Loyalty takes center-stage with WitsNotes Volume 3:
- Title: The Tipping Point of Loyalty (2021)
- Author: Upside
- Topic(s): Loyalty, Retail
- Length: 66 pages
- RetailWit Summary: 2 pages
The Summary: The value of a loyal customer has increased—for retailers, the top loyal customers are worth up to 27x of revenue versus your non-loyals. And, shoppers are less loyal now than before the pandemic, a change from previous years that saw only increasing loyalty.
No wonder that even Taco Bell is getting into the loyalty space.
First, a step back. Loyalty has changed. Here’s a snapshot of the Upside’s 5 generations of loyalty:
- 1st gen – The Advantage Card: in-store earning points, to bring people back into the store.
- 2nd gen – The Membership Card: the big innovation was looking at SKU level data, so cross selling was done between products. People that buy ice-cream might also like chocolate sauce.
- 3rd gen – The Exclusive Club: wanting customers to feel like they are part of an exclusive club by offering special events, special discounts, exclusive gifts.
- 4th gen – The Service Bundle: The book was rewritten on loyalty by understanding that it’s about frequency and ease of consumption. Began bundling various streaming services, shipping, and payment methods for the customer’s convenience.
- 5th gen – The Superapp: an app which the user never leaves. It serves all their daily task needs from communications through to shopping and commerce
Honing in on loyal behavior:
Out of 6 categories, Grocery and Supermarket retail has the least loyal behavior (47% classified as non-loyal) and needs the most transactions and spend to become loyal. Retailers need to 4-5x the visits or spend to increase a customer’s loyalty level. Not an easy feat.
Ecommerce behavior tends to have less loyalty than brick & mortar; shoppers need to spend roughly 2x to become “loyal” in the online space.
COVID, you guessed it, affected loyalty behavior—see the chat below. What’s missing is 2018-2019, to get a sense of pre-pandemic behavior, but we see a significant uptick in decreasing loyalty this last year. No surprise though, as options decreased, habits were disrupted, supply chain was fractured, and customers had to find new ways (and brands) to purchase.
One retail expert highlighted the importance of the “issue resolution process”, which is the perspective and expectations the customer has with how your firm handles resolving issues, errors, etc. and believe it drove “up to 40%… [of] customer loyalty and repeat purchase.”
“A 5% increase in retention leads to a 25% to 95% increase in profitability. In other words, give customers reasons to keep coming back and your business will be far more profitable.” - Harvard Business Review
Recommendations from The Tipping Point of Loyalty:
- Focus on actionable data. Data is easier than ever to acquire, harder than ever to draw action that drives profit. Linking action to improved sales data is the goal.
- Maximize existing customers. It’s a lot easier to move your existing customers up the loyalty chain than to acquire new ones.
- Attract the (right) new customers. The right customer is worth ~20x more than the wrong customer. Attract the ones that have potential to become your top loyals.
- Think Value. Know your CAV (customer annual value) & CLTV (customer lifetime value) at the individual level.
- Act now. Customer spending habits are still shifting and changing. With all of the loss that came with COVID (financial or otherwise), there is also opportunity.
Here’s the top retail news from last week:
Kroger and Instacart deepen their partnership by launching “Kroger Delivery Now” moving into the ultra fast delivery model. Clearly going after the likes of GoPuff, DashMart and the plethora of startups in the space.
IRI Launches New Lift Measurement Solution for Facebook & Instagram which “enables closed-loop measurement and optimization of social advertising impact for CPG retail sales using IRI’s unparalleled loyalty card data assets”
Hy-Vee unveils their new prototype store, which includes a new dining experience for customers with a large, open food hall dining area for fast-casual dining, a pub with full bar and outdoor patio. The 93,000 square foot store looks impressive!
J.C. Penny is using AI to transform e-commerce, using the smart predictive technology to better understand what assists shoppers in making purchase decisions.
Total Retail shared their 2021 loyalty benchmark study.
Who loves tacos? Taco Bell expands their rewards program, which launched a year ago to include a Taco Lover’s Pass (a 30 day taco subscription).
Tacos not your thing? Well, Jack in the Box also announced a new digital loyalty marketing program. As the CEO of Par Technology Group Savneet Singh said, “Having a frictionless loyalty program is a must for food-service operators to thrive now and into the future,” Par Technology Group is the technology behind the new loyalty program.
On that note, just a couple weeks ago, Chipotle gamified it’s loyalty program.
Interested in diving deeper into QSR loyalty? PYMNTS has just the research study for you on how QSR loyalty programs stack up in 2021.
The NFL had some momentum coming out of the first weekend, with the Thursday Night game drawing the biggest audience in six years. However, sports marketers are showing cautious optimism about this season as they aren’t exactly sure what this season will bring. We are no longer “stuck” at home, so it’s not the same captive audience that was available last fall.
Christmas in September? Basically. Holiday spending is expected to be huge this year:
– Mastercard adds their prediction to the holiday season, forecasting a +7.4% increase in YOY holiday spending.
– Amazon is planning a beauty products event in October, looking to get an early share of the holiday spending. More and more retailers are going to try and be first out with early promotions and sales to try and capture what might be an epic holiday season.
– Creatively, Christmas 2021 is expected to show stark contrasts – with both natural-looking, sustainable trees and flamboyant pop art colors. We have already seen a lot of retro colors and designs from brands this year, and it looks like it will continue.
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