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Published: September 9, 2020

COVID-19 has served as a litmus test for shopper loyalty, exposing the vulnerability of brand and store allegiance when consumer’s lives were thrown into disarray, and ‘business as usual’ was disrupted. In an environment in which basic needs such as store safety, product availability, and purchase price have emerged as the primary priorities for a consumer’s choice in retailer and brand, retailers and suppliers are having to re-assess the role that their customer loyalty programs and coalition loyalty schemes can play in driving shopper behaviour and engagement.  

Big Data and the Digitization of Loyalty Schemes

On the surface, the primary impetus of a membership program is to incentivize and reward spending. However, the true value of a loyalty program lies in the high level of personal and transactional data captured. In a period where shopping trends are evolving by the day, retailers with robust loyalty programs have a leg up on their competitors. They can gather real-time behavioural data such as trip frequency, basket size, and product sales that can then be analyzed to inform merchandising and consumer marketing decisions. In addition to collecting valuable transactional data, loyalty programs can also be utilized to gauge consumer sentiment. Loyalty schemes with engaged members are more likely to have those members respond to surveys around what is important to them, especially if survey completion comes with the bonus of earning points or additional member benefits for doing so.  

Engaged program members are under the expectation that by disclosing personal data and other information, the insights shared will be used to create a better experience for them. According to the Bond Brand Loyalty’s Consumer Tracker study, member satisfaction increases 6.4 times when personalization is executed correctly. A survey from a brand or retailer distributed during COVID-19 that focuses on understanding the shopper’s needs also serves as a platform to demonstrate that you value their input and are looking to address the issues that matter to them.   

Under the new realities of a stay-at-home and touchless economy, loyalty programs can also be leveraged to offer a more seamless and virtual shopping experience. According to a joint study from the Wharton Baker Retailing Center and WisePlum, engaged loyalty scheme members are 80% more likely to download a retailer’s app, twice as likely to subscribe to emails and push notifications, and three times more likely to engage with social media such as Facebook, Instagram and YouTube. By virtue of having “digitally engaged” members across a variety of technology platforms, these provide the infrastructure to interact more holistically and consistently with a shopper base. Walmart, in September, will be launching its newest membership service Walmart+. In addition to benefits such as free delivery and discounts, members will be able to download an app that allows them to scan and pay for their items as they shop in-store, thus eliminating the need to queue up at checkouts. Australia’s Coles is capitalizing on its Flybuys loyalty program to help make the online shopping and checkout experience more seamless for its program’s members. Through the launch of a new online payment channel called Flypay, members can attach a payment method to their Flybuys account. This then allows for a single click purchase confirmation as opposed to having online shoppers go through the process of inputting their payment details every time they place an order.  

Another way in which digitally enabled loyalty schemes currently hold an advantage over their more analogue counterparts is in the area of coupons. According to Inmar Intelligence, the redemption of digital coupons in the US surpassed the redemption of paper coupons for the first time in Q2 of this year. Many retailers, including the likes of Walgreens and CVS, have halted the distribution of print circulars and shifted all leaflets and direct mail campaigns online.  

In addition to meeting the more obvious need of accounting for the fact that people are reluctant to receive and handle paper coupons due to hygiene concerns, digital coupons offer suppliers and retailers the ability to reach consumers faster and in a far more personalized manner. Digital coupons can arrive in a consumer’s inbox instantaneously versus the six to eight weeks it could take for a physical coupon to reach a mailbox. The offers included can also be more individually personalized compared to more generic printed leaflets that are distributed en-masse to multiple households. 

Image from Marks & Spencer

Flexible Rewards Matter When it Comes to Loyalty

Findings from Bond Brand Loyalty’s latest COVID-19 Consumer Tracker study reveal that only 45% of customers find rewarding loyalty important given current conditions. This is an understandable sentiment as other factors take precedence, such as “product availability at the closest locations” (87%), “hand sanitizer/handwashing stations” (84%) and “facilitating social distancing” (83%). As conditions stabilize and consumer confidence gradually returns, loyalty scheme operators will need to reassess how consumers want to be rewarded in the “new normal.”   

According to Bond, the average consumer belongs to 15 loyalty programs but is active in less than half of them. The top complaint rendered is around rewards, with consumers wanting greater flexibility in how points are earned and the ways in which they can be redeemed. Salesforce, in its second “State of the Connected Customer” study found that 74% of consumers want companies to understand their needs and expectations. 

Travel rewards, the lifeline of several loyalty coalition programs such as the UK’s Nectar and Canada’s AIR MILES, do not currently offer the excitement they once did due to travel restrictions and apprehension. This is prompting reward program operators to adapt by offering points and rewards from and towards products and services currently in higher demand. As an example, Chase Bank recently added Netflix and Spotify to the list of affiliate brands where their credit card customers can spend their points.  

Recognizing that customers are shopping less frequently than they were pre-lockdown, Tesco is extending by six months the deadline in which its Clubcard members can redeem their accumulated points and vouchers. Vouchers that were set to expire on May 31st, as an example, are now valid until November 31st. Marks & Spencer, similarly, is stretching the period in which its Sparks program members can add points to their balances from 30 to 90 days.  

As discussed in last week’s edition of InFocus, COVID-19 is inspiring people to adopt a greater level of concern for their community, leading people to become more charitable  and pay greater attention to the ethics and social consciousness of the brands and retailers they engage. Nectar, the loyalty scheme coalition anchored by supermarket chain Sainsbury’s, allowed its members to donate Nectar points towards Comic Relief and the BBC Children in Need charitable campaign raising funds to help those in need as a result of COVID-19. Nectar also matched all member donations made to the two charities between April 9th and May1st.  

Advantage Perspective

Engagement matters. Winning loyalty programs elevate the customer relationship from transactional to emotional, with a focus not only on driving purchases and interactions but on achieving a personal connection with members. At a time in which consumers are feeling financially insecure and anxious about their health and general well-being, now more than ever, loyalty programs need to demonstrate care and empathy.  

Surprising members with a promo code or discounted item not tied to a recent purchase, but as a gesture of letting them know that you are here to support them in these stressful times, is a great way to engender goodwill. While some retailers were receiving bad press for price gouging on essential items such as toilet paper and pasta, those that instead offered these items to members at a discounted price conveyed that they put their customer’s well-being over their own bottom line. Such goodwill gestures would not be possible without the cooperation of supplier and retail partners on inventory, communication, and pricing strategies.  

Member engagement does, however, come with higher expectations and pressure to consistently overdeliver. In the aforementioned Wharton Baker WisePlum Consumer Loyalty Study published in August, 2,500 US consumers were asked to identify the changes that COVID-19 has brought about in retailer customer experience. 47% of those surveyed indicated that they belonged to a retailer’s loyalty scheme, with loyalty program members experiencing more problems throughout the shopper journey due to higher engagement levels and purchase frequency than non-members. The survey went on to find that customers who encountered problems with a retailer were 35% less likely to remain loyal to that retailer than to those with who they transacted problem-free.  

Of the problems cited, the one that was dubbed least forgivable was related to returning items that were ordered online. Membership program customers believed that the retailer should know who they are and make it easier for them to return items without an original receipt or without having to pay for return shipping. Loyalty program members who encounter a problem are also two and a half times more likely to contact a retailer than non-members, reinforcing the importance of the message stated earlier that in exchange for providing personal data, program members expect a higher level of personalized service and more frictionless interactions.   

For loyalty programs to evolve from transactional to emotional, benefits need to concurrently evolve from monetary to experiential. Consumers will long remember how they were treated by the business that they patronized during a time of crisis. We all know of someone who has complained about an airline they had booked a ticket with, pointing to the fine print of the purchase order to justify not issuing them a refund once COVID had derailed their travel plans. Compare that to the car insurer who decided to lower the monthly premiums of all of their customers to help relieve their financial burden once COVID hit.  

Consumers, now more than ever, are looking for a human connection forged through a sense of community and safety. Loyalty schemes have an opportunity to solidify this bond through the creation of meaningful customer experiences derived from their unique ability to understand and dissect what their customers value. Retailers and suppliers alike must work together to leverage their respective membership programs to collaborate on innovative and enticing incentives that appeal to today’s evolving consumer in order to build brand loyalty.