Time to re-think loyalty

Source: Franziska Schmidt, Wednesday, Mar 6, 2019

Time to re-think loyalty

With new points of influence emerging and a fast-growing variety of options available to consumers, shopper acquisition and retention is becoming more difficult and costly for both retailers and brands. Yet, retaining customers will be key to driving frequency and basket size, the relevant forces behind sales and market share growth.

Our new Winning Strategy Report on Shopper Engagement & Retention, to be published in March, sets out to identify how retailers and brands can achieve long-term loyalty through enhanced shopper engagement and retention strategies, based on our newly-defined formula for loyalty.

Customers are harder to win and even harder to retain 

Broad-based fragmentation of consumer touchpoints is now a key contributor to shrinking shopper loyalty. This goes beyond multiplying digital points of purchase, branching out into the many digital stations along the consumer path to purchase. Social media, marketplaces and intermediaries, just to name a few, are all influencers of shopper behaviour and, therefore, buying decisions. The demographic-driven surge in residential and online shopping further erodes the old-day loyalty to a specific store, retailer or brand, with this newfound convenience turning the scale.

Caption: There are now many more influential touchpoints along a shopper’s path to purchase compared to the traditional shopping process of routinely visiting a store nearby. The increasing number of touchpoints creates a situation in which brands and retailers have less control over their messaging and interaction with shoppers.


Loyalty requires far more than vouchers

Shopper loyalty features two aspects. Firstly, the emotional bond created through excellence in the day-to-day operations of a retailer or brand, and secondly, the physical act of repeat purchasing that can be encouraged by loyalty schemes. Companies must focus on both aspects to foster high value, create long-term customers and drive sustainable sales in the future.

Caption:

There are four key characteristics that shape retailers’ and brands’ shopper engagement and retention strategies. While the easiest-to-implement, tangible and convenient, are also the most prevalent characteristics, the highest value in creating long-term loyalty lies in the less prevalent sphere of emotional and interactive.

As our primary analysis of major players around the world has revealed, across their day-to-day operation and loyalty schemes, most retailers and brands tend to focus on the transactional angle. This includes tangible aspects such as assortment or vouchers, as well as convenient aspects, for example through a more frictionless purchasing and payment process.

However, with residential and online shopping, and particularly discounters, gaining market share, benefits from such monetary and convenience rewards are increasingly marginalized by the competitive environment. Retailers and brands, therefore, need to become more interactive and emotional to genuinely engage consumers and retain them as customers.

Who leads in engagement and retention capabilities?

In our upcoming report, we benchmark 25 leading retailers globally to assess their capabilities to drive long-term loyalty, considering their positioning across the essential characteristics of being tangible, convenient, interactive and emotional. Retailers should use this assessment to identify their own positioning and potential gaps. For CPGs, we derive how to best co-operate with retailers to support their loyalty strategies and highlight opportunities associated with D2C approaches.

As in all of our Winning Strategy Reports, we will introduce the key capabilities which brands need to adopt to create brand stickiness in the future, both in the context of partnerships with retailers and by approaching consumers directly.

Implications for CPGs

  • Embed data-sharing agreements in partnerships for more refined shopper profiles, so you can support retailers’ loyalty strategies more effectively and secure valuable shelf space.
  • Break down silos between teams and incentivize holistic collaboration across all customer touchpoints.
  • Broaden touchpoints outside of traditional retail contexts to create more engagement opportunities and brand stickiness.
  • Integrate digital intermediaries into your own ecosystem, with unique benefits identified for each partnership.
  • Leverage user-generated content as a key component of brand-building and trust.

 

Do you want to explore this topic further? Click here to be notified first when the full report is available!