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Rethinking Customer Loyalty in the Age of the ‘Zero Consumer’
The retail industry is undergoing a seismic shift due to the emergence of “zero consumers.” These shoppers, characterized by zero patience, zero boundaries, and, crucially, zero loyalty, are challenging traditional definitions of customer loyalty. According to McKinsey, “They scrimp and splurge at the same time, they’re not loyal to brands, and they care about health and sustainability (even though they aren’t always willing to pay for it).”
Decoding Loyalty
Customer loyalty is a complex notion. Many individual consumers identify with particular brands, but it’s debatable whether this is true brand loyalty or simply a preference for a certain aesthetic. In fact, loyalty is increasingly seen as a pursuit of value, with a keen focus on financial discounts. As economic pressures mount, a whopping 61% of consumers in the U.K. report feeling less loyal to brands than they did in 2022, instead hunting for the best deals, according to a report from the Data & Marketing Association.
A New Approach to Loyalty
If classic loyalty strategies fail to resonate, brands need a fresh approach. For the time-, money-, and frustration-conscious zero consumer, retailers must emphasize convenience. Seamless digital tools and user-friendly systems can enhance the shopping experience, subtly addressing customer concerns without them even realizing it.
Ultimately, brands may need to reevaluate and shift their value proposition. Combining competitive pricing with convenience can help retailers adjust to the zero consumer better, helping them not only survive but thrive amidst potential disruptions.
What Makes Customers More Loyal?
Additional research from SAP Emarsys’ 2023 Customer Loyalty Index survey provides more insight into the decline of customer loyalty. In this recent survey of “more than 10,000 consumers globally, including 4,000 in the United States, the U.S. experienced a drop in brand loyalty from 79% to 68%.” Out of the five loyalty categories specified in the survey, a hefty 49% of consumers fall into the compartment of incentivized loyalty. Notably, incentivized loyalty has seen a sharp decrease, tumbling from 76% to 49%.
As the study outlines, incentivized loyalty hinges on the temporary waiver of regular prices. While 49% of American consumers anticipate consistent discounts, loyalty points, and prizes, a significant 59% admit they would typically swap products if a more cost-effective alternative surfaced, making price the primary driver for customers to abandon a brand. Furthermore, 18% confessed that they no longer feel financially equipped to maintain loyalty.
In the contemporary loyalty panorama, U.S. shoppers crave concrete rewards in return for their loyalty. According to the survey, 50% of participants affirmed that the presence of a loyalty card or account considerably sways their spending on a specific brand. In addition to this, 43% of U.S. survey-takers expect to receive better pricing as loyal patrons, while 46% anticipate their loyalty being acknowledged with exclusive deals.
An intriguing 18% have registered for or initiated the use of additional loyalty programs to secure maximum value from brands. Interestingly though, despite the allure of discounts, a loyalty card proposing VIP experiences holds a higher appeal for some consumers.
Furthermore, U.S. customers place a significant emphasis on personalized, positive shopping experiences, with 52% confirming a switch in brand allegiance due to poor experiences, up from 48% in 2022. Brands that excel in customer service (52%), offer enticing discounts, incentives, and rewards (49%), and present a variety of ways to benefit from such rewards (39%) stand a higher chance of preserving loyal customers. These insights present a golden opportunity for brands to reignite and cultivate loyalty among U.S. consumers, as per the report’s findings.
One of the most notable examples of brand loyalty occurred this past year when consumers boycotted Bud Light after its controversial marketing strategy. This proves that once a brand builds its loyal followers, it can become a volatile force to be reckoned with that can either uplift or sink a company.
Discussion Questions
What strategic adjustments in product development, marketing, or customer service could effectively cater to consumers with zero patience, boundaries, and loyalty? How can the transition from brand-based loyalty to value-focused loyalty be incorporated into learning modules or training programs? Is incentivized loyalty, based on temporary price waivers, a sustainable long-term strategy, or does it carry inherent risks? How can retailers achieve the right balance between incentivizing customers and maintaining profitability?
Poll
Loading …BrainTrust
Chuck Ehredt
CEO, Currency Alliance
Dick Seesel
Principal, Retailing In Focus LLC
Have consumers ever really been truly loyal to brands? I don’t think so. People are loyal to the things brands stand for, provide, or deliver. Provided those things are consistent, loyalty continues. If a brand slips up, or something better comes along, people switch and adjust. The problem in the modern retail market is that there’s a lot more choice and much greater inconsistency in retail delivery. So it’s hardly surprising loyalty has become more tenuous.
Well Neil, you have either stolen my thunder or proven that we agree fairly consistently. The one word that – to me – explains it all is the word “consistent.” I believe that being able to come to ‘expect’ price, accurate sizing, service, or how the linguine are cooked is more important to most consumers. The mere existence of a ‘zero customer’, regrettably, is a flaw in our social mores or a character flaw. The vast availability of ‘choice’ is not an excuse for fickleness.
Aren’t we getting ahead of ourselves?? A customer that demands everything, and offers nothing – other than to pay…hopefully – doesn’t strike me as one a smart retailer would want to pursue.
To win over zero consumers, focus on revising the value proposition, incorporating sustainability in products & in entire supply chain, by combining convenience, competitive pricing with seamless experience and ESG initiatives. Incentivized loyalty, relying on temporary price waivers, has both strengths and risks. It can be effective in the short term by attracting price-sensitive customers, driving sales, and helping a brand stand out in a crowded market. However, as a long-term strategy, it carries inherent risks, such as discounts eroding profit margins, making it difficult to transition customers back to regular prices, compromising brand perception, and causing financial strain on the business.
Customers with zero patience and loyalty…if true, why would any retailer chase such a consumer? Seems to me this is more about segmentation and choices (as in let’s double down on loyal customers, how about that?) that retailers make, and less about chasing after people who switch constantly.
The zero consumer might be a new definition/category, but brands have had to deal with this type of customer for decades. A customer’s preference for engaging with one brand over competitors is fundamentally based on their overall perception of value and their cumulative experience interacting with that brand. For the zero consumer, this might be over-weighted to the price, but the key point is that there are lots of different types of customers and each category has different expectations. Brands must continue to differentiate their offerings and leverage loyalty programs to tie exclusive offers that resonate with the target segment to drive differing margins to maximize contribution margin from each segment. This will likely include coupons/discounts that are sent only to specific customers, bonus points for specific behaviors, and differing levels of customer service depending on the lifetime value of each customer. At the end of the day, every customer wants value and consumers who make an effort to shop with a particular brand want to be recognized and treated special. These are all factors that can be worked into a modern loyalty strategy – which in turn defines loyalty tactics, the design of a loyalty program, and how to allocate marketing campaigns across all customer segments.
One premise of CRM is to focus the retailer’s efforts on those “”platinum” or “gold” customers who are actually loyal to the store or the brands it carries. The “zero consumer” might represent a growing portion of the shopping population — so not to be ignored — but it’s transactional in nature. There is still loyalty to be gained through careful data analysis and segmentation.
The article states, “…U.S. shoppers crave concrete rewards in return for their loyalty.” That’s not a description of loyalty. That’s bribery. And I guess we are learning that ‘zero customers’ are easily bribed, bouncing from deal, to discount, to coupon to free delivery/return to…… Loyalty is sticking with a brand in the face of incentives to leave the brand. Or maybe the brand does something so offensive that loyalty to the product is abandoned as a repudiation of the brand. Social issues will do that.
Brands that offer truly differentiated product solutions with great service, convenience and price competitiveness will build true loyalty. Customers will not be easily bribed away. Without that level of differentiation, brands will find themselves in the bribe business.
Personally, I feel like I get an email a week from the various companies where I have loyalty accounts telling me that my benefits are being cut back. Typically, it is with some Orwellian message about “Less is More.” This certainly has me rethinking my loyalty. Even worse for the companies, when this happens in programs I’m paying for, I revisit if I should renew, and honestly, I’m not renewing more often than not.
Loyalty is a two-way street, and if the value isn’t there, don’t expect my fidelity.
For many years, I have preached that most loyalty programs are marketing programs. They created incentives in the form of points, perks, and discounts. Eventually, customers become loyal to the loyalty program and not the company. As soon as the loyalty program changes or is taken away, customers go elsewhere. The key to today’s customer loyalty is to create an emotional connection that is often driven by an amazing customer experience, a personalized experience, or something that connects the customer to the company emotionally, which is sometimes a cause that connects with the customer or something the company does in the community.
As I have stated before on RW, the concept of customer loyalty to a brand or retailer is backwards. Individuals may be loyal to their family, church, alma mater, etc. but not too brands. Brands & retailers need to be loyal to their customers by delivering on their promises, better than their competitors.
We often confuse ‘continuity of purchase’ with customer loyalty. Consumers are not necessarily loyal or disloyal. They’ve done nothing right or wrong to earn such a label. Brands & retailers become disloyal when they stray from their brand proposition, whether the promise is value, convenience, assortment, rewards, price, etc. Brands & retailers need a mirror to view the real purveyors of loyalty.
Brand loyalty simply is essentially the reaction or result of customers seeing or experiencing that you deliver what you promise each and every day. It is transactional in this sense, but not in an empty way. They’ll be loyal to companies and products who are aligned with what they want, who share their WHY, and if they make it real in the operations and in execution. Be careful in claiming the best, the widest, the lowest or the nicest unless you can quantify this, perform and prove it without hesitation. Stick with these principles first and front of mind, and your loyalty and marketing mechanisms will be received well, performing at a high level.
The Zero Consumer is a new type of customer, and you must know how to deal with them.
Zero Consumers shop across multiple channels, expect excellent service and shipping, and choose sustainable products. But even so, they demonstrate very little loyalty.
Maintaining and keeping customers is less expensive than finding new ones. The new Zero Consumer, however, can make it challenging to achieve.
Gen-Z and Millennials seem to make up the majority of Zero Consumers. Social media, celebrities, and content influence zero consumers. To make purchases, they use different buying channels and expect omnichannel options. Basically, be prepared to sell when and where they are ready: physical stores, apps, websites, etc.
The Zero Consumer no longer falls in the middle. Defining their shopping habits is more difficult. Either they save money or they are willing to spend more money on what they want.
There is a decline in mid-priced goods and services. Consumers are trading down to lower-priced goods. Nonetheless, a sizable percentage plans to splurge on their spending – when they feel like it.
Consumers were significantly more loyal in the Y2K era than now. Absent truly differentiated, exclusive offerings, the retailer is a utility, or just a means of distribution. All products and commodities today are “gasoline.”
Zero Consumers have zero patience. The trend has accelerated since Amazon taught customers what fast and convenient service is. If you don’t deliver at the speed Zero Consumers expect, they’ll take their business elsewhere – for this purchase.
It’s not my intention to be grouchy or pessimistic. We simply need to adjust, and even capitalize on the Zeros in other ways. Zero loyalty applies to everyone including our competitors. Db
Retailers can balance incentives and profitability by implementing a tiered loyalty program, offering rewards that increase with customer engagement.
This encourages repeat business without significant cost. Personalized offers based on customer data can drive sales and improve customer satisfaction.
Retailers may also choose to focus on providing exceptional customer service, as this can foster loyalty beyond discounts. Lastly, regular analysis of the profitability of loyalty programs is essential to ensure they are cost-effective. A though here is that the goal is to build long-term relationships with customers, not just short-term sales.