Crossing the loyalty chasm
To find out which areas need to change, and to mark Collinson's (formally ICLP) 25th anniversary in loyalty, we commissioned Forrester Consulting to survey over 1,500 consumers in the UK, US, China, India and Brazil. The findings highlight a 'loyalty chasm' - a gap between what is important to consumers in driving their loyalty and what companies are delivering. We share the key insights from the research on where the biggest chasms lie, and the implications for brands.
Where are the biggest chasms?
1. Instant rewards & discounts
One of the largest gaps was identified in US and UK, where consumers highlighted a failure of brands to instantly reward customers with discounts and savings. Indeed as much as 84% of US consumers and 75% of UK consumers indicated instant rewards were important to them, but only 59% of US consumers and 50% of UK consumers think that brands perform well, revealing a gap or 'loyalty chasm' of 25% in both markets. Whilst still just as important to consumers in more emerging markets, we found that brands were slightly better in meeting consumer needs in this area, with a smaller chasm of 16% being reported for China and 10% for India.
2. Customisable rewards
Allowing consumers to customise their rewards was highlighted as important across all markets and yet were also subject to significant chasms. The research determined that brands in India and Brazil experience a 17% chasm, the US a 26% chasm and the UK a 21% chasm. In addition, expectations were not being met specifically for those consumers in the US, UK and Brazil in the provision of coupons/rewards that they could use when they want, with chasms of 25%, 20% and 21% respectively.
3. Interaction via digital channels
Globally, we found that consumers in emerging countries are the most enthusiastic about mobile and social brand interactions, yet the biggest chasm in both China (27%) and Brazil (35%) is the ability to redeem rewards in different ways, such as mobile; over three quarters of consumers in these markets stated that this was important to them, but only half said brands were actually meeting that expectation. This is in stark contrast to the UK and US, where only around a quarter of consumers indicated redeeming via mobile and other mediums was important.
Not surprisingly, the demand for brand engagement via social media, SMS and mobile apps is far higher in emerging markets, outpacing even the US and UK. Approximately 50% of consumers in the emerging markets regard engaging with a brand on social media as important, whereas the average level of importance for UK/US consumers is only 19%.
Our research report, entitled "Crossing the Loyalty Chasm", also demonstrated marked differences in the way in which consumers interact with brands to which they are loyal. For example, consumers in India and China are three times more likely to use instant messenger/online chat facilities and twice as likely to respond to direct mail than those in the UK or US.
4. Over-delivering in social
Surprisingly the research also revealed that it is in the area of social media where brands in the mature markets are over-delivering, for example, the ability to interact with a brand via social media has an average negative gap of -8%, meaning UK and US brands are delivering more in this area than they need to be. Whilst this might position them ahead of consumer expectations, it should also be remembered that consumers in these markets do not place much importance on their social interactions with brands, which should point brands to review their level of efforts and budgets in this channel.
5. Real-time access to information
The report also highlights that brands across all markets surveyed need to review the ways in which they make themselves and information accessible to their consumers. Both of these areas were regarded as important but the results show consumers perceive brands in more mature markets to be less available than they would like with chasms of 20% and 21% for the UK and US respectively. In addition, clear chasms were highlighted for brands in Brazil, the UK and US when providing consumers with access to real-time loyalty and reward information (chasms of 16%, 17% and 22% respectively).
What are the implications for brands?
So what consumers really want, the study concluded, is a lot more control and choice over the way they are rewarded by brands. But what is even clearer is that brands must now work a lot harder to create more immediate value for customers who need to feel more instant and tangible benefits to reinforce their brand choices. The traditional 'collect and save' mechanic of rewards is no longer enough to keep the customer active and engaged with your brand.
And, even though it's not really a major driver of customer loyalty, social and mobile interaction can't be ignored: our research clearly highlighted that these channels are particularly important for Generation Y and Z consumers, and are likely to become increasingly important to all consumers over time. However, brands also need to align their budgets and efforts with the needs of their existing key customer demographics and ensure they are focusing on those areas that matter most to them and will secure their loyalty today.
Finally, marketers whose brands reach out into international markets can't afford the luxury of assuming that one approach works everywhere; instead they need to understand and deliver against the localised needs of consumers in each market. What works in a developed market - such as the mature models of loyalty and engagement seen in the UK and US - certainly won't have the same impact in a developing one.
Signposting the road ahead
Given the increasing use of new technologies, consumers are clear on what they want and brands need to challenge themselves on how they can find more innovative and flexible ways of meeting their evolving needs, both now and in the future.
There is no doubt that the future of customer loyalty will be increasingly digital, interactive, and data-driven as consumers continue to evaluate the way in which the emotional 'love' and rational 'commitment' they show to brands is recognised and reciprocated.