Raising the stakes
Digital has raised the stakes on loyalty. It’s now easier for customers to make competitive comparisons and to find better deals. But does that mean customers are any less loyal? Has digital made them more promiscuous? And what does it all mean for brands? These are crucial questions, which sit at the heart of a brand’s customer strategy.
Data on customer loyalty
We’ve been thinking about whether customers are more promiscuous or more loyal post-digital for a while, and now that we have three years’ robust trend data from the Quadrangle New Masters Survey, we have a definitive answer. Our analysis has homed in on four questions, which we have asked consistently across 2016-18: three are about behaviour, one is about expectations. Deliberately, these four questions don’t ask customers about digital, but loyalty. Our interest isn’t in understanding how loyalty works in a digital context, but how loyalty plays out with post-digital customers.
To draw out the trends more starkly, we only show 2016 and 2018 data.
Promiscuity versus loyalty
The four statements broadly split into two pairs:
The first two statements are more about brand promiscuity than loyalty, i.e. ‘I like to switch brands to try out new things’ (41% up to 44%); and ‘I often switch brands to get the best deal’ (63% down to 57%).
The behaviours described in both statements are essentially transactional, though their dynamic is in opposite directions: switching ‘to get the best deal’ is down, whilst switching ‘to try out different things’ is up.
The second two statements are more straightforwardly about loyalty, i.e. ‘Once I find a brand I trust I like to stick with it’ (47% up to 68%); and ‘I expect brands to give me something in return for keeping my business’ (32% up to 59%). Both statements tell us more than may first appear. The behaviour described by the first statement reveals that loyalty comes out of being able to ‘trust’ a brand; whilst the expectation described by the second statement contains a teeny hint of a threat as to what might happen if brands don’t ‘give me something in return’.
The second pair of statements resonate much more strongly with customers than the first pair in three ways: the level of agreement is higher, the dynamic is consistent, and both have increased dramatically from 2016 to 2018.
That is very good news for brands as it tells us customers’ tendency to ‘loyalty’ is inherently stronger than their tendency to ‘promiscuity’. We have a clearer answer to our question than might have been expected: post-digital, customers are inherently more loyal.
Customer loyalty schemes
The decline in the percentage of customers saying they switch brands ‘to get the best deal’ also looks like good news for brands. The watch out, though, is that it remains high in 2018 at 57%, and the 6% decline since 2016 is marginal compared with the 21% and 26% uplift for the two ‘ customer loyalty’ statements.
But there is a further piece of data to overlay here. The 2018 survey includes several other statements about loyalty, including ‘I use brand loyalty schemes whenever I can’. For all customers, agreement with this statement is 70%; however, for ‘switchers’ the numbers are significantly higher: 79% for customers who switch ‘to get the best deal’, and 80% for customers who switch ‘to try out different things’.
In fairness, though, this can be argued both ways: loyalty schemes are better at recruiting promiscuous customers than loyal customers (which is good if you want to bring such customers into the brand); but they’re also less effective in keeping loyal customers than promiscuous ones. The strong implication, underlined by what we hear in other customer research, is that loyal customers want something other than loyalty schemes… But hold that thought.
‘Trust’ and ‘fair exchange’
Going back to the pair of ‘loyalty’ statements and looking at them alongside each other, we see that the second statement qualifies the first, and a new thought emerges.
Essentially, customers are saying ‘We’re happy to be loyal to brands we trust, though we do expect something in return’. Which is fair enough – though, as we’ve just seen, that ‘something in return’ is probably not a ‘loyalty scheme’.
This is a genuinely powerful new thought in the context of post-digital customers. We say this partly because the thought combines the two statements that show the greatest increase across the two years. No other statements have seen anything like the same uplift: proportionately, they have increased 47% and 84% in just two years.
But the main reason we say this is because, as a thought, it embodies two ideas that have now become – for differing reasons – exceptionally important for customers, and which sit at the heart of the post-digital zeitgeist: ‘trust’ and ‘fair exchange’.
‘Trust’ has always been important for customers. Digital has made it more so due to the concerns that people now have about online security and privacy, with high-profile events like the Facebook and British Airways data breaches in 2018 providing good reason for them to be concerned. ‘Fair exchange’ has become important because, whilst customers don’t want to abuse the power that digital is putting in their hands – always remember, people are essentially decent – at the same time they don’t want brands to take them for granted or treat them like muppets.
Our research gives strong clues as to how brands can play into this zeitgeist, on how to build customers’ trust and to respond to their expectation of fair exchange. Importantly, it also confirms why the way brands should look to deal with customers differs considerably across segment, depending on the nature and level of their digital engagement.
But the other place all this takes us is to say that, as well as looking at customers, there are several brands that need to take a good look at themselves. Over time, brands have built up some, shall we say, bad habits that – whilst lovely for the bottom line – aren’t exactly great for customers, and particularly their most loyal customers. But rather than us get on our high horse, let us just share how the Financial Conduct Authority puts it in its Business Plan 2018/19:
‘Firms should not give longstanding customers less attention than new customers or treat them in a way which results in poorer outcomes. If competition is working well, it should not disadvantage existing customers over new customers.
Whilst many firms have made progress in putting customers more firmly at the centre of their business models, they need to further improve their standards of treatment for existing customers.’
That’s clear. As is this: the FCA has got the post-digital zeitgeist pretty much nailed. The question is, what can brands do to catch up?