Despite falling inflation rates, the UK is still navigating a cost-of-living crisis. Among the ramifications, this crisis has caused shifts in consumer behaviour and purchasing decisions. A recent Capterra survey highlights that 81% of respondents are anxious about increasing prices.
As customers reassess their spending habits, businesses must understand the evolving needs of these consumers and adapt their pricing and marketing strategies to maintain customer loyalty. Companies can turn to solutions like customer loyalty programmes to help them achieve these objectives.
Customer spending habits in B2C industry have shifted
With reduced spending power, consumers are making more conscious choices in their purchases. Some sectors are affected more than others. The clothing sector is one of the most heavily impacted by these changes, with 72% of customers reducing their spending on these items.
However, it is not alone. 66% of respondents have reduced their spending on bars and restaurants. Surprisingly, another 66% are cutting their expenditure on groceries. Furthermore, nearly two in ten consumers have stopped purchasing electronics and domestic appliances altogether.
In their pursuit of cost-saving measures, consumers are not only embracing new spending behaviours but also expecting more from brands when it comes to discounts and loyalty incentives. 79% of respondents are actively seeking more discounts. 69% of respondents who noticed price increases want their favourite brands to offer more discounts. Additionally, 46% feel companies need to make more effort to help customers manage rising prices.
The role of loyalty programmes in retaining customers
Acknowledging that discounts can boost customer satisfaction may seem a given, but applying discounts is easier said than done. Businesses should be analytical when deciding where to provide discounts in a way that can benefit them and their customers. This is where customer loyalty programmes emerge as an indispensable tool for brands that want to retain their customer base and foster loyalty.
Loyalty programmes can provide a compelling platform to reward and incentivise customers, encouraging repeat purchases and engaging a sense of brand commitment. Businesses can forge deeper connections with their customers and enhance customer satisfaction and loyalty by personalising rewards and offers based on individual preferences and buying patterns.
Benefits of loyalty programmes for customers:
- Rewards and incentives. Customers can receive exclusive discounts or points that can be redeemed for products or unique experiences, to keep them engaged with a brand.
- Enhanced customer experience. Personalised offers delivered through loyalty programmes can help customers feel more valued and appreciated.
- Cost savings. Loyal customers can save money through discounts and incentives that help mitigate financial constraints during the cost-of-living crisis. This can encourage customers to repeat purchases as they find it economically viable.
- Convenience. Loyalty programmes can streamline the shopping experience by offering easy access to rewards and leveraging customer data and login details to access purchase history and deliver personalised offers.
Benefits of loyalty programmes for brands
- Customer retention. Loyalty programmes can help retain existing customers by incentivising repeat purchases and building stronger relationships.
- Brand advocacy. If customers are satisfied with loyalty programmes or see that brands cater to their demands to offer more discounts, they often become brand advocates and promote the business and its products through word-of-mouth referrals.
- Data insights. Loyalty programmes can generate valuable customer data that enables businesses to understand customer preferences and behaviour better and deliver optimised targeted marketing.
- Competitive edge. A well-designed customer loyalty programme should directly address customer requests and provide offers for the products they need. This can help brands differentiate themselves from competitors and attract and retain customers in a highly competitive market.
How can you incorporate effective loyalty programmes?
To leverage the efficiency of loyalty programmes, you need to align your strategies with customer expectations. Here are some tips to help your business deploy these programmes:
1. Be transparent with customers
Our survey shows that over half of respondents who noticed price increases say they want more transparency about price increases. By openly communicating and showcasing the value proposition of your products and services, your business can foster trust and understanding among its customer base.
2. Use different channels to offer discounts
Customers seek discounts in different ways and on different channels. Two-thirds of respondents who use loyalty programmes, or discounts or coupon apps say they check online marketplaces like Amazon for discounts. Your brand should consider using these marketplaces to offer discounts and promotions to current and potential customers in order to leverage the vast customer base these platforms provide.
Along with marketplaces, nearly half of the same group of respondents searched for offers on dedicated deal and coupon-finding websites. You should ensure your brand appears on these sites if you have interesting promo codes or discounts you want to promote.
Finally, you should also optimise your business’ websites to offer discounts. Over a third of respondents who use loyalty programmes or discount and coupon apps look for offers directly on vendor websites.
3. Leverage data analytics to deliver personalised offers
Businesses have quickly learned the importance of leveraging technology and customer data to improve customer support. However, data analytics is equally important in marketing and in customer loyalty programmes.
Data analytics can enable your business to gain insights into customer preferences and tailor your rewards and offers so that they resonate with your target audience. By efficiently utilising customer data, your company can create hyper-targeted campaigns that can drive customer engagement and elevate retention rates.
4. Be selective when lowering prices
Your business shouldn’t shy away from lowering their prices due to the crisis. 68% of survey respondents who are changing their behaviour actively bought cheaper products in the current economic scenario. However, that doesn’t mean that brands need to lower all their prices.
Your business should develop pricing strategies and use tools such as price optimisation software to collect and analyse customer behaviour patterns and monitor competitor prices. This can help you decide the best time to offer discounts, to which demographic audience, and on what products.
When not discounting prices as part of your customer loyalty strategies, your brand should then focus on other factors, such as:
- Introducing tiered systems that allow customers to unlock rewards and create a sense of achievement when making repeat purchases.
- Providing exclusive access to early releases.
- Implementing referral programmes to encourage customers to share your brand with their friends and family.
- Special occasion messages or rewards, for example on birthdays.
All these marketing efforts can help transmit a unique value proposition to targeted customers.
The effective combination of data and customer loyalty programmes can be a valuable asset
As the cost-of-living crisis continues to exert pressure on businesses and consumers, implementing effective loyalty programmes can be a strategic imperative. However, as customer behaviours shift, brands must offer more discounts and incorporate data analytics for personalised offerings to weather the storm and strengthen their relationship with their customers.
If deployed effectively, customer loyalty programmes can be more than an alternative marketing ploy. They can be a critical strategic tool to help sustain business growth and maintain customer satisfaction rates in adverse times.