Evolving Behaviors Demand Renewed Examination of Transactional Loyalty
What the heck is happening with customer loyalty? If you ask those looking into the effect the pandemic has had on the loyalty industry, they might have an answer you wished you didn’t hear. But the facts can’t be ignored — covid has challenged loyalty behaviors in customers and altered the way they prefer to interact with brands.
According to joint research from first-party customer data specialist, Edit, and digital transformation consultancy Kin + Carta, more than a quarter (27.4%) of UK and US consumers now show no brand loyalty at all. Let’s not panic, though. Rather than spelling out the demise of our beloved trade, numbers like these might instead be a clue into the evolution loyalty programs must undergo to maintain relevance amongst new audiences.
A further look at the report by Edit & Kin + Carta reveals quantitative insight into the state of loyalty psychology. 2,000 respondents split equally between the UK & USA were asked multiple-choice questions relating to loyalty, personalization, and customer experience across a broad range of sectors. Key findings included the revelation that certain sectors are seeing a definite slump in loyalty affiliation since the pandemic’s grip on the nation. E-commerce, for example was one of the worst performing sectors analyzed, with only 6% of consumers claiming loyalty to brands within that vertical. Other poor performers included finance (9%) and offline retail, food and drink (21.5%).
Other studies back up these conclusions. A review by Omnicom Media Group during the heart of the pandemic discovered that brand loyalty declined up to 65% in late 2020.
The Truth About Brand Loyalty
Some of the rationalizations explaining this loyalty downturn may be familiar. For example, it’s true that key aspects of the US economy struggled during the pandemic. But other economic metrics have been quite healthy, even strengthening in 2021 into 2022, despite the continued observations that customer interest in brand loyalty may be waning.
So, what’s going on? Is brand loyalty really over and done with?
Rob McGowan, joint managing director at Edit, speaks to this phenomenon in the context of the research study his team conducted:
These results suggest that while the e-commerce sector boomed during the pandemic, brands would be wise not to confuse habitual purchasing with perceived loyalty.
The truth is, brand loyalty is inherently changing, and has been for some time. Customers are becoming acutely aware that the majority of programs which dramatize “loyalty” are superficial tactical ploys that reward purely transactional behaviors. Kantar, the world’s leading data, insights, and consulting company posits that we are moving towards a “kinship economy,” in which personal relationships are central — relationships which can mature to facilitate and foster brands. Brands easily fall into the trap thinking that rewarding repeat transactions, or executing traditional marketing which leads customers through the path-to-purchase on paper is equivalent to loyalty. But loyalty is far more than a series of transactions; it’s the underlying kinship with the brand itself that counts and the invaluable feelings and emotions of attachment that keep the brand firmly entrenched in the mind of the customer. Karl Hampson, CTO, Data & AI at Kin+Carta, states:
Our research shows that brands must not confuse repeat purchasing with “loyalty”. Instead, they should balance repeat transactional activity with how engaged the customer is across all interactions.
To own this territory, and to insulate your member base from the rise and fall of cyclical demand trends (pandemics included), loyalty programs must finally think past the transaction.