Monday, June 17, 2024

Aussie consumers can no longer afford to be loyal

This year, customer loyalty in retail has fallen by 14% to just 65%, down from 79% in 2022, according to the SAP Emarsys ‘Customer Loyalty Index 2023’.

The annual ‘Customer Loyalty Index’ from leading omnichannel engagement platform SAP Emarsys examines factors that impact Australian consumers’ loyalty towards brands and retailers. The Customer Loyalty Index 2023 surveyed over 10,000 consumers across four countries, including 2000 Australians, to find out how customer loyalty is shifting following continued economic instability around the world.

In Australia, cost of living pressures and interest rate hikes continues to be a dominating force behind loyalty towards brands. The research found that three in five (60%) consumers now prioritise cost over brand loyalty, and over one-fifth (23%) no longer feel they can afford to be loyal, a 2% increase compared to 21% in 2022.

For a third year in a row, the majority (56%) of consumers fall under Incentivised loyalty, among the five loyalty types defined by the SAP Emarsys’ Customer Loyalty Index, but incentivised loyalty has still plummeted 11% from 67% to 56%:

  • Incentivised Loyalty – loyalty developed through discounts, incentives and rewards
  • Inherited Loyalty – loyalty that’s built through association with other brands
  • Silent Loyalty – customer loyalty without public advocacy or endorsement
  • Ethical Loyalty – loyalty founded on emotional connections and shared values
  • True Loyalty – every brand’s dream, unshakeable loyalty that’s built through brand love.

This may seem contradictory but incentivised loyalty depends on the suspension of normal prices which won’t last forever. Incentivised loyalty is fleeting and while Australians are attracted initially by a low-cost deal, 63% of consumers would also typically switch products if a cheaper option is available. Additionally, more than half (51%) would lose loyalty to a brand if it sold poor quality products, followed by price increases while lowering the quality of service (48%), and poor customer service (48%), proving that price alone is not enough to convince a customer to stay.

When we see the three factors driving consumers to be ‘more loyal’ are discounts, incentives, and reward offerings (56%), excellent customer service (55%), and high-quality products (45%), it becomes clear that retailers who focus on customer service and quality products in addition to deals, as long as they are tailored to the individual, are most likely to retain those customers. Food (60%), clothing and fashion (47%), and beauty and skincare (32%) are the top three industries consumers are most loyal towards.

Showing a growing trust in AI, often used to enhance personalised recommendations to shoppers, 18% of Australian consumers have become more loyal to brands offering the best personalised deals in the past 12 months. Demonstrating the importance of a value exchange when asking customers for their data, 19% have signed up for or started using more loyalty schemes in 2023 to ensure they receive the best value from brands. A personalised loyalty scheme doesn’t have to mean discounts but could be something like VIP early access to new products which can provide a great way of keeping in touch with customers even when dormant. Australian surf and streetwear story City Beach uses the SAP Emarsys Mobile Wallet to engage with their customers consistently across multiple channels from email to mobile to in-store with convenience and ease, ensuring brands are delivering real-time, personalised incentives that foster customer loyalty.

City Beach Customer Lifecycle Manager James Neill said: “Mobile is the one channel that’s always with the customer, so it is integral to our omnichannel approach. Mobile Wallet opens our reach to different age groups, which unlocks a whole new set of use cases to better connect our digital and in-store experiences. The inclusion of a digitalised wallet has expanded customer loyalty by personalising products and shopping experiences across generations. The result? Customers can stay loyal to their favourite brands wherever they’re at.”

SAP Emarsys Regional Vice President, APJ Will Wilson said: “While incentives can drive short-term loyalty, they often fall short in maintaining long-term commitment. Consumers are growing impatient, feeling that brands haven’t done enough to reward their ongoing loyalty. Brands can leverage the window of opportunity created by incentivised loyalty to transition consumers toward “true loyalty”. This type of loyalty is built on an emotional connection with the brand and its products, valuing interactions, and fosters a lasting bond. It is one of the most reliable and steadily increasing forms of loyalty.”

Cultivating true loyalty depends on a complete understanding of your customer, making personalisation a fundamental part of true loyalty, not a nice to have – and that bespoke experience needs to transcend all channels that a customer might use, which makes it essential for marketers to embrace an omnichannel strategy.

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