Rough Waters Ahead – Turn to Loyalty

Guy Cierzan’s Insights

Chief Operations Officer @ Salient

Loyalty provides financial cushion—stretching budgets, offering rewards as an alternative currency, and delivering personalized discounts that allow consumers to optimize their spending.

For businesses, loyalty programs are a strategic lifeline and safety net to the turbulence of an uncertain and volatile economic environment. Retaining customers and helping sustain spending (those who redeem spend 25% more, according to McKinsey), while providing invaluable zero- and first-party data for personalization and to bolster financial performance inoculates the business from unnecessary attrition and revenue erosion.

More importantly, loyalty forges both a tangible and an emotional connection—restrengthening the bond between customer and brand and providing an insurance policy to economic headwinds.

Mike Giambattista’s Perspective

Founder & Editor-in-Chief @ Customerland

The question isn’t so much if loyalty can help (it can) but more about how brands should adjust their loyalty programs to this new dynamic. The pandemic was a perfect petri dish for what happens when consumers pull back, and it showed us, unequivocally, that economic pressures create brand-switching scenarios. A McKinsey Report found a high intent (65 percent or more) to incorporate these switching behaviors going forward.

Understanding the drivers behind these behaviors draws a clear roadmap for brands that are agile enough to respond. The same McKinsey report found that value, convenience, and availability (in that order) were the most often-cited reasons for trying a new brand. This suggests a deeper dive into understanding exactly how your customers define value and then applying those learnings to what your loyalty program is delivering—and maybe more importantly, how the program is communicating that value.

Economic uncertainty and the inevitable consumer pullback are also a not-so-gentle reminder that brands need to understand what their customers expect in order to have any chance at meeting them, much less exceeding them.

Richard Schenker’s Insights

Founder & Chief Customer Engagement Officer @ Loyal Strategy Consulting

As the economic situation grows more strained, with rising costs and increasing unemployment, many consumers will look for ways to cut back and stretch their budgets. Loyalty programs—often seen as an easy way to save—are likely to see an uptick in points redemption during these times. Consumers will increasingly turn to the equity they have accumulated in loyalty programs to offset the financial pressures they face.

Rather than using points for expensive travel, dining, or experiences, consumers will likely prioritize more practical, cash-equivalent rewards, such as discounts, gift cards, and savings on everyday essentials like food, fuel, and household goods. This shift will also be reflected in the loyalty programs offered by airlines, hotels, and other service providers in the travel sector.

Jodi Rausch’s Perspective

VP and Managing Director, Loyalty Solutions @ Concentrix Catalyst

I certainly expect consumers to change their spending habits in the current economic environment. With so many brands reforecasting their Q1, 1H and FY outlooks already, combined with the impact of tariffs, consumers are bracing for higher prices and possible supply chain issues.

As we have seen in so many recent challenging economic times, I believe consumers will be more intentional in limiting the number of currencies they are earning, spending with those brands they are most loyal to as a way to increase the impact of their spend and to find special offers for their continued loyalty.

David Slavick’s Recommendations

Co-Founder and Partner @ Ascendant Loyalty Marketing 

While loyalty marketing cannot generate immediate profit results or overcome fundamental business model challenges, there are tactical ideas that can be considered for implementation in challenging economic conditions:

• Offer Members to Purchase Goods on Layaway
• Provide Zero Interest and extended terms for high-ticket items
• Increase frequency of bonus point offers
• Reward members with “house” gift cards
• Reduce free shipping spend threshold
• Lower the cost of paid membership for subscription programs

During a downturn in the economy, the companies that maintain their spend and customer engagement ALWAYS come out ahead in market share versus the competition that pulls back.

Melissa Shaw’s Perspective

CEO @ Shaw/Scott

Loyalty runs a lot deeper than discounts. At its core, customer loyalty is deeply personal. The relationship a brand builds with its customers is all about values and demonstrating that “we are for you.”

In times of uncertainty, consumers pull back on discretionary spending. This is when retention becomes absolutely vital. The most successful brands are going beyond a blanket discounting strategy and focusing on more meaningful customer experiences. For example, MOTHER Denim messages customers with exclusive early access to new styles based on their purchase history, creating a sense of special treatment and care.

In an omnichannel world, it’s even more important to give customers a reason to shop direct. The goal should be to invite customers in and stay deeply connected to their stated and observed motivations.

Ellen Green’s Insights

Vice President, Loyalty Strategy @ Bounteous

As economic pressures continue, consumers are forced to make choices about how and where they spend their next dollar. In cases where consumers must choose between one brand and another, Loyalty can serve a differentiator.

Consumers aren’t just loyal to brands based on a loyalty program. They consider all elements that drive value for them in the relationship with the brand: what the brand stands for, the products the brand offers, the price point, and the overall guest experience. Brands who succeed will create meaningful value to win the hearts and wallets of consumers.

Brands that succeed:

• Understand who their target consumer is and deliver products they love at a price that is reasonable based on the value they are delivering
• Have a strong brand identity and highlight it as a differentiator in their marketing and loyalty strategy
• Make it seamless to interact with the brand
• Know their members and what matters most to them – and personalize their experience accordingly
• Create feedback loops to gain ongoing insights, identify shifts in their customer’s needs and action upon them

As competition rises, the brands that take an ever-evolving consumer-centric approach that builds true customer loyalty will prevail, while the rest will fail. 

Erin Raese’s Perspective

Chief Growth Officer @ Annex Cloud

Most organizations enjoy 80% of their revenue from 20% of their customers. During challenging economic times, organizations need to know who those 20% are and make sure they continue to spend consistently. 

Those organizations with a loyalty program already know how these people are. They know their prior behavior, they know what motivates them and they know how to make them feel special. Now is the time to double down on the activities that make these people feel special. How are they weathering the storm?  What can you do to help? How can you make their lives easier? How can you make purchasing from you easier?  What additional value can you provide. Note this value doesn’t need to be monetary – recognition, empathy and support go a long way.

Those organizations contemplating loyalty, need to move and move fast. Loyalty on a Saas platform like Annex Cloud can be up and running before the holidays (note it’s mid March now). You can identify those best customers and be communicating with them before they start making big decisions on where they will invest their holiday spending. If you wait you will lose market share this year, especially if your competition has loyalty or dives in now.