The Future of Consumers | Embracing Customer Loyalty – Part 1

By Anastasia Lloyd-Wallis
Chief Operating Officer and Head of Consumer Insights, Retail Doctor Group

How customer loyalty has changed

We really have seen a shift in the focus of loyalty. Customers are now wanting to create an emotional connection with brands. They’re wanting to interact with brands, to really be part of that tribe, part of the team. And, in essence, they’re becoming brand advocates.

What does this mean for you, as a retailer? How do you build that emotional connection with your customers, and get them to be your loyal advocates?

Loyalty scheme influence

Let’s start by looking at what loyalty means to customers. What are they looking for? And what’s going to make them loyal to you and your brand?

One of the obvious first steps is implementing a loyalty scheme.

  • Do you have a loyalty scheme in place?
  • What is your database?
  • How do you interact with customers in that loyalty scheme?

From our RDG Insights Research we know that 1 in 5 customers are significantly influenced by loyalty schemes.

92% of all women are actually members of loyalty schemes, and so is 86% of men. So, we really see this large proportion are members of retailers’ loyalty schemes, and they want to interact.

However, the offer needs to be right. So, let’s have a look at those pesky Millennials and Gen Zs, because one of the things that has been the talk is that our younger consumers are less influenced by loyalty.

But this is actually quite the reverse to what we are seeing in our RDG Insights Research. We’re actually seeing that those younger demographics can be more loyal. They can be more vocal. And they can be your biggest advocates, if the offer is right, if you really do have the brand they want to connect with.

Our research shows that three quarters of consumers aged between 25 and 34 are influenced by loyalty schemes in all sectors. And Gen Z and Millennials are more influenced by loyalty schemes than any of the other segments. But just how are they influenced?

The findings below will help you understand why you need to get your loyalty scheme strategy right.

Loyalty scheme spending in different groups

First and foremost, loyalty schemes influence customers to visit more often:

  • 38% of consumers are saying that it actually influences them to visit that particular store or retailer more frequently.
  • Almost one in three consumers actually spend more every time they visit, because they are a member of that loyalty scheme.
  • 25 to 44-year olds are significantly more likely to spend more when they’re members of a retail loyalty scheme, more so than other demographics.

It’s obvious that having the right offer and creating an emotional connection through your loyalty scheme really can develop a large return on investment (ROI) for you and your store. A key question here is, who are you aiming your loyalty scheme at? What segment of consumers do you want to interact with your loyalty scheme? And what does this all mean for you, as a retailer? This is an integral part of your customer behaviour journey, and a key area of your customer loyalty loop.

These four steps in the process will help you revamp your customer loyalty scheme strategies:

  • Review your existing loyalty scheme to determine your unique demographic.
  • Compare your demographic data to your target customer profile. How do they match up?
  • Determine ways to align your current loyalty scheme demographics to your target customer. What’s going to influence their purchase?
  • Initiate loyalty scheme rewards that influence repeat purchase behaviour and result in word of mouth recommendations.

It’s not really about what you’re offering. It’s more to do with why they would want to interact with you.

Our Consumer Insights data below can help you understand what your consumers like about loyalty schemes, overall. The most important take-away from this data is that there is a variety of options that consumers are looking for. There is no one size fits all.

50% of consumers are looking to redeem points, aiming to collect points quickly, and actively on the hunt for exclusive discounts. Once again, who are you targeting with your loyalty scheme, and what do they really want out of it? This is going to differ depending on their personality types and demographics. This is why loyalty schemes should be as individualised as possible.

Different personalities actually have very different loyalty drivers, our research has shown:

The ‘why’

So, keeping loyalty scheme spending behaviour in mind, we come back to the question of who is our consumer? If you’ve previously heard me talk about consumer personalities, you’ll understand just how much this aspect drives consumer behaviour.

How do personalities actually influence loyalty?

We know that 95% of consumer decision-making happens in the emotional brain. This is the limbic part of the brain. We also know that emotional decision-making drives sales, but why? Understanding why customers pick your brand over your competitors’ is vital to your brand’s longevity.

The rational brain is involved in just 5% of decision-making scenarios. This involvement includes the how and the what of the purchase, as well as the point collection, discounts, and other rewards in a loyalty decision. However, the rational brain has very little say beyond this, relying instead on the emotional brain to complete the decision.

Retailers need to understand the emotional driving power behind purchasing decisions and behaviours, specifically wanting to feel special, to be part of the community, to be entertained. What are your consumers’ driving-why? And from that, you can determine what your loyalty scheme type and its offerings need to be.

Up until quite recently, that driving-why was thought to be driven by demographic segmentation because we think about our consumers through a demographic lens in fictional retailing. Whereas now, it’s more important to think about the consumer’s driving-why through an emotional lens.

What Else Do You Need to Consider?

In part 2, I deep dive into personality profiling and how implementing this can positively impact/improve ROI, conversions, foot traffic and your loyalty program. Follow our socials and subscribe to our newsletter to know when part 2 launches.

We hope you enjoyed reading this article and learnt some useful insights! If you did, have a read of my other blog articles on customer loyalty:

This blog post forms part of a podcast series on The Future of Consumers in Retail. You can listen to the original podcast here.

If you’re looking to understand “Why” your customers interacts with you and how to use this to drive foot traffic, increase conversions and improve frequency of visitation reach out to me for a complimentary discussion anastasia@retaildoctor.com.au

Or connect with us on LinkedIn, Twitter, Facebook, and Instagram.