As recent years have rolled by, it seems that the world is hopping from one crisis to another. Yet again, it seems that consumers are back on the front lines, battling their way through another price war. This time in our gun sites: Ever-increasing inflation and the uncertainty that war brings.
Loyalty programs have been a lifeline for brands during intense economic variation and market uncertainty. Nothing clearly better epitomizes this than the COVID-19 outbreak and following pandemic. It is clear that COVID-19 broke the orthodoxies of customer loyalty and retention. This is due to the fact that many brands themselves saw an increase in their loyalty program utilization and participation. Fueled by the need for digitization, customers sought preferential and memorable consumer experiences that were personified by their unique attributes and exclusivity.
Some of the examples of change that the pandemic brought are as follows:
- Online grocery sales grew 40% year over year in 2020/21
- Hotel companies and airlines saw their business traveler client base (loyalty driven) decrease alarmingly whereby challenging hotel brands such as Marriott to extend premium loyalty status to members and adjust their benefit programs
- The new wave of digital engagement with customers drastically increased, while physical foot traffic slowed to a trickle. This was evident with brands like Chipotle witnessing 134% year-over-year growth in digital orders and increased app-based engagement.
Due to the shifting economy and pressing fears of the future the name of our current enemy is inflation. Within the European Union the annual HICP inflation up to 8.6% in June 2022 up from 1.9% in June 2021 (HICP - Harmonised Index of Consumer Prices). While across the pond, the current U.S. inflation rate running over 8.5%,, the highest in four decades.
This spells disaster for the consumer market as the increase in the cost of goods and services, energy and fuel prices as well as overall accessibility of goods decreases, it seems another recession is on the horizon. Also, this doesn’t take into account the recent Russian invasion of Ukraine compounding the current state of affairs.
I can hear many of you asking if the end is nigh?
In all times of trouble, there is an opportunity for brands to utilize their most powerful tool to keep the economic waltz continuing. That tool is the loyalty of its most loyal customer base.
Loyalty programs and their concept have been around since Roman times when they were further utilized in the epoch of the industrial revolution. But it doesn’t mean they are old and out of fashion. A KPMG survey found that around 96% of millennials agreed that companies should develop new ways to reward loyal customers. Another KPMG survey revealed that 75% of consumers would even switch to a competitor to take advantage of better loyalty rewards.
So this is good news, right!?
Well, as always the answer isn’t as simple as it always first appears.
Many brands across all industries fall into the trap that customers only want a simple loyalty program where they can see their customers as commodities that are to be mined, rather than what they should, that being, of course, their customers. To ensure that doesn’t happen certain steps need to be taken so that brands don’t create lackluster loyalty schemes that end up being a financial burden on the business rather than being a positive ROI.
In summary, with these trying times ahead, customer loyalty is at the cutting edge of brand success and economic fortitude. This is a tried and tested modus operandi with several previous economic and pandemic events clearly showing a positive reciprocal relationship in the quality of loyalty programs and their ability to help retain business during uncertain times. If you have any questions about how we at Sparta Loyalty can help your brand attain that next level, feel free to contact and we can discuss how we can take your brand to the next level.