Loyalty and the cost-of-living crisis
The cost of living is now officially a crisis. With inflation in the UK now at 9.1%, and with predictions of 10% by year-end now likely to become a reality,
pressure has been brought to bear on retailers everywhere.
Several factors had contributed to this – policy uncertainty, environmental issues, increased costs across many industries and of course, a certain global pandemic. Together, these created the mix that has seen inflation rates rise to their highest levels in the UK in forty years.
Loyalty in a time of crisis
As the UK emerged from the pandemic, 55% of consumers surveyed remained loyal to their favourite brands. For many consumers, loyalty to a trusted brand became something of a mainstay during an unprecedented lockdown. However, now that the economic realities of 2022 are beginning to bite, brands cannot count on continued loyalty without these same customers needing the assurance of value-for money propositions, which accurately track their needs and adapt accordingly. For customers, this assurance during a time of economic hardship is immense. The comfort derived from being able to still access even a scaled-down version of familiar luxuries, as well as the trusted brands, cannot be underestimated.
This is particularly the case for supermarket purchases. According to the Toluna Global Consumer Barometer Study, 93% of respondents stated that they are already feeling the pinch on their grocery spend. Almost 40% of these customers were contemplating the switch to own-label products in place of their preferred brands, whilst 29% were looking to change their supermarket brand altogether, in a bid to contain rocketing food costs.
As always, pin-pointed data becomes of paramount importance. Drilling deeper to obtain accurate, first-party data insights from loyalty customers, creating more personalised communication – and thus tailoring offers accordingly – could well make the difference in helping to retain loyalty customers through the current crisis. Messaging-in-the-moment, whilst customers are shopping, could prove especially effective.
Crisis or opportunity?
It has now become a well-documented fact that during each financial crisis since the Great Depression, worldwide sales of lipstick have soared. The reason was simple. Customers simply swapped out larger extravagances for smaller ones. A lipstick provided a feel-good luxury at an accessible price point.
In 2022, retailers across the board need to find their own ‘lipstick effect’ to keep their customers engaged and hopeful, beyond the current squeeze.
The cost-of-living crisis has already resulted in retailers significantly shifting their pricing models. Waitrose has expanded its Essentials range, John Lewis is doing likewise with its affordable Anyday range, the launch of Asda’s “Dropped and Locked” initiative, which sees the price of 100 key items being both reduced and retained for a year, is another such initiative. Morrison’s has slashed its prices on 500 essential items, while Sainsbury’s has taken to price-matching Aldi. Tesco’s recent brand message of “We want you to spend less with us” speaks directly to the prevailing climate of cost-saving. Clearly, all of these pricing adjustments will need to further reward loyal customers, to enable them to use their memberships to enhance their cost savings.
Tracking the change in consumer behaviour, and tailoring offers accordingly, is another way to retain a loyal customer following. With 74% of consumers surveyed saying they plan to cut back on eating out, moves such as those by M&S to redouble the promotion of its “Dine in for £10” will be very much welcomed.
Turning to the pharmaceutical sector, Boots has invested £3 million into its Price Advantage initiative, which it is now in the process of rolling out across 2000 stores in the UK. Boots loyalty members can now access price discounts on over 150 products, with the selection varying every month.
With the rise in food costs driven largely by the higher cost of fuel, it’s fitting that loyalty members of supermarkets such as Tesco and Sainsbury’s can now use their membership to access savings at the fuel pump. And whilst these savings might not seem substantial, for a cash-strapped customer.
The case for innovation
Retailers can, and indeed must, become more innovative in finding ways to keep their customer base engaged. Consumers need to feel valued. Shifting their allegiances from a trusted brand to a less familiar one is not undertaken lightly.
But this is where retailers can use their loyalty programmes to target their messages accordingly and build customers’ trust – for new and existing customers alike. And again, accurate data plays a crucial role in helping to create successful promotions with attractive pricing. Retailers who can do this the most successfully can come out the cost-of-living crisis with a stronger and more engaged customer base.
An effective solution, for both retailers and their customers, is digital loyalty. With the effortless, seamless deployment of Bink’s Payment Linked Loyalty, the customer’s payment card becomes their de facto loyalty card, with every purchase made thereafter being tracked and rewarded.
Aside from the obvious convenience to the customer, the benefits are significant. Even a modest purchase – possibly deemed too small for the bother of burrowing for a plastic loyalty card – now automatically accumulates benefits. For customers in the throes of a cost-of-living crisis, the comfort of knowing that every purchase can contribute to the loyalty rewards tally and provide that little extra assistance, is invaluable. For the retailer, ‘seeing’ the customer 100% of the time provides the effective level of insight that can bring together and better articulate KYC efforts. And for retailers that haven’t so far considered a loyalty or membership programme, Payment Linked Loyalty offers the flexible, adaptable, and easily manageable solution that can adapt to their specific strategic objectives and reap rewards for both them and their customers.
Moreover, through Bink’s partnerships with top UK banks, retailers have a great opportunity to grow their customer base. By featuring membership programmes in the banking apps of half of the UK adult population retailers can acquire new customers with no extra effort.
Looking long-term
It would be a brave pundit indeed who could claim to predicting an end to the current cost-of-living crisis. Uncertainty will be the watchword for some time to come.
However, those retailers who can shut out both the noise and the naysayers, engage their customers meaningfully through laser-like data accuracy, and have the courage to innovate, will thrive. For Bink, this means constantly being alert to changes in the retail environment. It means always being in pursuit of the most creative tech solutions. And it means consistently aiming for new ways to broaden customer reach. In so doing, the challenge of the current crisis could become an opportunity for future success.