What is customer loyalty and how can retailers and brands influence it?

 

By Anastasia Lloyd-Wallis
Head of Insights, Retail Doctor Group


41% of retailers are not focussing on customer loyalty and yet up to ¾ of customers are influenced by loyalty schemes. Are you losing out on sales dues to an ineffective loyalty scheme?

In the ever-changing world of retail everyone is battling to be a customer’s brand of choice. Retailers are striving to have loyal customers but what does this mean?

What does a loyal customer do for you? How does a loyal customer influence sale? Or brand awareness? And more importantly how can retailers influence customer loyalty?

Recent Retail Doctor Group research shows that 59% of retailers are prioritising loyalty for 2021. They are wanting to understand how they can improve customer loyalty and understand how they can influence that behaviour.

The question is then, why is loyalty important?

  • Loyal customers will walk past other brands to get to yours
  • They will be brand advocates and talk about your brand to others
  • They will be more inclined to join loyalty schemes which then has a significant impact on their behaviour.

What can a loyalty scheme do for a retailer?

Retail Doctor Group research also delves into customer behaviour to show that 1 in 5 customers are influenced by loyalty schemes when selecting a retailer across all categories. It also shows that younger generations are heavily influenced with almost 3/4 of customers aged between 25 and 34 stating that a loyalty scheme influences their behaviour.

38% of customers state being a member of a loyalty scheme causes them to visit more often and 29% saying they spend more money each time they visit, with this being even higher for certain customer segments.

1 in 4 customers state that when they are a member of a loyalty scheme it influences them to recommend it or talk about it to others. As we know from other research that word of mouth is one of the most influential types of marketing these recommendations linked to loyalty can be a vital lever for retailers to gain brand awareness and new customers.

So how can a retailer influence customer loyalty that goes beyond points and discounts…

Step one – Who is your customer?

We often get approached by clients looking for the newest, best, innovative loyalty scheme, that will give them market share and customer stickiness. When we think about loyalty we must first think about who are our customers, what are their personalities and their emotional drivers.

If we can connect with customers on an emotional level we can see both an increase in brand awareness and up to 20% increase in brand preference. Appealing to our customers sub-conscious brain means we build deep connections that go beyond transactional and removes the need to complete purely on price.

To commence we need to understand who are our customers:

  • Demographics will give insights into modes of connection (the How)
  • Personalities will give details of their motivations and emotional triggers – the “Why”

The simplest way to do this is to talk to our customers, understand their lifestyles, their habits, their likes and dislikes and then layer this with emotional questioning.

We will find that there are clear different emotional drivers to loyalty with different customers ranging from trust, security, excitement, pleasure, simplicity and reliability.

These emotional drivers then influence all aspects of a brands communication with its customers from their tone of voice, imagery used, brand cues, in-store experience, staff interactions, website layout, in-store layout right down to colour schemes. Learn more about the psychology of colours here.

Once we have these clear customer profiles, both demographic and psychographic, we can then move onto step 2.

Step two – What is the journey for each of your customers?

We need to think about the customer journey, How do customers want to interact with us? Before, during and after the point of sale. Linking all this together will then help us understand what the optimum way is to develop customer loyalty.

Our customer journey will be different for different customer segments. We know that certain customers are very influenced by imagery and excitement so are looking for quick, fun, continuously changing engagements with retailers, others are looking to be educated so on their journey they want to learn about the products and how to use them others are purely looking for social proof, they see a product recommended, talk to a friend to confirm and then look for cues of this at the point of sale.

Plotting the different customer journey for each segment then allows you to determine are you giving the optimum engagement at each touchpoint for each customer? Are you using emotional cues at each stage to build brand engagement and loyalty rather than purely transactional interactions?

Step 3 – Determine your optimum loyalty scheme to enhance customer engagement

We will now know what influences customers to visit us for the first time and come back to us again and again. Using this information coupled with how they prefer to interact with us we can then determine what our ideal loyalty scheme will be.

Whilst a general points / discount loyalty scheme may be working it may not be the main driver for your customers, you may be giving away discounts unnecessarily.

We need to look at the emotional triggers for each consumer segment and how we can implement this in our loyalty scheme. Examples of different customers drivers include:

  • Gamification –Driven by a challenge – collect the most points, achieve this goal by a certain date, collecting items, finding special objects.
  • Status –Driven by success, achieving a status or target.
  • Security – Driven by reliability, warranty – they want to be looked after.
  • Special –Want to be unique – special events, new products, first release items.

Combining this knowledge of our customer and their journey, we can determine the optimum loyalty platform (the how) and the incentive (the why) with the ultimate goal of increased customer visitations leading to increased sales.

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