Many businesses may need to urgently rethink their approach to keeping customers loyal as the impact of the recession deepens, according to research by The Logic Group which found that, although 52% of UK consumers say they are members of a loyalty scheme, there are still significant opportunities to develop greater loyalty.
The positive news for the 57% of business leaders that recently stated their intent to focus on nurturing and keeping existing customers rather than concentrating on attracting new customers (only 23%) is that this strategy is likely to pay off during hard times, with the strongest companies concentrating on improving the customer experience and paying more attention to their best and most profitable customers.
The research report, entitled 'Imperatives for Customer Loyalty', explains that the traditional models for engendering customer loyalty are changing with the economic climate, even in sectors where existing barriers to brand-switching are significant.
Indeed, according to Antony Jones, CEO for The Logic Group, "Consumers were very clear on the need for organisations to deliver on their promises, to provide good customer service, and to recognise them as individuals. As the recession bites, it is evident that businesses have a very clear brief: focus on improving the customer experience and building loyalty through programmes that deliver rewards that are actually valued by customers."
According to the research, supermarkets, banks and building societies act as a reference point for attitudes to loyalty with 72% of consumers feeling loyal to at least one company in these sectors. However this may suggest that, for many consumers, loyalty is more about habit than a deep attachment. Surprisingly, although banks have seen their public reputation collapse in recent months, 72% of people still described themselves as loyal to their primary bank or building society.
The survey found that significant opportunities remain for improving feelings of loyalty among customers, with almost half of the population not taking part in a loyalty programme of any sort. The majority of consumers that have signed up for loyalty programmes described themselves as feeling only 'fairly satisfied with the benefits' in the retail sector (51%). Only 24% in retail and 13% in financial services were prepared to describe themselves as feeling 'very satisfied'.
The research also provides an insight into the different demographic and age profiles of consumers' attitudes to loyalty, reflecting the need for businesses to recognise these if they are to succeed in retaining customers during the difficult year ahead. For example, 15 - 24 year-olds seem to see little value in today's loyalty programmes, with only 28% being a member of any such programme.
Simon Atkinson, managing director of loyalty for Ipsos MORI, added: "In a business environment where the focus has shifted sharply onto the retention of customers, it is striking that so many of us don't take part in loyalty schemes, while those of us that are members don't necessarily value them. Current programmes urgently need to be reviewed and refocused if businesses are to successfully create true loyalty amongst today's consumers."
The report concluded that customer loyalty is not necessarily only about specific tangibles such as points or money off and that, instead, good customer service (34%) remains the leading driver in encouraging people to spend more in the shopping and retail sector, even within loyalty programmes, followed by rewards that were relevant to the individual (30%). Both of these were prioritised ahead of rewards that provide money off (25%) or periodic vouchers (16%).
At the other end of the scale, poor customer service (44%) is the feature most likely to put people off from increasing their spend as members of loyalty programmes, as are unachievable rewards (28%), unrealistic points expiry deadlines (20%), and too much communication (18%).
"As the focus turns to retention rather than acquisition, despite current beliefs that consumers will switch their business to value brands or price offers, opportunities for organisations to build successful loyalty with consumers still remain. A clear imperative has been identified in linking customer experience and service with loyalty programmes that are relevant to an organisation's consumers. The time has come for businesses to be loyal to their customers, rather than expect the other way around," concluded Jones.
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