In the current financial landscape, it has become increasingly difficult for consumers to maintain their traditional spending habits, leading to more frugal approaches when it comes to spending.
According to data from the Australian Bureau of Statistics (ABS), the tightening grip of increased mortgage repayments, rising income tax, and the effects of high inflation are causing households to cut back on expenditures.
The broader economic landscape, as reflected in the gross domestic product (GDP), showed a modest expansion of 0.4 per cent in the three months leading to June, marking a reduction in the annual growth rate from 2.4 per cent to 2.1 per cent. The drop in GDP growth over the past year has been attributed to a decline in discretionary household spending, especially on items such as clothing and appliances.
As disposable incomes dwindle, and cost of living continues its upwards trajectory, consumers are becoming more reliant on monetising the value from the loyalty schemes—previously a “nice to have”—to help them get through difficult times and maximise their spending.
For businesses, this means there’s an opportunity to serve customers by providing value through loyalty programs. However, it’s essential for these programs to be genuinely beneficial. Offering real value will ensure customers stay engaged and loyal.
Traditional loyalty programs operated on the principle of “spend more, earn more.” However, with the rising cost of living and shifting consumer expectations, this is now changing. Now, it’s not just about earning points but about immediate tangible benefits for consumers, including:
- Savings: points or cashback from loyalty programs can translate to direct savings. Especially when budgets are tight, these savings can be significant.
- Ease of use: many modern loyalty programs are digital. Customers can earn and track rewards through apps or websites, making the process more streamlined than traditional programs.
- Flexibility: loyalty programs often let users choose how they use their rewards, whether it’s for discounts, specific products, or even donations.
At the same time, businesses can significantly benefit from using a loyalty platform:
- Customer retention: by offering rewards, businesses can encourage customers to return, increasing long-term sales.
- Data collection: loyalty programs let businesses collect data on purchasing habits. This information can be used to improve product offerings and marketing strategies.
- Increased sales: even though discounts or rewards might reduce the profit margin on individual sales, the increase in overall volume through repeat customers, activating dormant customers and savings in customer acquisition costs, can lead to higher total profits.
Today’s loyalty platforms integrate seamlessly with everyday shopping, both online and offline, by simply linking to consumers’ preferred credit or debit cards. This means every time a customer shops at participating merchants, they are automatically connected to the program, garnering rewards without any added fuss.
Modern loyalty platforms also offer the flexibility to update or integrate older schemes, optimising the entire reward process. With these programs, businesses gain deeper insights through data analysis and can instantly communicate branded rewards to their customers.
Registration is easy for members, encompassing most major cards, while businesses benefit from minimal infrastructure investments and a flexible rewards structure. What sets these programs apart is their top-notch security and the ability to cater to varied needs, from enhancing loyalty chains to offering diverse reward distribution methods.
As the cost of living pressures continue to rise, loyalty programs offer a win-win for both consumers and businesses. Consumers can offset some of their expenses, while businesses can drive repeat sales and gather valuable insights. The key for businesses is to ensure their loyalty programs offer genuine value and are easy for customers to use.
Businesses have an excellent opportunity to protect their profits through enhanced loyalty programs. By offering incentives, exclusive deals, and personalised offers, retailers can encourage consistent spending from consumers, providing a buffer against broader spending cuts.
Anurag Vasisth is co-chair and group CEO at Loyalty Now.