It has never been easier for customers to switch brands, and as a result brand loyalty isn’t what it used to be. Where previous generations would stick with one brand for their entire life, the same cannot be said for consumers of today. But why? In this article, we’ll cover the reasons for a steep decline in brand loyalty and, more importantly, what brands must do about this.
Who Killed Customer Loyalty?
Generational Shift
It could be said that loyalty was just simply more important to past generations. Ask any Boomer or member of Gen X, and they will probably have a favourite car manufacturer, fashion house, alcohol brand, etc. They may not even have a reason as to why a brand is their preferred option; it might be a preference that they simply inherited from their parents.
Younger consumers, especially those who make up Generation Z, are known for being quite the opposite. Independent, experimental, and rebellious are just some of the adjectives used to describe those born between 1997 and 2012. These people typically don’t want to be tied to one thing and are far more likely to jump from one brand to another.
The New Purchasing Journey
The way today’s consumers shop has had a massive impact on loyalty. Prior to e-commerce, when you wanted a new pair of shoes, you headed to your favourite store to browse their options. Today, a quick online search presents you with a catalogue of options. Customers can compare prices, reviews and more before making their decision. When a brand is presenting a similar option for half the price, past experiences become slightly less redundant.
Social Media & Online Ads
Speaking of digital, it is worth factoring in the significance of social media and online advertisements when it comes to brand loyalty. Social media has become the place to win new customers, especially for brands operating in an ecom setting.
Take a quick scroll down any of the major social platforms, and you will probably see brands that you haven’t purchased from before. It doesn’t matter whether it's brands you like the look of but aren’t ready to buy from, or if it’s brands you’ve never heard of hitting you with ads. Both increase the likelihood of you moving away from your favourite brand to try something new.
Data
Brands have never had access to the amount of data that is available today. While this is great for brands that want to target existing loyal customers, it’s also perfect for poaching buyers and disrupting brand loyalty.
Data allows brands to target competitors’ customers with offers, advertisements and so on. Put simply, data allows brands to go on the attack, making it harder to keep hold of loyal customers.
Transactional Loyalty Programs
Loyalty schemes are not new, and digital innovation has allowed brands to increase the interactivity of their programmes. It could be argued that brands have prioritised this, forgetting about the actual offering of their loyalty programme.
As a result, we’re seeing more and more loyalty programmes that target customers with transactional metrics but fail to enhance the actual experience of the customer. Without building emotional relationships with customers, it’s only a matter of time before these people find brands offering more transactional value.
How Brands Can Revive Brand Loyalty
Value Existing Customers
As mentioned above, the development of digital marketing has led to an overfocus on customer acquisition, which could explain why brand loyalty has decreased. Maybe brands of today simply don’t value loyalty the same way they used to.
It’s important to remember that returning customers spend 67% more than new customers, which should be enough for brands to shift the focus back to their existing customer base.
Shift From Transactions to Experiences
As mentioned, brands have started to see loyalty as transactional. The typical customer loyalty programme today sees customers earn points for every purchase, points dictate tiers, and tiers usually lead to monetary discounts on future purchases. But this doesn’t strengthen the emotional relationship between brand and consumer.
Rewards like members-only events, exclusive drops and similar are far more likely to foster a stronger connection.
Gamification
Buy 9 coffees and get your 10th free is the perfect example of the outdated transactional loyalty schemes mentioned above, despite some brands still leading with this offer. If your brand is going to launch a loyalty scheme in this day and age, there’s no reason why it shouldn’t offer an immersive experience. Many brands have chosen to go down the route of gamifying their marketing in an attempt to increase engagement and interaction rates.
Personalisation
There’s no reason to be sending one-size-fits-all offers to your customer base. With the amount of data available today and the development of AI, brands are now able to target customers with hyper-personalised offers and experiences, which plays perfectly into the hands of customer loyalty.
Final Thoughts
There are two main reasons for the decline in brand loyalty. One is due to the overwhelming choice that is put in front of customers on a daily basis, meaning brands are constantly on the defensive, fighting off attempts to poach their most loyal customers. The second reason is the obsession with acquiring new customers, driven by the advancement of digital marketing.
Brands should remember that existing customers offer more long-term value than new ones, and should be prepared to change their focus. This shift should be accompanied by a desire to deliver more experience-driven rewards over merely transactional rewards.
But it’s equally important to remember that loyalty can be revived. Brands that go above and beyond in terms of developing relationships with customers will see the same benefits as brands of the past.
