Loyalty Programs More Important than Ever to Bring Customers Back to Retail Brands

Every retail business should always try to treat its most loyal customers well. But the turmoil that has hit the retail sector during the past six months has had a profound impact on customer behavior and retailers need to redouble their efforts to ensure their best customers stay loyal.

Perhaps the most obvious change to consumer behavior has been the shift of retail sales towards eCommerce. Even though stores are now open, a significant number of consumers who only began to use eCommerce during the Covid-19 lockdown are likely to continue to shop online in the future.

In the world of omnichannel retail, it should not make a difference if consumers shop in your store or on your website; either way, you still get the sale.  But as more retail transactions shift online, it is much easier to lose that sale because online buyers are impatient and less loyal. Perhaps the item is temporarily out of stock or the website is slow, or they try to buy it and their payment is rejected. Whatever, the reason, they will probably not try again and the competition is just one click away.

A recent study by the Baker Retailing Center at the Wharton Business School, found that difficulty navigating a retailer’s website, lack of guaranteed delivery date and inability to track shipping caused an increase in “loyalty damage” in Q2 of this year over Q1. Problems relating to returns and exchanges created the highest damage to customer loyalty.

Another more subtle change in consumer behavior during the pandemic has been the changing attitudes to consumption. After months of enduring restrictions on their movement, which have made physical shopping a hassle and, in the depths of the crisis, often impossible, many consumers have realized that they can live just as well with less, particularly in the category of consumer discretionary goods. Why buy a new suit if you will be working from home for the foreseeable future?

So it is reasonable to expect that some customers will visit the store less frequently in the future; that doesn’t necessarily mean they are less loyal, but rather that their values and priorities have changed.

What are the implications of these changes in consumer behavior for retailers? It is more important than ever to have an effective loyalty program. Almost by definition, members of a program are more engaged with a retail brand. But it will perhaps surprise some retailers to learn just how much more engaged members are than non-members.

According to the authors of the BRC report, loyalty program members are:

• 80% more likely to download a retailer’s app;
• Twice as likely to subscribe to emails and push notifications;
• Three times more likely to engage with social media, with Facebook, Instagram, and YouTube leading the way.

So if you have previously downplayed the importance of loyalty programs, now is the time to revisit the subject. Loyalty programs are often one of the simplest ways to boost a business’ revenue and profits and a relatively modest investment in a digital-led loyalty scheme can have a big benefit on the retailer’s business.

Do you want to see how Openbravo handles loyalty programs? Watch our on-demand webinar “Hands-on Demo: Engage and Motivate your Customers with a Loyalty Program“.