What is the price of consumer loyalty? In Waitrose’s case, the answer appears to be free coffee after the chain reintroduced the benefit to its beloved ‘myWaitrose’ loyalty scheme.
The decision to reinstate the perk after initially cutting it during the pandemic is a sign of the times – and reinforces the power of loyalty.
The cost of living crisis is in full swing. Prices are soaring and consumers are looking for new ways to purchase their essentials. Rising inflation caused supermarket prices in October to spike almost 15% higher than the previous year and the recession’s negative impact on consumer spending is unlikely to subside anytime soon. Forecasts predict that 43% of consumers will reduce their total spending over the next 12 months.
Evolving consumer expectations means that delivering value-for-money has to be prioritised. According to research by Pay.UK earlier this year, 39% of consumers are now actively searching for more value from the products and services they are purchasing during this period of economic uncertainty.
But this desire for value has done little to curb consumers’ need for convenience. 70% of US consumers have acknowledged they would part with more money in exchange for greater convenience and this is where brands can take inspiration from subscription models.
Subscriptions are seeing a growing influence. While this is not a revelation, tapping into their combination of exclusivity and value is the first step towards nurturing consumer loyalty during this period of economic uncertainty.
Loyalty schemes to feel good about
The shifting economic landscape is driving changes to the consumer experience. As this matures, the need to implement an infrastructure that allows commerce and loyalty to converge grows more apparent.
The subscription model is already resonating with modern consumers. Recurly’s research found that one in four British consumers planned to sign up to more subscriptions, with a third of consumers acknowledging they have more subscriptions now compared to 2020/21.
The question is - how to leverage this acceptance?
Waitrose wasn’t reactionary in its decision to bring back free coffee – rather, it has identified the need to revitalise its loyalty scheme. The programme now requires loyalty card holders to make an in-store purchase before enjoying their hot drink, and non-members can only buy a coffee if they have a reusable cup.
This strategy isn’t just delivering value and reward to returning customers - it is also a nuanced way of incentivising non-card holders to sign up. Status quo strategies are outdated and ill-equipped to cater to consumers’ new expectations. The revamped ‘myWaitrose’ scheme epitomises how to effectively drive both sales and loyalty.
Consumers’ bond with subscriptions means they will think twice before departing. These schemes are also effective at driving increased loyalty. We found that consumers are more loyal (59%) and tend to spend more money (45%) with brands and businesses they subscribe to.
But what does a best-in-class loyalty program look like?
There’s more than one way to play the loyalty game
There isn’t a ‘one-size-fits-all’ subscription model. First impressions count – the first 30 to 60 days of a consumer’s experience with your brand will set the tone of the relationship. Creating an intentional journey can help reinforce your brand purpose and mark your business out as unique.
Exclusivity is also a vital addition to any loyalty program. Priority access to the best delivery times, for example, sets loyal customers apart and creates a “Loyalty Program +” that others will want to be a part of.
Complementary subscription bundles also bring value to the table. These complement, rather than compete with, existing promotions. This is particularly effective for B2C businesses, and for example, could mean rolling out a subscription for breakfast pastries to run alongside a free coffee loyalty program.
Omnichannel strategies for subscriptions
Delivering a comprehensive experience is integral to success – but this doesn’t revolve solely around the physical. The rise of omnichannel strategies means that every medium should be considered. Combining physical and digital goods, leveraging a combination of virtual and live events - these are essential for fostering greater affinity.
The most effective subscription services embed themselves into consumers' habits. Unique pricing and promotional strategies are effective at achieving early adoption but the churn rate at the time-to-convert will also be higher. Ramp pricing models enable businesses to attract consumers through a discounted point of entry and the monthly rate can be subsequently raised over time to the full subscription cost.
Discounts, freebies and exclusive content are all effective assets that drive loyalty. Subscription models give a deeper understanding of your audience, as well as increasing both retention rates and average revenue per consumer.
A good loyalty scheme is its own reward
Waitrose recognised that offering increased value in the short term could be the stepping stone to long-term growth. Mastering subscriptions and loyalty programs allows businesses to foster strong relationships with their customers, enabling them to ride out a recession.
Consumers are searching for the best deal as the cost-of-living crisis bites. Price remains an important differentiator, but subscription models are a powerful tool for brands looking for the most valuable asset in this market: loyalty.
General Manager - EMEA