Investing in loyalty during a period of inflation
In recent months, economic instability has brought its share of uncertainty and represents a source of anxiety for many families across the country. Runaway inflation puts increased pressure on everyone’s finances, and consumers are looking for tools to help them cope with this additional financial burden.
Naturally, essential consumer goods—such as those belonging to the food, health and transportation sectors (particularly gas)—are the ones people pay the most attention to. Since these items are purchased regularly and frequently, any increase in the cost of these basic goods is noticeable and easily measurable.
Economically uncertain times provide an opportunity for managers of customer loyalty programs to show their empathy with consumers. This article will present a variety of ways a company can accomplish this, in addition to covering concrete examples.
Cultivating the relationship
Customer relationships are the heart and soul of loyalty programs. While this might seem obvious, it’s also essential to remind yourself of this fact on a regular basis. This idea should orient every last activity and strategy.
Given the confused and uncertain economic context we’re currently experiencing, adapting your programs to Canadians’ needs and developing personalized offers that bring true added value are the best strategies for strengthening your relationship with your customers. To accomplish this, managers must focus on three main features: trust, attentiveness and empathy.
As presented in a recent article published by Deloitte, trust is becoming more and more central to how consumers evaluate brands. According to Deloitte, companies who have gained their customers’ trust perform up to four times better than their competitors, and customers who trust a company are 88% more likely to repurchase products or services from them.
In short, trust pays.
But while this might appear to be a simple idea, it’s tough to achieve.
Trust is hugely complex, difficult to define and measure, and very easy to lose. In addition, qualities that influence the degree of trust given an organization—reliability, transparency, competence and humanity, amongst others—vary from one person to another and are based on their personality, culture and values.
This means the loyalty programs more likely to earn the trust of their customers are those able to understand—or better, anticipate—customer needs and offer a solution that is as adapted, efficient and personalized as possible.
Attentiveness and empathy
To change your offer to meet customer expectations and gain their trust, a company must absolutely be open to hearing from members of its loyalty program, who represent the most valuable segment of its customer base. While this should be a requirement at all times, this open attitude becomes positively essential during times of economic or social upheaval, such as the one we’re currently experiencing.
Beyond simply adopting the right attitude—one that is open, welcoming and empathetic—listening attentively must also be part of the strategies used by loyalty program managers. To this end, there are two key activities that should be mobilized consecutively: the customer survey and customized segmentation.
The good old survey
To show how attentive you are to customers, a company can start by developing surveys for collecting specific information as well as more general comments, which will let you know the needs and interests of your loyalty program members. To facilitate a better response rate, we recommend offering “bonus points” (or any other bonus that is particular to your organization) in exchange for their participation in the survey. For example, companies will often offer a certain number of points, representing a value of five or six dollars, to those who complete a survey, which is a simple yet effective strategy.
Some underestimate the reach and power of information collected by surveys, but make no mistake: Data collected by survey have significant value to any company. They allow you to hear the “voice” of your customers, get to know them better, determine which aspects of your loyalty program are less effective and, as a result, make accurate adjustments to such programs so that they respond better to customer expectations.
By making a genuine effort to adjust your program and show its members your genuine interest in improving their experience, companies can show their empathy through concrete actions that, as we all know, always speak louder than words.
Once the survey is complete, we highly recommend conducting a targeted analysis of transactional data from members of your loyalty program.
By combining the data collected by survey with those produced from a study of their purchases, you can identify which members are more price sensitive and, ideally, determine what these people have in common.
Through this dual analysis, program managers are looking to understand how many people belong to members’ households, where they live, their family income or any other important details likely to reveal more about this customer segment.
It will also be possible for them to track the purchasing behaviour of program members in order to measure any progression in their engagement level with the brand and how concentrated their purchases are (particularly by noting their frequency and average shopping cart value).
Once again, it’s the changes you make to your program to respond to their expectations and behaviours that count, and (we can never repeat it too often) such changes require the company to pay attention and show empathy.
Our current stormy economic situation and the COVID-19 pandemic are two contexts in which companies with effective loyalty programs have been able to show their attentiveness, change their approach and provide adapted offers to customers.
Even if such measures negatively affect profit margins in the short term, these companies have been able to present themselves as empathetic during critical times and, therefore, increase and consolidate the trust their “community” of members places in them.
As an example, we would like to present the activities of two companies that adapted well to the periods of uncertainty recently experienced: The first is Loblaws, which implemented a carefully designed survey, and the second is Morrisons, which conducted a survey of its members’ transactions.
1. Loblaws : PC Optimum
At the very start of the COVID-19 pandemic in 2020, managers of the PC Optimum loyalty program surveyed their members to learn more about the community. This led them to notice that many members felt powerless and anxious due to the lockdowns and the changes these caused in their everyday lives. One of the main irritants identified by the survey was the necessity of staying at home and, as a result, having to cook three meals a day (especially for families).
The PC Optimum team quickly developed new customized content to respond to the needs and expectations identified in the survey. This variety of content (basic recipes, fast lunches, tips for preparing certain foods, videos, articles about nutrition, etc.) were specifically aimed at helping families manage their daily meal preparation given the context of the pandemic.
To take things even further, PC Optimum also offered members a free 30-minute session with a nutritionist, a privilege usually reserved exclusively for PC Insiders, who are subscribers to the paid component of the loyalty program.
This is a perfect example of an activity that showed empathy, compassion and generosity, based in attentive listening to the community of members.
2. Morrisons supermarkets
In 2021, managers of the loyalty program for Morrisons (a supermarket chain in the U.K.) performed a detailed analysis of their members’ transactional data. Their observations revealed two main trends in the purchasing behaviour of certain customer segments, specifically an increase in the ratio of products purchased that were on special and an increase in the use of coupons. Based on this observation, the Morrisons team confirmed a growing desire on the part of members to save money when faced with inflation.
Here is the message to customers published by Rachel Eyre, chief customer and marketing officer at Morrisons:
“We know that this is a very tough time for customers and so our improved My Morrisons scheme will help the millions of customers who are part of it by rewarding them with instant offers when they shop. We have taken on board customer feedback about which categories are the most relevant and have also introduced unexpected surprises to put a smile on our customers’ faces.”
This was the idea the British company kept in mind as it made changes to its offers and established new features in its supermarket loyalty program. The supermarket particularly offered members:
more points on products purchased frequently;
more points in dairy and meat products;
digital discount coupons for use in-store;
“surprise offers” that let customers save during holiday periods (Easter, Mother’s Day, Halloween, etc.); and
the chance to receive bonus points for each transaction made with a member’s card or by mobile app.
Through these highly relevant, targeted actions, Morrisons intelligently combined data analysis, compassion and concrete gestures that were based on members’ expectations, all during a difficult period of economic and social crisis.
Hats off to Morrisons!
Relational: A marathon that pays off
It’s no secret that the amount of work required to continuously adapt your customer relationship or loyalty program is far from being negligeable. Building and deploying large-scale surveys, analyzing answers, studying transactional data and, above all, making the adjustments necessary to adequately respond to the (ever changing) needs and (often elevated) expectations of members requires an enormous amount of time, resources and money.
It’s definitely a long and winding road strewn with pitfalls.
And yes, in the short term, it’s costly for companies to change their approach, the benefits they offer members or, for companies without loyalty programs, to build them from scratch.
However, while customer relationship marketing is more of a marathon than a sprint, believe us when we say that it’s absolutely worthwhile undertaking.
The work and money invested in a loyalty program will pay off by strengthening the trust of your most faithful subset of customers. That’s no small advantage, and it’s not the only one. In the long term, effective relationship marketing brings an excellent return on investment to companies that devote the necessary time and energy to its cultivation.
If you think about it, that makes sense.
When they feel heard, welcomed and well-served, customers invest more trust and maintain a better relationship with a business. We’ve said it before and we’ll say it again: Developing a good relationship with program members has a notably positive effect on engagement with the brand and loyalty. Even better, these high-quality relationships contribute to customer retention and in some cases allow you to regain formerly loyal customers who had recently turned to a competitor.
In short, we can summarize the benefits of a well-constructed relationship program in the following (very long) formula:
Time, energy and resources devoted to a loyalty program = improved adaptation to the needs of its members = better program = better relationship with members = trust + loyalty = better engagement of members with the brand = retention + increase in share of wallet, regaining of customers = increase in sales = more revenue = excellent return on investment.
That might be long, but it’s pretty straightforward! 😉
At Adviso, our team of experts in analytics and data science have developed many segmentation and financial modelling tools that enable the identification and targeting of customers who are more price sensitive, as well as the measurement of potential return on investment for development and relationship marketing projects.
If you have any questions about your loyalty program or if you would like to discuss relationship strategies adapted to your business sector given the current macroeconomic context, don’t hesitate to get in touch with us. Our team of specialists would be happy to help you foster a special relationship with your customers to spur the growth of your business.