Is brand loyalty dead? Data shows incentives, not emotions, drive the ‘habit’ generation

A new report reveals that consumers can become habitual but not ‘loyal’ to brands, while understanding customer pain points and offering them rewards to buy can increase repeat purchases.

Is brand loyalty dead? Data shows incentives, not emotions, drive the ‘habit’ generation

Rewards or incentives are the most significant driver for consumers sharing data, including contact information with brands, and ‘kick-start’ the move to habitual purchasing.

But habitual or repeat purchasing should not be confused with brand loyalty, with more than a quarter of consumers stating that they have no perceived loyalty to any brand. 

The Loyalty Paradox, a report released this week by customer data specialists Edit and digital transformation consultancy Kin + Carta, surveyed 2,000 UK and US consumers. Its results reveal that 43 percent of customers would be encouraged to share personal information, including contact details, with a brand if there was an incentive or a ‘reward’, such as a discount code or incentive.

A quarter of customers would be encouraged to sign up with exclusive or first opportunities to purchase a product or service. Exclusivity particularly appealed to Gen Z customers, with almost a third of those aged 16 to 23 responding that they would be more encouraged to sign up to brand communications with this incentive.

Emotional connection no longer key for brands

While such incentives may encourage consumers to repeat purchases with a brand, this should not be confused with loyalty and brands should no longer rely on an emotional connection, says Edit’s joint Managing Director Rob McGowan.

By sector, e-commerce fared particularly badly in the loyalty stakes, with just 6 percent of those surveyed saying they felt loyal to e-commerce brands, compared to 9 percent for finance and 21.5 percent for offline food and drink retail. 

“Brand affinity through emotional connection has weakened to be replaced by habitual ties based on lived and related experience with brands and retailers,” McGowan says.

Karl Hampson, Chief Technology Officer Data & AI at Kin + Carta, adds: “Our research shows that brands must not confuse repeat purchasing with ‘loyalty’. Instead, they should balance repeat transactional activity with how engaged the customer is across all interactions”.

The report also found that:

Operational and customer experience points outweigh rewards as a driver for returning

Rewards may be seen as the right trade-off for sharing personal information, but customer service communications were key to a ‘return factor’. More than half those surveyed said that not being able to contact customer services in the way they preferred would make it likely or very likely to deter them from making another purchase with a brand.These operational considerations were particularly important for Gen Z (34 percent) and Millenial (32 percent) respondents. 

Customer contact throughout the purchasing journey makes a difference 

A third of those surveyed said they would be deterred from making a repeat purchase if they were not kept informed of the progress of their order or delivery, while just over a quarter said that not being rewarded for being a loyal customer would put them off returning. 

Kin + Carta’s Customer Data Director, Gary Arnold, says: “Brands should consciously map and identify customer touchpoints and aim to unify these sources of data to better understand the totality of customer interactions with them. Doing this, will provide a view of the real-world “journeys'' people follow, versus the conceptual target journeys marketers and customer experience professionals envision and build solutions to support.”

More affluent customers expect personalisation

The report found that those with higher incomes were broadly more likely to expect personalised communications, seemingly caused by more highly personalised interactions with what they purchase, or purchase more premium end products or services. 

However, Edit and Kin + Carta found that personalisation should be action based, rather than relying on an audience segment alone. Despite contact across the journey being a key driver towards repeat purchasing, respondents were positive about automated processes replacing human interaction, on the proviso that service levels remained the same. 

The loyalty picture is more complex depending on demographics

For financial products in particular, perceived loyalty to a brand increased with age, levelling off as respondents hit their 40s, while 20 percent of those with a household income of £75,000 or more claimed they were loyal to a financial brand. Families with children under 18 also claimed more loyalty to brands across all sectors excluding food and drink retail.

Rob McGowan says: “Consequently, brands should be looking at the customer journey as a whole, as well as spotting opportunities to innovate through data. Do it right, and there is an opportunity to retain more customers, as well as bringing in new ones.”

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