Customer loyalty program reboot: Win back customers this holiday season

Customer loyalty programs have a major role to play in winning customers this holiday season. In the wake of inventory headaches, rising inflation and other challenges, it’s imperative that CPG brands and other companies build customer loyalty back up.

The end of the year is one of the best times to introduce or reboot a customer loyalty program. Promoting a holiday rewards program is an excellent way to amplify holiday marketing campaigns and attract new customers while retaining existing customers with eye-catching limited-time rewards, services, and savings opportunities — all of which can help drive holiday sales and collect customer data.

That’s why it’s important to enter the holidays prepared — here’s how to build a loyalty program that turns one-time holiday shoppers into devoted advocates throughout the year.

When COVID-19 took hold in the U.S., customer behaviors significantly changed as many people strayed from their normal shopping routines and began stockpiling products. Retailers began notifying customers in March 2020 that certain household staples were sold out and were struggling to keep shelves stocked, online and in-store.

Depleted inventories drove consumers to purchase alternative brands. When consumers experienced out-of-stock items, many switched brands or products instead of waiting for the item to come back in stock.

Compounded by rising prices in an inflationary landscape, customers are now more likely to switch brands during the holidays and throughout the year. Our research shows that consumers have grown comfortable putting unfamiliar items in their carts. In fact, in a recent 84.51° Insights survey, shoppers — especially those in lower income households — admitted to saving money by purchasing different brands, types and forms of items than what they typically buy.

Customer loyalty refers to a person’s willingness to repeatedly buy a product or use a service from a company. In many cases, customer loyalty is transactional. Customers are loyal to a brand as long as it offers lower prices than competitors or offers steeper discounts for specific products.

Brand loyalty, on the other hand, has less to do with prices or money; rather, it’s about how consumers perceive a brand. This could be based on a brand’s reputation, promotional activities, or experiences with the company. Brand loyal consumers are less price sensitive than consumers on the customer loyalty side.

It’s important to understand the distinction between customer loyalty and brand loyalty in an era where customer and brand loyalty have been disrupted. To retain valuable customers who are less price sensitive, brands must rethink their approach to brand loyalty and customer loyalty.

Customer loyalty programs are a powerful tool for attracting and retaining customers. In today’s highly competitive markets, where customers easily switch brands and providers, customer loyalty programs are essential.

Successful loyalty programs:

• Draw in new customers and nurture them into devoted brand advocates 

• Build an emotional connection between brands and customers

• Keep customers engaged as they gain loyalty points with every purchase

• Reward members with benefits that motivate them to make repeat purchases

• Provide a rich source of data for improving the customer experience

• Improve brand reputation while reducing costs for customers and retailers

While savings are a major draw for loyalty program members, there are other key features that retailers should consider to attract members. Experience, for instance, is an important factor that is often overlooked. Taking too long to earn rewards is the top complaint that consumers have about loyalty programs, according to Statista. Ease of use, relevancy of rewards, data usage and trust, good communications, and digital capabilities are all features of a positive experience with rewards programs.

Both retailers and consumers benefit from loyalty programs that are done right. Consumers are motivated by quick wins, large prizes, and attractive discounts, which in turn drive up registration numbers and encourage usage. Additionally, retailers benefit from having a larger and more loyal customer base, increased engagement, as well as a stronger brand connection.

It’s unquestionable that loyal customers are extremely valuable to both retailers and brands. In fact, a loyal customer’s omnichannel spend is 10 times higher than a non-loyal customer, notes Benjamin Marston, director, business acceleration consulting and communications, at 84.51°.

Retaining customers is key to long-term growth. But as a result of the pandemic and rising prices, customer loyalty is up for grabs. When the pandemic disrupted consumers’ routines and daily life, it also ushered in an environment for experimenting with new brands and new shopping behaviors from e-commerce to curbside pickup to shopping local.

There’s no guarantee, however, that holiday shoppers will remain loyal to these new brands. Consumers are seeking convenience and value and will easily switch brands to meet those needs. Loyalty programs that engage customers with relevant offers and increase positive consumer sentiment can help brands rebuild their base of loyal customers.

In addition to launching a customer loyalty program it’s important that brands get it in front of customers at the right time. In a world where customer loyalty is dwindling, competition is rising and consumer attention is increasingly fragmented, brands need to be among the set of options that people see. In fact, they need to be the loyalty program that consumers see.

Using advertising to drive brand affinity by articulating differentiation and value is an effective way to amplify a customer loyalty program.For example, 84.51°’s Best Customer Communication (BCC) vehicles such as Loyalty Customer Mailer (LCM), MyMags, and MyMags Extra provide relevant, personalized offers to shoppers in both direct mail and digital formats that drive engagement and retention. Powered by robust data science, each vehicle has unique targeting capabilities and a retention/acquisition focus to help CPG firms deepen the customer relationship and drive loyalty.

Staying top of mind when consumers are making their purchase decisions is critical. Investing in paid search on a retailer’s website is another way to accomplish that, ensuring that information about your loyalty program is at the top of the search results, where most clicks happen.

Retail website display ads are also an effective way to engage shoppers while they are filling their carts. Retailer advertisement offerings differ, but placing an ad on frequented areas of retailer websites or targeting them based on basket data or shopper search behavior allows you to get your brand in front of valuable customers and provide a direct link to the program’s sign-up page. Targeted digital messaging via retailer emails or other digital retailer channels is also an important part of your overall marketing strategy to win today’s grocery shopper.

When brand loyalty has been diluted, CPG companies need to adjust their marketing investments accordingly. And they need to do it quickly, before their brands fall forever out of their previously brand-loyal consumers’ digital carts, in favor of competitor brands.

From inflationary pressures to labor shortages to tenuous customer loyalty, the 2022 holiday season is rife with challenges. Shoppers are more likely than ever to switch brands, making it critical that CPG firms and other companies give shoppers a reason to remain loyal to their brands. The most successful companies will use the holidays to rethink their approach to customer loyalty, brand loyalty and customer retention. Customer loyalty programs are a powerful tool for building connections with new and existing customers, motivate them to make repeat purchases in a way that drives differentiation and value. Brands that thrive during these challenging times will use this inflection point as a chance to drive transformative change during the holidays with an eye to the future.

The holidays are fast approaching. Learn more about consumer insights and strategies that can help your company better engage shoppers and drive loyalty instead of basement bargains. Check out our new white paper, Holidays 2022: 8 key shopper insights and how brands can respond to win the in-store and digital shelf this season.

Download the white paper

If you’d like to learn more about how to best leverage customer loyalty programs and brand loyalty strategies, here are some additional pieces that might interest you:

Retail Touch Points: How Kroger Strengthened Customer Loyalty by Sharing its ‘Passion’ for Sustainability - Many factors go into customer loyalty, from the most basic (offering quality products that shoppers want) to more emotionally driven considerations. 

Cheddar News: Pandemic Sparks Big Shift In Brand Loyalty - Barbara Connors, VP of Commercial Insights at 84.51°, breaks down this shift in brand loyalty and how brands are adapting to it.

Ad Exchanger: DTC Data Isn’t Enough To Fully Inform Retail Advertising – That’s Where Loyalty Programs Come In - Instead of going all in on DTC commerce and first-party data collection, many brands, startups and well-known CPGs are missing the more effective retailer data sets at their disposal: loyalty programs.