Only 37 percent of consumers say loyalty programs are an effective way to earn their favor.
96 percent of Millennials want companies to find new ways to reward their loyalty; 75 percent of all consumers say they would switch brands for a better loyalty program.
Bottom line: retailers need to get serious about customer centricity − loyalty platforms may help.
Digital disruption and new generational influences are making customer loyalty tough to hold onto these days, but fresh thinking on loyalty programs is key to winning and retaining customers, according to KPMG International's The Truth about Customer Loyalty report.
With the holidays near, KPMG's survey of over 18,000 consumers in 20 countries, explores the nature of customer loyalty and how some traditional loyalty programs, long a mainstay of customer retention strategies, may not be keeping consumers brand-faithful.
Given the huge online success of events such as Black Friday, Cyber Monday, and e-commerce giant Alibaba's recent record-setting $38 billion in sales on Singles' Day, loyalty platforms, when done correctly, show promise for enhancing customer loyalty.
“Despite massive digital and consumer-driven disruption in the retail sector, and the resulting need for a laser focus on customer centricity, it's ironic that many customer loyalty programs today haven't changed much,” said Paul Martin, Head of Retail, KPMG in the UK.
“Our research shows that 75 percent of consumers would switch brands for a better loyalty program. Retailers who are serious about customer centricity need to ensure their loyalty programs are in line with the expectations of their customers. And today's consumers like to interact with an ecosystem that covers payments, fulfilment, social media, etc. as this can drive value, convenience and a positive experience. And that's a platform experience.”
Brand loyalty doesn't only earn companies repeat business from their loyal customers--over 86 percent of consumers, from Gen Z to the Silent Generation, say they would recommend a brand they loved to friends and family.
In terms of earning customer loyalty, 59 percent of the consumers surveyed said they are loyal to their favorite brand because of a personal connection. Seventy-five percent said their loyalty was driven by product quality, 66 percent said value for money and 57 percent, customer service.
Meanwhile, only 37 percent see loyalty programs as an effective way to earn their loyalty. And 55 percent of consumers who are enrolled in loyalty programs use them infrequently -a few times a month or less. Ninety-six percent of the Millennials surveyed said companies need to find new ways to reward loyal customers altogether.
“Our research tells us that the top three valued benefits of loyalty programs are cash back or discounts, special pricing, and the ease of earning and redeeming rewards,” said Katherine Black, Principal, Strategy, KPMG in the US. “But the stakes for winning loyalty now are much higher; to remain competitive, retailers must consider mixing it up, throwing in a bit of novelty, personalizing offers, and showing they know their customers through a great experience, whether online or in-store.”
Here are KPMG's four recommendations to improve customer loyalty programs:
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