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The Future of Customer Loyalty in Retail

Insofar as the pandemic accelerated existing trends that demand digital transformations, those who were unable to rapidly adapt and thrive were canaries in the coal mine, as it were, for the business trends of the 21st century going forward.

For many retailers, the rapidly changing conditions of the lockdown period provided a challenge, a sink-or-swim scenario wherein many did not survive. Yet, the industry as a whole demonstrated tremendous resilience.

Indeed, many retailers found a way to come out on top and even grow in subsequent years (despite, for example, the ongoing labor and inflationary crises), and it all had to do with a keen understanding (and rapid response to) the rapidly changing consumer preferences the pandemic produced.

Examining how successful pandemic-era retailers managed to survive one of the worst economic periods of the last century is key to understanding where the road to success in the digital era lies for retailers both playing catch-up and planning their next move, whether internally or with the help of a partner such as Ingenico, an innovator in seamless checkouts.

Understanding the Best Solutions Always Starts with the Customer

It is well-established that the pandemic changed customer behavior in dramatic ways. Customers rapidly became more demanding along four main vectors: loyalty, value, personalization, and convenience. For now, we will focus on loyalty. 

Much has been written on how new consumers are ‘no longer loyal’ or that there has even been a ‘death of loyalty’ in the retail and food service space.

The trouble, as I and others have argued, is and has long been outdated thinking at the conceptual level; the pandemic proved a ‘critical juncture’ for how businesses decided to move forward strategically to generate loyalty. 

Loyalty once meant that, for example, someone who bought a Ford would always buy Ford. People staked out consumer ‘territory’ as it were, and in some cases, would stick to that for their whole lives.

Loyalty now must be understood as earned, but not through brand recognition alone, for there are nigh-limitless brands (and the modern consumer is as empowered and spoilt for choice as ever). The brands’ customers will remain loyal to are those businesses that can provide value, convenience, and optimally, omnichannel personalization. 

That doesn’t mean loyalty is dead, it simply means that the road to it has changed. Yet, for retailers, many of the pandemic’s changes provided industry-specific challenges.

As retailers bolted to strengthen their digital service channels, they found they had to develop a data infrastructure that could leverage the new data capture capabilities of their system, deciding on what their strategic posture would be in order to affect the kind of digital transformations necessary to remain competitive. 

This helped in the development and deployment of a range of PoS modalities and innovations to better suit the socially-distanced needs of their customers, often bolstered by much higher levels of investment into app infrastructures.

Indeed, a myriad of solutions arose, all aimed at meeting the need for safety, convenience, accuracy, and personalization. For example, interactive kiosks allowed guests to place their orders while minimizing staff interaction during a labor crisis (one that lingers to this day).

In other cases, AI and machine learning processes were able to quickly and efficiently answer customer questions or ensure order accuracy automatically, to name but two applications of a technology set to turn much of the world on its head.

Yet, as these innovations multiplied to respond to the challenges of the lockdowns, customer expectations responded in turn by rapidly shifting toward a greater reliance on digital ordering that would prove longer term, an example of a permanent change in consumer preference. 

The pandemic-mandated shift to curbside was a clear example of the sort of adaptation that resulted in that longer-term change, from the use of QR codes to smartphone-powered menus to the increasingly sophisticated apps that powered it all (and the new ‘deal economy’ those apps created to incentivize their use).

In fact, according to one international survey, 78% of customers now make regular use of retailers’ mobile app programs, though it was a trend already in the making prior to the pandemic.

Additionally, the increased reliance on apps increased customer expectations for retailers to provide loyalty programs, and indeed, those that had robust loyalty programs best weathered the pandemic.

Additionally, mobile apps are the perfect vector for increasingly customer loyalty; notes one Forbes report, “Retaining existing users is often more financially viable than attracting new ones,” noting that apps provide the opportunity for retailers to leverage greater communication, personalization, gamification, and storytelling to affect greater engagement and thereby loyalty.

Notes one Forbes report (quoting McKinsey), “customers who are members of a loyalty program are 59% more likely to choose a brand over a competitor and 43% more likely to buy weekly…customers who are members of a loyalty program are 62% more likely to spend more on the brand.”

Furthermore, a global survey by Yotpo found that nearly 70% of those surveyed agreed that they’d participate in a loyalty program if it was offered, and that, again, they were more likely to spend with a brand that offered a compelling program.

Additionally, loyalty programs are important stops for collecting first-party data, another Forbes report argues: “As third-party cookies gradually fade into obsolescence, brands are racing to adapt to changing consumer behavior and new data privacy regulations. At the same time, businesses recognize the value of brand loyalty.”

In other words, it is not exactly mysterious whether investment into customer loyalty is ‘worth it’ for retailers. Of course, while customer loyalty programs have become an obvious investment, executing them properly remains a challenge for many businesses. 

Furthermore, there remains a significant demand pressure on retailers that haven’t yet developed their loyalty programs to quickly do so or even simply improve the ones they have, making them more efficient and accessible in order to stay competitive.

That leads us to another key change that has proven longer-term: the consumer demand for frictionless experiences; frictionless shopping ties into that need for convenience, yes, but also value (time spent vs. utility gained) and personalization (the customer freedom to decide how they want to check out).  

In order to ensure you can provide a consistently smooth, efficient visit for customers at a time when loyalty has become so focused on the customer experience, you need to ensure your PoS system is not only up to the task but provides that better overall experience.

Why a Frictionless Customer Experience is Key to Generating Loyalty

Notes one report by Deloitte and The Wall Street Journal, “To maximize the value of loyalty programs, restaurants can move beyond the “earn and burn” model of rewards to deepening emotional [connection with customers].” 

At a glance, it may not be clear how frictionless retail models help to create better emotional connections with customers as compared to, say, excellent customer service agents, dazzling in-store displays, and so on.

However, it’s best to remember what creates loyalty at a core level for most consumers: the feeling that they not only had a good experience, but got what they needed quickly, efficiently, and in a manner that bettered the quality of their life. 

Businesses ultimately want to convey reliability and trust, and they can do so through innovative service systems, including the latest frictionless PoS.

In that sense, frictionless payments in-store, on the go, and via self-checkout kiosks/tablets are a way to cultivate customer loyalty by increasing their quality of life in a world of disruptions while in the store environment. 

After all, if a customer is frustrated by the checkout experience, they’ll associate your business with frustration, and that will be the impression they leave with.

And, while yes, many retailers already do provide loyalty programs, too many are out of date or just not good enough, still utilizing poor incentive structures like expiring reward points.

Notes a report by McKinsey, “macro-economic factors are putting downward pressure on businesses, necessitating value generation through customer loyalty,” and updated, frictionless, smart checkout systems are a key part of that puzzle.

One example of that puzzle piece is Ingenico’s AXIUM solution, an Android-based PoS system with a wide application portfolio, global API integration, and built-in estate management and security functions. 

Solutions like AXIUM help to not only provide the digital PoS service you need to facilitate smooth transactions for the loyalty programs that have become so critical to QSR performance and resilience, but integrate with other systems to create a holistic service modality for your clients and customers. 

That, ultimately, is what frictionless commerce is all about.

Simply Put, Digital Loyalty Programs are Essential for Competitive Retailers

The economic hardships of COVID-19 built upon long-standing difficulties following the housing crash of 2008; customers are feeling the squeeze as much as they ever have in modern economic memory.

As such, every business leader must keep front and center that ultimately, loyalty programs—and competitive business strategy—has to continue focusing on value-added for customers in a cash strapped, inflationary environment.

When customers have less and businesses have thinner margins, efficiency is what’s left on the table, and digital transformations are the ever-evolving answer to a conundrum that yet has no end in sight.

The opportunities are there. Notes one KPMG research initiative, 96% of millennials “say companies should find new ways to reward loyalty customers,” while 81% note that “being a member encourages them to spend more” and they “would switch to a company that offered a better program.” 

Retailers looking to reach out to both younger consumers (who isnt’?) and more cash-strapped, value-seeking customers can find ways to achieve both by tweaking their loyalty programs to their preferences, and increased convenience and ‘seamlessness’ is one of those.

Indeed, for retailers seeking to remain competitive, it can only be reemphasized that the customer experience remains imperative; it all goes back to making customers feel good about their visit, to creating that emotional connection, and loyalty programs are increasingly at the core of those experiences. 

Young consumers will return if they felt good about shopping with you, period, and while the same can be said of any demographic, young consumers are your business’s future.

Though the task may seem daunting, retailers should feel empowered to know that the means to fully leverage the next generation of consumer loyalty are well within their grasp.