There’s been a significant shift in the focus of loyalty in the retail sector. Customers want to create a genuine emotional connection with a business.
They want to interact with brands, to be ‘part of the tribe and part of the team’. 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 encourage them to be your loyal advocates?
Let’s start by looking at what loyalty means to customers. What are they looking for? What’s going to make them loyal to you and your brand?
One of the obvious first steps is implementing a loyalty program. Do you have a loyalty scheme in place? What is your database? How do you interact with customers regarding this?
Our Retail Doctor Group Insights Research shows that loyalty schemes significantly influence one in five customers. This research found 92 per cent of women and 86 per cent of men are members of loyalty schemes.
So, we see this large proportion of people who are members of retail programs and want to interact with businesses personally. However, the offer needs to be correct.
So, let’s take a closer look at those pesky Millennials and Gen Zs because one of the things that has been the ‘talk of the town’ regarding retail sentiment is that younger consumers are less influenced by loyalty.
This sentiment is quite the contrast to what we are seeing in our research. We’re finding that younger demographics can be more loyal, more vocal, and the most prominent advocates of your business.
This is only true if the offer is correct and you have the brand they want to connect with. Our research shows that loyalty programs influence three-quarters of consumers aged between 25 and 34 in all sectors.
Loyalty schemes influence Gen Z and Millennials more than any other segment! But just how are they influenced? The findings below will help you understand why you must fine-tune your approach to loyalty programs and younger customers.
Spending in different groups
First and foremost, loyalty schemes influence customers to visit stores more often. Research has found that 38 per cent of consumers reported that loyalty programs influence them to visit a particular store or retailer more frequently.
Almost one in three consumers spend more every time they visit because they are a member of that program. It’s also been discovered that consumers aged 25-44 are significantly more likely to spend more when they’re members of a retail loyalty scheme.
This demographic outperforms all others regarding retail spending based on loyalty. It’s evident that having the right offer and creating an emotional connection through your loyalty scheme can develop a significant return on investment for you and your store.
A key question is who you aim for in your loyalty scheme. What segment of consumers do you want to interact with? And what does this all mean for you as a retailer?
This is an integral part of your customer behaviour journey and a key in 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.
- Ask yourself the following question – what will 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 about why they want to interact with you.
Our Consumer Insights data below can help you understand what your consumers like about loyalty schemes.
The most important conclusion from this data is that consumers seek various options. There is no one-size-fits-all solution. It’s been found that 50 per cent of consumers are looking to redeem points, aiming to collect points quickly, and are actively searching for exclusive discounts.
Once again, who are you targeting with your loyalty scheme, and what do they want? This will differ depending on their personality types and demographics. This is why loyalty schemes should be as individualised as possible.
Our research has found that different personalities have different loyalty drivers. Below is a list of groups to consider when assessing your customers.
Group one: These consumers want to be rewarded with discounts, promotions, and exclusive offers.
Group two: Performers looking for status tiers and VIP omni products. These consumers expect to feel important.
Group three: Consumers seeking gamification, excitement, fun, and competition. They expect your business to make shopping exciting and engaging for them and will remain loyal if you do so.
Group four: Bored consumers searching for new and exciting products. This group is excited by the launch of new products, particularly when they’re available to them exclusively.
Group five: Consumers searching for open-minded pleasure. They expect products and services to make their life easier and more enjoyable.
Group six: Harmonisers looking for a business to relay to their friends and family. They expect to be a part of a community with family discounts, linked rewards, and club memberships.
This is Australia's largest segment, around one-third of all consumers.
Group seven: Traditionalists who are eager to feel pampered. These consumers seek help with production decisions and expect excellent personalised customer service. They should also be offered a warranty and given any other appropriate guidance.
This is another significant segment of Australian retail consumers, comprising around one-fifth of all shoppers.
So, considering loyalty scheme spending behaviour, we return to the question of who our consumers are.
If you’ve previously read about consumer personalities, you’ll understand just how much this aspect drives consumer behaviour.
How does personality influence loyalty?
We know 95 per cent of consumer decision-making happens in the emotional brain. This is the limbic part of the brain.
The limbic system is the part of the brain involved in our behavioural and emotional responses, especially concerning behaviours we need for survival. These include feeding, reproduction, caring for our young, and fight-or-flight responses.
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 five per cent 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 motivations behind purchasing decisions and behaviours, specifically the desire to feel special, to be part of the community, and to be entertained.
What are your consumers driven by? By understanding this, you can determine the type of loyalty scheme and its offerings. Until recently, that driving influence was thought to be driven by demographic segmentation. We consider our consumers through a demographic lens in fictional retailing.
Now, it’s more important to think about the consumer’s driving ‘why’ through an emotional lens.
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