Does brand loyalty still exist?

19 September 2017

Marketers have always debated whether brand loyalty exists or not, but since the boom of the millennial generation, and the introduction of ‘Gen Z’, discussions have been heating up!

No doubt, you’ll have seen many articles and studies that claim ‘brand loyalty is dead!’, but that may not be the case. Rather, it seems that brand loyalty is changing.

Keeping up is vital for brands and who wish to stay ahead of their competitors. After all, it costs six times more to attract a new customer than to retain an existing one.

Let’s take a look at the current state of brand loyalty, and what businesses can do to keep the attention of millennial and Gen Z customers.

Millennials believe they are loyal

It’s easy to assume that younger consumers aren’t as loyal as previous generations, because they are used to having much more choice. However, millennials themselves don’t believe this is the case – research from Buzz Marketing Group revealed 95% of multicultural millennials say they are loyal to the brands they like.

Millennials are also extremely influential – 80% say they usually introduce trends to friends and family before they become fashionable in pop culture. Whether that is based on hipster hot air or not, the important takeaway is that millennials believe they are influential, and are happy to share details of their latest experiences and products they’ve purchased. These are exactly the types of consumers you want to attract, and retain.

Don’t judge a millennial by its avocado

Young person wearing watch

Businesses shouldn’t be making assumptions about their younger customers. Millennials are the most diverse generation the world has ever seen, and understanding this varying group of consumers is vital if you want them to remain loyal to your brand.

Millennials are often portrayed as sale-savvy consumers, always on the lookout for a bargain, but it seems they are searching for products and experiences with value, more than anything else. Almost three-quarters (68%) of millennials currently own luxury brand products and 79% said they purchase such products because they are of a higher quality, according to Buzz Marketing Group’s research.

You don’t have to be the cheapest provider to win the hearts of millennials. Not only is this a difficult goal to achieve (another business will always, eventually, undercut you), but it is unlikely to inspire loyalty.

Know what your customers value

To truly understand your customers, look at their spending habits. Interestingly, millennials would rather spend more money on experiences than anything else, whereas older generations are dining out less than they used to. Whether a customer buys a product or speaks to your customer service team, the service should be a memorable experience.

Look at how Apple does business: everything from an instore visit to the product packaging is treated as an experience, and young consumers can’t get enough of it. Businesses need to show they have a heart, too. Some 83% of millennials like it when brands take a stand for or against something they believe in.

Brands are listening, and speaking out about political issues more often. Smirnoff’s ‘Love wins’ campaign is a perfect example of how brands can capture the hearts and minds of their customers, by making a small but significant gesture. This campaign also included personalisation, as LGBTQ couples were invited to submit their photos for a chance to appear on limited edition bottles of Smirnoff.

Personalised content is a big hit with both millennials and Gen Z – three quarters are happy to share personal information in exchange for a more personalised experience. But remember, loyalty is a two-way street: misuse their data and young consumers are unlikely to stay loyal to your brand.

Loyalty programmes may not inspire loyalty

woman opening her wallet

Despite being more than 100 years old, loyalty programmes remain hugely popular with many businesses. The average shopper’s wallet is full of loyalty cards for everything from supermarkets and local coffee shops, to their favourite clothing stores. In fact, 92% of UK adults have at least one loyalty card. Even travel businesses like Hotels.com offer rewards to returning customers.

Loyalty programmes are popular, but new research indicates they may have little or no effect on brand loyalty. More than half of consumers (61%) switched some or all of their business from one provider to another in the past year and 77% say they retract their loyalty more quickly than they did three years ago.

They may not be generating a massive uplift in sales, but there is one benefit of these existing loyalty campaigns: they keep customers engaged. Fully engaged customers are more likely to refer others, so businesses need to ensure their audience doesn’t lose interest.

Again, understanding your audience is key. Millennials are more likely to react negatively to a company purposefully trying to earn their loyalty. Businesses will need to change their tactics. Know what loyalty looks like to your consumers, and tailor your experiences and language to match your customers’ values and behaviours.

Millennials and Gen Z customers may not be interested in a free coffee for every ten they buy, but exclusive offers and innovative experiences could be much more appealing.

Loyalty has changed

Long gone are the days where you could stave off competitors simply by offering a better loyalty programme, the lowest prices or the best customer service. Loyalty still lives, but customer expectations are changing. Brands must be present, have a personality, and work hard to keep their customers engaged.

At Feefo, we’ve spent a lot of time researching what make customers tick. Net Promoter Score (NPS) is just one of the many tools we use to measure customer loyalty, and identify those valuable brand advocates and dangerous detractors.

If you’re interested in gaining greater insight into your customers, sign up for a free trial with us today.

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