Best Practices for Maintaining Loyalty During Market Volatility
The economic downturn triggered by the coronavirus and the social distancing efforts aimed at slowing infections has been unprecedentedly rapid, severe, and comprehensive. While most economic analysts came into 2020 predicting a year of uninterrupted growth, the impacts and uncertainties of COVID-19 have upended all of those projections.
Though forecasts differ, they do share pessimism about the economy over the short-term. For example, the consultancy Wood Mackenzie projects U.S. gross domestic product (GDP) will shrink by 8 percent in the second quarter, 4 percent in the third quarter, and 1 percent in the fourth quarter, followed by a robust rebound in 2021. While the future state of the economy remains uncertain, it’s already clear that specific industries have been hit especially hard by the global pandemic.
Travel and hospitality have been walloped, with substantial job losses and revenue evaporating for airlines, restaurants and hotels. Retailers, too, have faced rough going, particularly those that depend on in-store sales. For example, Macy’s furloughed the vast majority of its employees in late March after closing its 775 stores.
There are a handful of bright spots. Beyond just the grocery stores and delivery services that are keeping Americans fed, Thriftbooks, an online bookseller, has a distribution model that ensures employees can maintain social distancing while shipping titles to readers with ample time on their hands. The company has also been smart about producing content geared to parents who are struggling to guide their kids’ school instruction and educating shoppers that COVID-19 can’t be transmitted on its books.
Why Loyalty Matters Now More than Ever
Adapting business models to better engage and serve customers is a necessity for virtually all companies today. What's also clear is that strengthening customer loyalty will be vital to navigating challenging economic times, no matter how long COVID-19 restrictions remain in place. The truth is, even booming economic conditions don't significantly reduce the time and money required to woo new customers. As the economy contracts, both businesses and consumers carefully watch their spending—making the difficult task of landing new customers even more challenging.
This is why companies need to lean harder on their loyalty programs to retain their existing customers. There are intuitive reasons why it makes sense to focus limited resources on loyalty. By definition, those who have signed up for a loyalty program are eager to engage and do business with a brand. Strong customer loyalty is also good for profitability. A study by Bain & Company and published in the Harvard Business Review found that a 5 percent increase in customer retention rates increases profits by between 25 and 95 percent.
Loyalty Program Best Practices
The current economic downturn and the reality of ongoing uncertainty mean that brands need to manage their loyalty programs over the short-term in ways that will cement customer retention over the long-term. Here are some ways to do that:
Best Practice #1: Reassure your best customers
Consumers value the rewards they receive via loyalty programs. Just ask a frequent flier or hotel patron whether they care much about flight and room upgrades or access to swanky lounges. Here’s a hint: They care a lot. One reactive step brands can take to retain their customers is to assure them that their points, status, and other rewards will not expire while they’re unable to fly, dine, and shop. For those customers who have already booked reservations with points, companies should proactively let them know there is no fee for cancelling or making changes. Even retailers who have a robust e-commerce capability should let their customers know that points won’t expire during a time when so many people have lost their income and are watching every penny. All of these are a way for brands to not only do the right thing but to communicate to customers that they are valued, even when no actual transactions are possible.
Best Practice #2: Focus on education and non-traditional ways to earn rewards
People everywhere are hungry for guidance about how to navigate this new world we live in. What are some ways to reduce stress? How can they help their kids learn and remain curious while they’re out of school? Brands can use their loyalty program communications to become a source of trusted information and advice. In some cases, if this content is truly related, it can be tied to the brand’s products and services. More often than not, though, it will have nothing to do with prompting a transaction.
Customer communication doesn’t have to be exclusively about the uncertain moment we are living in, either. Brands can also seek engagement with their most loyal customers by offering them points for their opinions. Not only is this a nice distraction for customers, but it also provides a brand with valuable user-generated content and feedback used to guide everything from product development to future promotions and rewards.
Best Practice #3: Provide alternative ways to use rewards
While it is undoubtedly important for companies to reassure their customers that rewards will be there for them when life returns to normal, it's also good to provide opportunities for people to use their rewards to meet the challenges of the moment. For example, because of the economic uncertainty so many people are feeling, consumers may feel less inclined to give to charities doing meaningful work. Brands can earn goodwill from their loyalty program members and the community by making it easy to donate points to support philanthropy. For example, Kellogg’s Family Rewards makes it easy to translate rewards into help for Feeding America, which supports the work of food banks around the country.
Best Practice #4: Make online options available
It might sound obvious, but companies need to make it easy for their loyal customers to redeem their rewards and engage with them online. At least for the moment, commerce and much of life have transitioned online. While hotels and airlines can't recreate what they offer in a virtual environment, brands that can facilitate transactions and redeem rewards online should make it simple and easy to do.
Unease and uncertainty are everywhere. That includes companies that are seeing steep revenue drops and no clear path back to normalcy. Still, it’s important to remember that the economy and life will rebound. The brands that use their loyalty programs to deliver value to their best customers and their communities now will be remembered and appreciated. It’s an investment that earns goodwill that will be so important over the long-term.
Brierley offers a range of strategy and consumer insight modules that can help you in evaluating and enhancing your member acquisition and on-boarding efforts. Our Strategy and CI Teams can help with projects such as CX Journey Mapping, Competitor Evaluations, Communication Audits, Loyalty Ideation Workshops, and more to ensure you maximize every opportunity to drive enrollments. To learn more, click here.
Brierley is the industry leader — transforming loyalty around the world. The company’s focus is turning client challenges into successful and profitable loyalty program solutions. Brierley brings together innovative thought leadership, unparalleled expertise, and advanced technologies to help brands win customers’ hearts and minds.
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