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Where Retailers Are Missing the Mark on Customer Loyalty

Where Retailers Are Missing the Mark on Customer Loyalty

Brad Brodigan TotalRetail Thursday, 24 January 2019

In an era when purchasing is increasingly being dominated by millennials and Gen Z, retailers can no longer rely on traditional rewards systems to drive customer loyalty. The age of membership points and retail-backed credit lines is over as the next wave of shoppers expect loyalty programs to be simple, automatic and valuable.

According to our 2018 Consumer Loyalty Survey, nearly 50 percent of consumers don’t feel like major retailers value their loyalty. While consumer expectations have completely changed over the last decade, retailers have remained tied to antiquated technology and attempted to dance around what consumers actually want: easier ways to get monetary rewards for their loyalty.

The Loyalty Gap

For decades, methods like tiered reward systems and merchant credit cards have been used to drive customer loyalty. However, as consumers gravitate toward more mobile and highly personalized shopping experiences, our research shows these traditional methods no longer resonate. Ninety-one percent of consumers said they feel little to no reward from tiered reward systems, and 89 percent said they feel little to no reward from merchant credit cards.

Today’s tech-savvy and easily distracted consumer is fed up with clunky rewards programs that require them to open a line of credit, track their points status, or any other complexity that requires ongoing inorganic behavior from the shopper. They expect to be rewarded for their loyalty automatically at the point of purchase without extraordinary effort on their part, or they won’t make the effort to engage. Currently, only 43 percent of Gen Z shoppers report signing up for an in-store rewards program (compared to 53 percent of millennials and 57 percent of Gen X).

As retailers increasingly depend on return customers and repeat purchases to drive sales, it’s important they take stock of what consumers want out of a loyalty program and how they prefer to receive loyalty rewards. If they don't, they risk losing customer loyalty to competitors that “get it.”

How Retailers Can Bridge This Gap With Consumers

From what they've told us, consumers just want more money to make their everyday lives easier. According to our research, 83 percent of consumers said cash makes them feel rewarded. Meanwhile, retailers need a direct line to both new and existing customers to incentivize them to shop with direct, card-linked offerings.

For example, Sam’s Club has implemented card-linked cash-back offerings, and found its card-linked customers were visiting 29 percent more often and spending 60 percent more per visit after 60 days when compared with customers who had not linked their card to its cash-back offers.

As millennials and Gen Z continue to be key demographics for retailers, serving as primary sources for increased sales, retailers must rethink how they approach loyalty programs to meet the new demands and expectations of the next wave of shoppers, or risk becoming irrelevant. Our report found that more than one-third of consumers would switch to a retailer that provides cash back over one that does not, reflecting the opportunity to leverage cash-back rewards to not only win the loyalty of current customers, but win over new customers as well.

About redPanda Software

At redPanda Software we have a decade of experience in developing customised software for the retail and financial industries.

Working with clients in South Africa, Africa and the UK, we have built our reputation for producing the highest quality solutions across the following specialised business processes. Read more...

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