How Loyal are Your Customers? Not as Loyal as You’d Think

Nov 26, 2013

“How loyal are your customers?”

That’s the question framing Nielsen’s Global Survey of Loyalty Sentiment (Q1 2013), released earlier this month.  Representing 29,000 consumers across 58 countries, the survey reveals that, while frequency of purchase and frequency of use are loyalty drivers, customer enrollment in a loyalty program is no guarantee of loyalty.

Nielsen’s survey also reveals that “bigger rewards generally inspire higher loyalty levels,” but there isn’t a one-size-fits-all answer. Loyal customers actively engaged with a brand – spending money regularly and telling their friends and family about their brand experiences across multiple channels – are obviously worth more. Meanwhile, a disengaged loyalty program member is essentially taking up valuable space while consuming brand resources, including the effort required to send timely and relevant messaging or to determine what offerings will maintain their brand allegiance. Some members are eager to make a switch regardless of any tangible or ‘soft’ incentives.

Geography impacts loyalty sentiment, too.  In Latin America, beauty brands achieve the highest loyalty levels, while Europeans are the least loyal to snack brands. Price (i.e., discounts and/or freebies), however, is consistently the strongest driver of consumer behavioral changes across all regions.

Another important point loyalty marketers should be thinking about is, “what types of brands generate more loyalty?” Nielsen’s survey found that mobile phone brands recorded the highest levels of loyalty in the Middle East/Africa (at 35%) while online retailers were most favored by North American shoppers.

What does this tell us?  Different incentives drive different behaviors.

Developing countries, for instance, tend to consist of highly price-sensitive consumers, but this doesn’t mean they always choose brands with the lowest price alternatives. Switching from a known brand can be full of tradeoffs that consumers with limited disposable income are reluctant to make. On the other hand, new brands are often appealing to consumers who are enjoying an upward mobility boost as they make inroads into the middle class.

Incentivize This!

Improving customer engagement comes back to the quality of the loyalty program itself, as incentivizing repeat behavior is what all great programs seek to achieve. Co-branded airline credit cards that award miles or points for items purchased are a great example, making that card an essential loyalty mechanism.

Brands must also have a strong sense of what is motivating their customers’ loyalty – and act upon them.

Such motivators may include:

  • Better pricing
  • Better quality
  • Better service agreements
  • Better selection
  • Better features
  • Free shipping
  • Exclusive products

Loyalty programs are getting more accurate in discerning these motivators and retailers in developing countries are using their loyalty programs to incentivize customer behaviors.

What’s next: mining the latest customer data to uncover new insights and additional ways to incentivize loyalty. In today’s tech-savvy world, where attention spans, time and wallets are spread  thin, finding that trigger or unique incentive to turn an observer into a buyer is critical for any program that wants to know exactly how loyal its customers are.

If you enjoyed this post, you might also be interested in reading “How to Stop Restaurant Patrons Doing the Dine and Dash” by my colleague, Joe Easley. In that post, Joe discusses how restaurants should get out of their loyalty rut and find what motivates their patrons beyond the usual coupons for discounted or free meal/drink rewards.

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