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Persistent inflation is driving consumers to think twice about brand loyalty, with many potentially opting for more affordable versions of their favorite products.
This means CMOs must gauge how inflation will affect their brand loyalty and redouble their efforts to offer their most stalwart customers gestures of appreciation and incentives to stay true.
A recent Gartner report on how inflation will impact brand loyalty concluded CMOs must make decisions to emphasize strategic brand investment to retain existing customers or attempt to capture new ones.
Rachel Steinhardt, research director at Gartner, explained even among consumers who say they’ve remained loyal to at least one brand throughout this inflationary period, more than half of them are also disloyal.
That means they’ve also stopped buying a favorite brand in favor of a less expensive one during the same period. She pointed out only a quarter of consumers say they’ve never switched to less expensive options amidst inflation.
“But consumers are fatigued from the constant comparison shopping and re-assessing of value,” she added. "Your would-be loyal customers — the ones you’d like to retain — want clear and obvious reasons to keep you in their consideration set.”
She advised giving them exclusive perks and promotions and telling them why your product’s pricing continues to buy them savings across other aspects of their lives, such as energy efficiency or durability.
The Gartner report also advised reinvesting in affiliate marketing channels that help retailers present cashback or exclusive offers to consumers, and to speak to consumers on the loyalty fence by playing up the unexpected ways quality brands save consumers money, too.
Related Article: 4 Ways Brands Are Boosting Customer Loyalty
Investing in Foundational Customer Understanding Efforts
Halle Stern, senior principal analyst in the Gartner marketing practice, said to ensure that customers express loyalty through digital channels, brands must first invest in foundational customer understanding efforts.
“This will help determine the channels their highest-priority customers use at critical touchpoints of their end-to-end journey and not just the path to purchase," she said.
She added not every customer uses digital channels the same way, so it is important for brands to do the work to determine where customers can exhibit behaviors that indicate customer loyalty.
“Brands must also ensure that if they are leveraging a loyalty program as a part of their loyalty and retention efforts, the program is communicated across a variety of channels, rather than just through one channel,” Stern explained.
Related Article: 9 Ways to Build Customer Loyalty
Customers Want a Consistent, Personalized Experience
Ian Clayton, chief product officer at Redpoint Global, said today’s customers are clear about their expectations — a brand must exhibit a consistent, personalized experience to earn loyalty, and rewards for delivering personalization well and cultivating brand loyalty are also evident.
“Customer journeys are increasing across channels in real-time, so brands need to get the real-time basis in place so that no matter where the customer is, the brand can orchestrate next best action for them,” he said. “You can’t have data that’s seven days behind or even 24 hours behind the customer journey — it has to be real-time today.”
He added consumers are more loyal to brands that understand them as an individual, and they are more apt to purchase from the brands they are loyal to.
“If anything, inflation and the potential recession is bringing loyalty to the forefront and proving just how important it is to a brand’s success if done right,” Clayton said.
Targeted VoC Campaigns to Gather Customer Data
Stern noted voice of the customer (VoC) efforts can be improved to gauge customer loyalty and find out what improves it by brands focusing their VoC efforts on their highest-priority customers.
“Instead of deploying surveys to every single customer in their customer base, brands should be focusing on the audiences that have the highest impact on revenue and the customers that are crucial to maintaining,” she explained.
Brands should also be thinking about how to differentiate their customer understanding efforts rather than focusing on one tactic.
Although there are various tactics brands can leverage to gather higher quality VoC data (i.e., customer interviews, focus groups, customer listening), surveys will always remain as one of the most popular methods of gathering VoC data.
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“There are many different elements of best practice survey design, but brands should place emphasis on having a clear objective of the survey — in this case loyalty — and frame questions to only measure customer loyalty, measuring things such as likelihood to recommend, customer effort and value enhancement, rather than focusing on various objectives,” Stern noted.
Related Article: Building a Next-Level Customer Loyalty Program
Promoting Smart Customer Loyalty Programs, Leveraging Metrics
During this time, brands should be prioritizing smart loyalty programs with incentives that offer the most value.
"Personalization in lieu of a loyalty program’s traditional rewards may, for instance, take the form of a brand granting a status extension as a show of empathy for a customer’s new circumstances," Clayton explained. "Perhaps a brand provides specialized offers that are relevant to a customer’s unique situation."
From his perspective, knowing what matters to each customer and going the extra mile to prove that their loyalty means something to you is a huge step for ensuring loyalty lasts.
Clayton added that with third-party tracking becoming a thing of the past, brands are realizing how crucial an effective customer loyalty program can be for accumulating much-needed first-party data.
He added brands are also finding a need to better incorporate personalization and customization into existing loyalty programs to make them more effective.
“At the end of the day, loyalty programs are only as good as the level of engagement they drive, and the more shoppers are incentivized to engage, the more data a brand can have to improve communications and tailor individual customer experiences,” Clayton said.
Stern said to understand comprehensive customer loyalty, brands must measure a combination of transactional and attitudinal loyalty program metrics.
Some examples of transactional metrics include purchase frequency, repeat orders, time between transactions, revenue growth rate and multichannel usage, while attitudinal metrics include things like the Net Promoter Score, customer satisfaction, customer referrals and customer lifetime value.
"Combining the two approaches to measurement will lead to a deeper understanding of the behaviors that signify loyalty from a qualitative and quantitative perspective," she said.
Loyal Customers Boost Bottom Line
Steinhardt pointed out when consumers decide to remain loyal to a brand, they’re often willing to pay more for it.
“While the majority of consumers will buy alternatives instead, the relatively small cohort of loyal customers becomes a lifeline,” she said.
She noted half of consumers who stay loyal to a specific brand amidst inflation will pay more — either slightly more or significantly more — to own that brand.
“It’s a tough balancing act for brands: Would-be loyal customers treasure exclusive pricing perks, but existing loyal customers will pay more,” Steinhardt explained. “The common denominator here is a brand that has made a clear case for its value proposition and demonstrated its understanding of the fatigue and cost-of-living pressures consumers face.”