brand loyal. Both generations can be won over by loyalty programs, and tend to participate in these in high numbers. Younger generations tend to favour easy, digital reward schemes whilst older ones such as Baby Boomers like cashback and paper coupons.
Millennials expect to be reached via social media, particularly on Facebook, whilst Baby Boomers respond well to direct mail and more traditional media.
Emotional connection is the basis for all customer loyalty. Consumers are generally cynical about brand trustworthiness – fewer than half of them really trust brands, with markets including South Korea and Australia reporting even lower levels of brand trust. Despite this, consumers are still capable of strong emotional connections to brands.
Yet brands aren’t very good at recognising or investing in the importance of emotion for brand loyalty. Brands that run loyalty programs tend to focus on money-saving aspects of the scheme.
A smaller number offer experiential benefits, personalisation or additional interactions which might better drive brand loyalties and also help consumers feel they are valued. While consumers tend to be very good at calculating whether the rewards of participating in a loyalty scheme make it worthwhile, it’s important brands don’t neglect the emotional elements of the relationships managed by loyalty schemes.
A study by Collison Latitude claims to find 67% of customers are dissatisfied with their existing loyalty programs. Brands would do well to consider what information they are gaining from their customer loyalty schemes and whether they are using this to improve the programmes.
If customers aren’t getting enough out of the programme, it may be that brands just aren’t considering what they can do to motivate their customers and make them feel valued. Brands may not be aware of customer expectations for participating in the programme.
Brands that want loyalty need to offer flexibility to their customers. Although many consumers are confident buying online, younger consumers also enjoy an in-store experience. It’s important that loyalty programs work at a physical stores as well as online. It helps to gather customer data but it also helps the customer to feel recognised for their loyalty however they interact with that brand.
The subscription model
Subscription boxes are highly popular with customers and they’re a good illustration that today’s customer wants fun and enjoyment from the brands they love. Subscription models tend to be popular with the more frivolous type of food and retail. Makeup, beauty products, scented candles and chocolate are just a few examples of what you’d expect to find in a subscription box.
But there are also popular subscriptions available for more obscure areas of retail such as guns and ammunition, animal skulls and witchcraft. Mainstream brands offer subscription boxes so that loyal fans can experience the brand on a regular basis.
Offering a subscription box is a good way to reward loyalty. It’s a regular chance to delight and excite customers while also deepening their involvement with your product range. One example is a beauty retailer that might get a customer using a product they don’t normally use as part of their beauty routine, simply by offering a sample in a subscription box.
How does a brand offer constant gratification and constant rewards to customers? It’s not enough to ask customers to invest in the long term future of the brand-customer relationship when customer’s heads are easily turned. Instead, brands need to ensure customers receive maximum value at every touchpoint.
One way to do this is to offer small rewards at every encounter, rather than promising rewards at some later date. This caters better to customer impatience (and the reality that they might prefer an immediate encounter with a different brand if the rival can offer a better experience right now). Smaller rewards, delivered more often, can reinforce the positive feeling a customer has for a brand right now. Lush does this by offering sample products each time the customer makes a purchase in-store.
It goes without saying that brands need to make every brand encounter the customer has is a positive one. To truly win at building customer loyalty, encounters need to be memorable, fun and social. This means maximising engagement with the customer wherever possible, and delivering a tailored experience.
Clever brands also merge in incentives. Gap did this by running a memorable in-store event where customers were offered a lucky dip on entry to the store. By tearing open an envelope, they could find out whether they had a 20% discount or perhaps an even better offer.
One of the most challenging aspects of delivering constant gratification is the need to act decisively to deliver a rewarding experience every time. Brands only have a small window of time to recognise the customer’s need at a particular point in the journey and give them an appropriate reward at that moment.
Customers want to be recognised and for their needs to be met. Identifying who they are is a major challenge for brands trying to add value and make customers feel valued.
It’s also challenging to personalise each experience. Whilst technology is key to managing reward-based loyalty, it’s not the entire solution. That’s perhaps why some of the organisations that are best at delivering constant gratification are the smaller ones.
Independent cafes and grocery stores can and do offer a rewarding, personalised experience to their small customer base using old-fashioned values such as recognising and rewarding regular customers. In many ways, it’s more challenging for larger organisations that need to replicate this at scale.