How Has the Pandemic Affected Consumer Behavior in Loyalty Programs?
The epidemiological situation stabilizes, and marketing normality is slowly returning to the old tracks. Some customers are reacquainting themselves with stationary shopping and are more willing to interact with in-store consultants. What challenges do marketers face in the post-pandemic reality? Will the position of the online channel last, while the offline channel will be irretrievably lost? How will post-pandemic customer behavior evolve?
Conversion to loyalty programs – an upward trend
At Loyalty Point, we support more than a dozen leading loyalty programs in the retail category. This enables us to observe changes and quickly react to emerging trends efficiently. Loyalty programs are used as sales support also in crises – that’s why their position has strengthened during the pandemic. As shown by most projects we work on, the number of registrations for loyalty programs is steadily growing. New people are eager to join more loyalty programs with the mindset of ‘nothing to lose but to gain.’ Last year we saw between 15 and 20% growth in registrations.
The digital transformation in the area of loyalty is a fact. We move away from paper form and stamp card programs to more digital solutions. Nevertheless, in-store registrations with the help of a salesperson or consultant are still very popular among many customers. Therefore, the loyalty program market is still developing in two directions when it comes to the registration process. Most companies offer the possibility of registering for the program both offline, which we understand as registering in a stationary store, and online, through a mobile app or a form on a website. Brands whose primary source of club members was online or mobile registration could sleep well. As a result, there was an additional increase in program registrations among their customers relative to 2019. In contrast, the low (compared to online) number of in-store registrations remained stable.
Online registrations – an excellent addition or a necessity?
During the pandemic, enabling online registrations became a necessary alternative for brands that previously operated primarily in traditional ways. The spread of this opportunity allowed marketers to recruit new clubbers during the pandemic period while stationary stores were closed. As a result, the number of clubbers recruited online was up to 200% higher than through the same channel in the corresponding periods before the pandemic.
However, the changes in consumer behavior did not prove to be a permanent trend. They resulted from necessity. Now that it seems that the pandemic and the worst is behind us, customers are eager to return to their habits. In-store registrations are once again returning the favor. What is essential, therefore, is that the emergence of the online channel among brands that have so far relied on attracting new clubbers in the stationary store has not entirely displaced this method. Instead, it has opened the door to attracting new customers with different preferences. The position of the online channel is now stable, so marketers need not worry that their investments were short-term, only for lockdowns.
Increased participation among young, unstable among old
Increased participation among young, unstable among elder
It turns out that turning online and promoting this channel over traditional loyalty programs has changed a lot. Young customers, especially those in the 18-24 age group, have adapted to the new reality and are more likely to register for loyalty programs than before the pandemic. Digital solutions are more intuitive and attractive for this segment of the population. As a result their share of registrations, especially for traditional loyalty programs, has increased thanks to the new registration option. An analysis of selected projects shows that we could observe between a 30 and 50% increase in the participation of the youngest age group.
People in the 25-34 age group are the most likely to register for loyalty programs, both before, during and after the pandemic. Based on the projects we run, we observe that they account for more than 30% of all people joining loyalty programs. So it’s not without reason that this is the target group for many brands.
Accepting the new reality and new opportunities, on the other hand, proved to be more burdensome for older age groups. For example, people 55-64 and 65+ have significantly withdrawn from joining loyalty programs during periods of hard lockdown. The significant reduction has influenced this in in-store registration opportunities caused by store and mall closures. Marketers are therefore faced with the challenge of simplifying the online channel so that it is intuitive and accessible to those who are not fluent in this type of functionality daily.
Offline? Online? Omnichannel!
After the pandemic, planning activities that cover all channels and brand-consumer touchpoints proves crucial. This will give customers the freedom to choose the best option relative to their preferences. In addition, by balancing the distribution of your loyalty program across offline and online channels, you can provide a similar experience tailored to user preferences.
Turning online has its advantages, but unfortunately, also its disadvantages. Competition on the Internet is fierce, and before buying something, a potential customer wanders between websites searching for the best product. Convincing them to a particular offer is more complicated than you might think, so many loyalty program sign-ups don’t follow through with a transaction. Customers sign up to stay up to date with discounts, follow offers and get information about promotions, so they are more likely to agree to communications. Marketers should therefore focus on encouraging transactions in this case. The quality of contact information (email/sms consent) is higher for online registered customers than for offline registered customers.
Registered. And what’s next?
However, it should not be forgotten that offline registrations have an advantage – a customer in a store is more motivated to purchase a person comparing offers of different online stores, which should be kept in mind, especially by salespeople and consultants in stores to invite a customer to a loyalty program and encourage them to agree to communication. Then, such registration combined with a transaction may be the most qualitative.
Loyalty program registration, however, is only the beginning of the journey in building loyalty. Even more critical are transactions and data that customers leave behind. Consent for SMS or email communication and the ability to profile content according to customer preferences are key factors that can determine the success of a loyalty program. Typically, more than 80% of those who join a loyalty program via a website or mobile app consent to email or text message communication. When registering in a stationary store, the same consents are left by less than 50% of registrants.
Unfortunately, we have recently seen a significant decline in SMS and email communication consent. As a result, we are seeing increased consumer concerns about protecting their privacy. This is true for all age groups. Consumers’ comfort level with allowing brands to use personal data has decreased across all data types, making it even more important to reassure consumers about data security and illustrate how each consumer’s experience will be improved by sharing their data. It must be clear to consumers how their experience with a loyalty program will be enhanced if they provide personal data. Brands must therefore ensure that data is secure and transparent about how it is used.
Loyalty programs are still very popular. Loyalty can save a brand, especially in difficult times, as we experienced during the pandemic. However, the mere fact of popularity of a program, having a card or an application does not determine the success of a project. The key is the level of engagement of club members. Pandemic changed business priorities and accelerated digital transformation in loyalty programs. In doing so, it has opened up a new field for action and work in the area of loyalty. In the post-covid era, there will be some changes in relationship marketing – the priority for companies will not be to acquire new customers but to retain existing ones, to ensure that the data they acquire is secure and that they are engaged in more transactions with the brand, and to engage older age groups in digital experiences.