COVID-19 disrupted life across the globe for people and businesses alike. In the U.S., stay-at-home directives pushed more people to work and shop from home than ever before. But for many businesses, the digital journey, paired with increased demand, caused shortages in products and services.
This reality, along with factors like accessibility, safety and value, are affecting brand loyalty in ways not we haven’t seen before. In fact, a recent McKinsey report revealed that more than 75% of consumers in the U.S. have changed their shopping behavior, with the majority doing so for value, availability, and convenience.
Here are five factors driving this shift and what marketers can do to stay ahead.
A Rapid Increase in Digital Adoption Puts Loyalty up for Grabs
The U.S. Census Bureau recently announced that consumers spent $211.5 billion online during the second quarter, an increase of 31.8% from the first quarter of 2020. According to Walmart’sthird-quarter earnings reportonline sales were up 79%. Business is booming online.
According to Gina Fleck, senior director of strategy and insights and promotion andloyalty solutions at Merkle, Inc., brands were pushed to try new ways of doing business and to “accelerate innovation in areas like technology, partnerships and rewards, and that has led to brands connecting with customers in new ways.”
Economic uncertainty has also caused customers to pay extra attention to those brands that have earned their loyalty. “Especially loyalty programs, which are being looked at through a lens of value,” Fleck said. “Customers want to make sure that they are getting a strong return both in terms of how they earn and how they redeem.”
A McKinsey report, entitled “The Quickening,” reported that e-commerce has experienced the same amount of growth in three monthsthat would have previously taken 10 years. As a result, consumers are going with brands that are convenient, reliable and have the products and services they are seeking.
Shep Hyken, customer service and experience expert, CAO at Shepard Presentations, said the pandemic has put consumer loyalty up for grabs. “Because a company doesn't adapt or adapt quickly enough to what the new norms are, customers are saying ‘I'm going to go try somebody else,’ at the moment you give them the opportunity to review and try somebody else,” he said “They might like what they have elsewhere enough not to come back.”
Lack of availability has affected his own sense of loyalty, Hyken said, and that same thing is happening on a broad scale across the world as customers are pushed into trying new brands. This has long-term effects on loyalty as customers find that new brand acceptable, and perhaps even better than their previous brand.
His usual retail outlet ran out of his favorite ice cream. “So thanks to that, I have a new favorite.” he said “You know, they pushed me to try another flavor. And I liked it even better. And that's not going to happen all the time. But that's what any company risks.”
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Value and Convenience Drive Customer Loyalty
A McKinsey report on consumer sentiment indicated consumers around the world have responded to the pandemic by engaging in different shopping behaviors. Convenience is now one of the main factors driving customer loyalty. “Certain companies have really been emphatic about making sure the process becomes convenient and COVID-friendly. Those are the companies that I believe are appreciated,” said Hyken.
Additionally, customers are holding on to their money in the face of economic uncertainty, and looking for greater value in those items they do purchase. The convenience of being able to buy all of the items they need from one retailer is driving customers to purchase more at once, rather than going from one retailer to another as they normally would have done.
Fleck said value and convenience are tied to exceptional customer experience. The reason Amazon is so successful is the company makes it so easy and convenient to buy practically anything, she said. The same could be said about Starbucks, which provides a mobile app that makes the purchasing experience more convenient.
“Starbucks has seen huge success with its loyalty program because of the seamless app experience that makes it easy to order and pay,” Fleck said “It’s not just about the digital experience — it’s the entire customer experience and finding ways to create value and convenience end to end.”
Customer Pain Points Reduce Brand Loyalty
Each touchpoint in the customer journey is an opportunity to build an emotionally positive connection with a customer, but it is also an opportunity for customers to run into roadblocks or other pain points.
There is a direct correlation between the bottlenecks a customer experiences and how loyal they will remain to a brand, Hyken said, and customer experience cuts across all of a brand’s channels.
“Let’s say that I want to buy something and walk into a store. I'm having a bad experience,” he said. “I walk out and then I go down the aisle to another store at the other end of the mall, and they're not as busy, I go in there and get what I want. That other company that didn't properly staff, that didn't create the process for the holiday shopper may have lost a customer permanently.”
The customer is likely to remember the last experience they have with a brand, and their loyalty often depends on whether that experience was positive or negative. If it was negative, the customer will remember what was done (or not done) to address the problem.
Customers Shop Locally to Support Their Community
Customers have continued to remain loyal to local businesses in the midst of the pandemic. The National Retail Federation indicated that 49% of consumers made a purchase specifically with the intention of supporting local small businesses during the crisis. Customers have been doing whatthey can to support local businesses, either by using their online store, taking advantage of delivery and pickup options, or opting for outdoor dining at local restaurants.
“I’m loyal to my local coffee shop, for example, even though they don’t have a drive-through and parking is a nightmare,” Fleck said “Despite that, the baristas know my name and exactly what I want to order, so by the time I get to the counter, they have everything rung up and my drink is almost done being made — which is incredibly convenient. They use a local coffee that I love, and I have a personal relationship with the staff. Those things are valuable to me.”
The choice to support local businesses is not necessarily coming from a sense of loyalty to those businesses, but rather a desire to help local businesses that have been heavily impacted by the pandemic. “In general, this is coming from a place of civic and social responsibility and accountability, and not necessarily a shift in brand loyalty in most cases,” said Fleck.
Customers Adopt New and Potentially Permanent Habits
There is good reason to believe that these trends will continue long after the pandemic is over. In a statement, Walmart chief executive Doug McMillonsaidnew customer behaviors will persist and that Walmart is prepared to provide customers with the value and experience they are seeking.
The McKinsey report on consumer sentiment indicated that 65% of those polled intend to continue to engage in different shopping behaviors. A report on brand reckoning (registration required) from communications firm Ketchum indicated that, of those consumers who switched brands during the pandemic, 62% will make that change permanent.
When asked if she thought customers would return to brands once the pandemic is over, Fleck said it depends on how well the brands were able to maintain a relationship with the customer during the pandemic.
“If the brand was able to stay top of mind and provide resources or content that was useful or appreciated, then it’s definitely likely,” she said. “If not, then it might mean the brand needs to return focus to a strong push for acquisition and win-back versus ongoing retention.”
Hyken said many of the trends we are seeing were already in the works and that nothing that is happening now is the result of a new invention. “There's a lot of curbside delivery, curbside service delivery service, touch lists, touchless service, cashless transactions — all this would have happened in the next three to five years,” he said.It took customers a few months to get used to the new normal, but now that they have come to recognize the convenience of shopping for groceries online, for example, they will be unlikely to go back to shopping in store. These are theconsumer behaviors likely to remain long after the pandemic is over, Hyken said.
“People found out just how easy it is to use Instacart,” he said. “Why would they go back for the typical grocery delivery?”
While the trends are clearly pushing in new directions, no one knows for sure what is next for customer experience. As a result, organizations need to remain agile, provide value and stay up to date on the needs of customers to ensure they remain loyal and keep coming back, long after the pandemic is over.