THE POWER OF PERSONALISED LOYALTY
Shifting loyalties?
Loyalty tends to be an early casualty in tougher economic times. During the 2007–2008 global financial crisis, one study found that more than half (52%) of shoppers either reduced or completely switched their brand loyalties [5]. More recently, and even without the impact of a full-scale recession, 41% of UK consumers admitted that their feelings of loyalty towards brands and companies have dwindled [6] while a recent study revealed that 80% of shoppers in the US admitted to altering their shopping habits by opting for lower-priced retailers or goods, compared with 74 per cent 12 months prior [7].
Sentiment doesn’t always translate into action. To see whether scenarios like those above might now be playing out in the world of grocery – and to what extent – we shifted our attention towards customer behaviours – and specifically any changes in customer loyalty.
It quickly became clear the current situation could best be described as ‘muddied’. In just under half (44%) of the featured banners, for instance, the number of loyal customers remains unchanged.
Correspondingly, around a quarter of retailers have seen loyal customers either grow (26%) or shrink (30%) over the past year or so.
Keen to understand more, we again polled some of our international client leads on the possible drivers. Where loyal customers had reduced, inflation and the rising cost of living were the most referenced causes. Notably, “shopping around post-Covid” was also mentioned, albeit far less frequently than those raw economic factors.
For those retailers that have managed to increase loyal shoppers, the sense is that an unwavering focus on customer needs has now started to pay dividends.
Our panel was quick to point to some of the Customer First strategies their clients had introduced, with members-only deals, price promotions, and relaunched loyalty programmes all cited as motivating factors in boosting engagement.
“It’s a story of consistency right the way through,” notes Sam. “We’ve already seen retailers doubling down on the most effective loyalty and personalisation techniques.
"Here we can see that they’re doubling down on their core customers too. Those who have grown loyalty have done so because they’re laser-focused on doing what’s right for their primary audience.”
For those retailers that have managed to increase loyal shoppers, the sense is that an unwavering focus on customer needs has now started to pay dividends.”
It is widely reported that customers are less loyal than ever. Looking at your client’s customer loyalty segmentation model, are they seeing a shift in loyalty?
Figure 6: For most retailers, customer loyalty is holding steady. And while a quarter have seen a decline, an equivalent number have managed to grow their base of loyal shoppers
Are customers currently buying more or less private brands from your client’s stores?
Figure 7: In most cases, sales of private label products are seen to be growing or – at the very least – remaining static. Only rarely are they referenced as being in decline.
Are you currently seeing an increase in sign-ups to your client’s loyalty programme or not?
Figure 8: More than half of retailers are seeing growth in take-up of their customer loyalty programmes.
When it comes to what’s ‘right’ for shoppers, there are few universal answers, but private brand comes closest. Sales of own-label products have increased at more than two-thirds (70%) of those retailers featured in our study, with just a tenth (11%) seeing volumes decline. This aligns closely with data from the wider market; private brand sales reached an all-time dollar value high in 2022.
Asked what was responsible for this growth, most of our client leads pointed to inflation and the rising cost of living. Some also suggested shoppers are increasingly likely to see private label products as on a par with national brands from a quality perspective. That, in tandem with the (perceived) lower cost, represents an irresistible opportunity.
“When we think about loyalty and how best to grow it, it’s very easy to focus on things like rewards, discounts, and personalised recommendations,” says Debora. “As influential as those can be, there are other routes to loyalty too. Delivering value via a strong private brand proposition can be one of them, particularly if that can be tied to some of those other mechanisms.”
Private brand sales aren’t the only area where retailers are charting significant gains. While loyalty as a whole may be comparatively static, participation in loyalty schemes is not; around half (53%) of the retailers included in this study are seeing uplift in their programmes, with just a fifth (20%) seeing memberships decline.
Keen to understand what proportion of that growth might be attributed to current inflationary pressures, we asked our client leads to highlight how they’d seen retailers using loyalty programmes specifically to tackle the challenges posed by rising costs.
Some of the key callouts included relevant personalised offers, members-only pricing, private label lines offering bonus loyalty points, subscription-based programmes, and the addition of fuel to discounts.
“Better understanding leads to better experiences – and that’s what drives loyalty.”
Debora Franchim
Director of Personalisation and Customer Engagement
Samantha Sergeant
Customer Engagement & Media Global Propositions Manager
In combination, these steps are helping retailers to cut through what Sam describes as the “loyalty noise”: “A lot of work is going in to delivering value for customers, but the most important things are where and how that value is being delivered,” she says. “What we’re seeing is that retailers are making value feel exclusive, but they’re also delivering it in areas that really matter – fuel being a notable example. That’s a powerful combination.”
With all that work going into personalisation and relevance, there’s a clear opportunity for consumer packaged goods (CPG) brands to work collaboratively with their retail partners to address their own loyalty challenges, adds Debora.
“When we look at the growth in private label, it is obviously important for CPGs to maintain their own relationships with customers,” she says. “Personalised offers and members-only pricing models provide an excellent way to do that, giving customers the opportunity to continue buying their favourite products despite the pressure inflation is putting on their grocery budget.”
“More than anything, making value personal provides additional flexibility,” she continues. “Where customers prioritise price, it’s possible to recognise and meet that demand. When they’d prefer to maintain their existing purchasing habits, but need a little help to do so, retailers and CPGs can come together and meet that need too. Better understanding leads to better experiences – and that’s what drives loyalty.”
The theme of value is a constant one - and those retailers who take the time to understand individual customer needs and then tailor their offerings to deliver individualised value are those that are positioning themselves best to maximise loyalty among their customer base. Read on for our final analysis of the information gathered for this study.
5. Recession takes bite out of brand loyalty: study – Reuters, 22nd June 2009
6. How is the cost-of-living crisis impacting customer loyalty? – My Customer, 11th October 2022
7. McKinsey annual Consumer Pulse Survey 2023