Customer loyalty is changing

Voting with their wallets

According to recent research by McKinsey, more than 75 per cent of consumers have changed their buying habits since the onset of the pandemic.

In what they describe as a “historic shift in customer loyalty”, 39 per cent of people have changed brands or retailers, while 79 per cent are continuing to explore their options.

The research found three major drivers of this shift: availability, value and purpose.

Availability and the importance of avoiding out of stocks

According to further McKinsey research from the US, over 60 per cent of consumers have experienced out-of-stock items in the last three months. And for most of these customers, it resulted in them switching brands.

In fact, only 13 per cent of customers waited for the item to be in stock, while 39 per cent changed brands or products, and 32 per cent switched retailers.

These incredible statistics highlight the importance of effective inventory management and illustrate why retailers must employ all the tools they have at their disposal for avoiding out of stocks.

Value and what’s in it for them

Value relates to price, but most importantly it reflects the perception of what a customer will receive for the money they outlay.

Importantly, value also encapsulates the experience a consumer has with a brand – from its marketing to its service, staff knowledge, and ease of transaction.

It also relates to how valued the customer feels, including the rewards a retailer draws on to recognise its valued clientele.

Purpose and why customers will opt-in for what you stand for

Perhaps the most fascinating shift in customer loyalty relates to purpose – that all-important social ethos where the consumer buys into what the retailer stands for.

This trend became evident early in the pandemic, but the rise of the socially conscious consumer was evident long before that, with customers increasingly making decisions based on factors like:

• Where and how products are manufactured
• Ethical product sourcing
• Environmental sustainability
• How the company treats its employees
• Plus more…

Enhancing customer loyalty

With customer loyalty at a turning point, retailers can no longer afford to simply do what they have always done.

With that in mind, here are five key tips for increasing that loyalty…

Use data to create a personal experience

Retailers potentially have an incredible volume of first-party data at their fingertips, but often it’s not used to the best effect.

This data helps capture trends and spending habits on a macro level, but also drills directly into the products the individual consumer has purchased before, their demographic, location, abandoned shopping carts, and more.

Leveraging data both in-store and in the omnichannel environment allows retailers to create a personalised experience for their customers, including offers, rewards and incentives.

And when the customer feels known, valued and spoken to as an individual they are more likely to forge a loyal connection to a brand.

In statistics that back this, McKinsey found personalised offers to customers:

• can boost revenue and retention rates by up to 15 per cent
• are up to 30 per cent more efficient as a marketing technique
• increase customer acquisition rates by 3-5 per cent

Recognise loyalty and provide value

Many retailers have loyalty programs, but the focus needs to shift to the value that program offers their customers.

Are incentives personalised, and based on their spending habits? Are offers tailored to them or good enough to entice them into the store or to a website to spend?

Again, this comes down to catering to the big customer question ‘what’s in it for me?’ by ensuring the value of the offer meets their expectation.

Reduce out of stocks

Perhaps the most simple way for retailers to increase customer loyalty is by actively targeting that age-old problem of out of stocks.

And there are now a wealth of tools to assist, including analytics, inventory management, and more.

To learn more about the changing consumer, see here, or view our analytics and insights tools which help improve store operations and customer loyalty.