Loyal customers sustain brands through the lean times.
Consistently we see that loyal customers spend more than new customers and can provide up to 80% of a business’s revenue. Earning that loyalty, however, is never guaranteed, particularly when an evolving economy continues to drive changes in consumer behavior.
So how exactly can marketers earn a customer’s loyalty? Perhaps the best way to answer that is to ask the customer directly.
SAP Emarsys recently conducted research on respondents across the globe to ask them all about loyalty. The findings, presented in our 2023 Customer Loyalty Index report, reveal how current global and economic factors are impacting the way customers demonstrate loyalty, and how marketers can earn the loyalty of their customers throughout the rest of 2023 and beyond.
Let’s look at three key findings from the report that can help marketers better understand their customers and increase customer loyalty.
1. Incentives spark loyalty, but won’t sustain it
Discounts and incentives are go-to tools in the marketer’s toolbox because they’re powerful motivators for attracting and converting customers. After all, there’s not a consumer on earth who wants to spend more money on a product or service than they have to. In fact, research shows that, this year:
- 45% of customers agree they will be loyal to retailers due to discounts and incentives compared to 39% in 2022 (source: Customer Loyalty Index 2023).
This increase from the previous year would suggest that customers are more responsive to incentives. Yet, when asked to think about what actually keeps a customer loyal to a brand long-term, the answer is different:
- In 2023, 47% of customers will remain more loyal to retailers offering discounts, incentives, and rewards, compared to 56% in 2022 (source Customer Loyalty Index 2023).
At first glance, these seem contradictory. But what this research reveals is that, this year:
- Incentives are more effective at initially earning a customer’s loyalty.
- Incentives are less effective in sustaining a customer’s loyalty long-term.
One reason for this is that incentive-driven customers are always looking for the best incentive. They remain loyal to you only until a competitor can offer a better deal.
However, a second reason, as revealed by the research, is that customers now expect more in exchange for their loyalty.
2. Customers expect more in exchange for their loyalty
Today’s customers are very much in control of their relationships with brands. And why shouldn’t they be? Through the growth of e-commerce, customers have more options than ever before, along with more ways of finding and connecting with the brands they love. They no longer have to settle for subpar customer experiences.
With this in mind, it’s no surprise that customers are setting the bar higher when it comes to maintaining their long-term loyalty.
- In 2023, 20% of customers agree brands must “do more to maintain their loyalty,” compared to 13% in 2022. (source: Customer Loyalty Index 2023)
If 20% doesn’t seem high, consider that this is a 54% increase when compared to the previous year.
If you’re wondering what those expectations look like, personalization, exclusive offers, and more loyalty points all came up in the research. When looking at US customers specifically, here’s what we found:
|“What, if anything, do you expect to see in exchange for your loyalty to a particular brand?” (Select all that apply)|
|More loyalty points to be spent as you choose||45%|
|Best pricing compared to less loyal customers||43%|
3. Loyal customers won’t tolerate poor quality and service
It might seem obvious that poor product quality and poor customer service could negatively impact customer loyalty. But for brands willing to test their luck and try cutting corners anyway, they’ll quickly discover how it hurts their bottom line.
The recent research from our Customer Loyalty Index report shows exactly what will drive loyal customers away from a brand, never to return:
|“What are the top things a brand would have to do, if anything, to lose your loyalty?”|
|“Sell poor quality products.”||44%|
|“Increase prices while lowering quality of service.”||42%|
|“Poor customer service.”||42%|
|“Treat existing customers poorly.”||30%|
It’s worth noting how the top reasons a brand will lose a customer’s loyalty come down to how they treat customers. Whether it’s product quality, experiences, service, or pricing, customers want the best. The brands that can meet — or better yet, exceed — expectations on all fronts are the ones that will have the greatest share of loyal customers, and as a result, the greatest business outcomes.
Applying the research to your customer engagement strategy
We’ve looked at three key research-backed customer loyalty insights. But now, as you refine your customer engagement strategy, how do you apply these insights to ensure you can increase retention and maximize customer loyalty?
Here are a few key tips:
#1. Use segmentation to ensure the right customer receives the right discount
The latest loyalty research shows that discounts can lay the initial groundwork for building customer loyalty. But indiscriminate discounting can hurt your margins. And not every customer needs or responds to discounts. Use segmentation to ensure the right incentive reaches the right customer.
“[We mapped] out our customer journeys, looking at how we wanted [them] to sit within each customer segment, and what journey we did want to take the customer through for each flow. We also discovered how to fill the gaps in our automated programs… and [identify] which segments to prioritize. So, by identifying these segments, identifying these gaps, we were able to leverage the Emarsys AI to really see where the highest revenue potential was within each segment.”
— Kelly Priest, eCommerce & Digital Marketing Manager, French Connection (AUS)
#2. Earn your customer’s loyalty with 1:1 personalization
The research confirms that customers expect brands to do more in exchange for their loyalty, and the “more” includes personalization and exclusivity. One-size-fits-all marketing might seem appropriate for certain promotions, or during and after the holidays when many customers have the same shopping objectives. But going by the numbers, it’s clear that customers expect relevant, 1:1 experiences in every engagement.
If you want to build on your new customer relationships and convert them into loyal lifelong shoppers, leverage your data to incorporate personalization when and where possible, and offer deals exclusive to customers on a 1:1 level.
“Through our loyalty program, Insider Rewards, customers share their data with us and expect us to use it to add value to their day-to-day lives … and drive more personalized product recommendations [that provide] a more rewarding experience whenever they choose to shop with us.”
— Elisse Jones, Group Head of Loyalty, Total Tools
#3. Unify the customer journey for unparalleled service and experiences
We learned from the report that bad customer experiences and poor customer service are both surefire ways to lose a customer. If your data and channels aren’t connected, you are certain to leave your customer with disjointed, or even frustrating, experiences — bad for your customer and bad for long-term loyalty.
Bringing together your data and channels into an integrated solution ensures that no matter where a customer is along their journey with your brand (first purchase, making a holiday return, shopping your post-holiday sale) or where they choose to connect with your brand (online or in-store) they’ll always have a seamless and satisfying 1:1 experience.
“So the way that we’re using technology to improve our fans’ lives is [by] really understanding what our customers want and where they are in their individualized journeys. So we have … a massive span of different, individualized types of fans we connect with. [By] understanding [where] they are in their journey, where they are interacting with us, we can take that information and [help] craft how we stay connected with them.”
— Josh Ehren, Global Head of Direct to Consumer, Gibson Brands
Learn how your customers truly feel about loyalty
As a marketer, it’s easy to get so focused on loyalty through the lens of business objectives that we forget to consider: what does loyalty look like from the customer perspective? What do today’s customers think and feel about loyalty? And what does it take to actually earn and secure their long-term loyalty?
Those questions, amongst many others, were what propelled us to conduct our 2023 Customer Loyalty Index. The report not only yielded rich loyalty insights from a global consumer perspective, but it also revealed nuanced differences in loyalty behaviors amongst US, UK, Australian, and German consumers.
As you start to map out your strategy for driving customer loyalty in Q4 and into the new year, make sure you have the latest research to guide you. Download your free copy of the 2023 Customer Loyalty Index report now.
Then, as you look to execute on your strategy, ensure you have the best omnichannel customer engagement solution for delivering the highly satisfying 1:1 experiences your customers expect in exchange for their loyalty.