After an expensive festive season, many Australians are facing a thrifty start to 2024 as they recover from additional spending over the November-December period amid the ongoing cost of living crisis.
According to the Australian Bureau of Statistics (ABS), the Consumer Price Index (CPI) rose 5.4 per cent in the 12 months to September 2023, putting significant pressure on Aussies’ wallets.(1) Meanwhile, household spending increased 1.9 per cent in November, with many shoppers bringing their Christmas expenses forward to take advantage of the pre-holiday sales, like Black Friday and Cyber Monday.(2)
It’s clear that Australians are shopping based on cost, looking for the most affordable alternative to keep their ever-rising expenses as low as possible. As such, customer loyalty is wavering, with 60 per cent of consumers prioritising cost over brand loyalty, and 23 per cent reporting they no longer feel they can afford to be loyal.(3)
As loyalty to brands changes and people criticise retail giants for making significant profits when average Australians are struggling, it’s more important than ever for businesses to work on building strong, long-lasting relationships with their customers. The challenge is complex; however, the solution is a simple shift to digital.
The core of customer retention hinges on delivering value. In this context, value must go beyond the basic exchange of goods for money to encapsulate the entire customer experience, from the moment a shopper considers a purchase to the after-sales service they receive. In today’s market, delivering peace of mind is an integral part of delivering value, and ensuring customer’s data security is a good way of tackling that elusive peace of mind challenge.
In the battle for customer loyalty, digital loyalty and rewards platforms, especially the ones that offer robust data security posture through Payment Card Industry-Data Security Standards (PCI DSS) Level 1 certification, have emerged as strategic weapons that can pivot the trajectory of customer engagement. They offer a seamless and secure interface for customers to interact with brands, transforming every transaction into an opportunity for deeper engagement. More than this, they also offer great opportunities for brands to give back to customers where they need it most: their wallets.
Personalisation sits at the centre of digital loyalty and rewards platforms. Sophisticated algorithms and data analytics capabilities empower businesses to tailor their offerings to individual needs, moving beyond a simple marketing ploy towards a strategic approach that makes every customer feel valued and understood.
Critically, this powerful data lets businesses offer targeted rewards and savings directly at the point of sale for customers. This immediacy is crucial to help ease the pressure on penny-pinching shoppers while fostering a positive relationship between brands and buyers. The ability to immediately reward customers for their loyalty is a powerful motivator that creates a tangible link between loyalty and reward, reinforcing the value proposition of staying loyal to the brand.
Too often, brands look at digital loyalty and rewards programs as a means to an end, where the end goal is to understand and leverage customer buying behaviours for more targeted marketing efforts, which drive sales. This is a critical component of such programs; however, they can be even more powerful when used strategically in terms of crisis, such as the cost-of-living challenges Australians currently face.
Leveraging data driven insights to enhance the customer experience in a meaningful way—while delivering savings and deeper value to customers—is an effective way to garner brand loyalty even when times are tough. A deep understanding of customer needs and challenges, coupled with the agility to adapt to changing market dynamics, can help brands re-establish customer loyalty that will endure affordability crises.
Engaging customers through these platforms also creates opportunities for innovative reward systems that go beyond traditional discounts and points, especially when the cost of living crisis begins to ease. Retailers can explore experiential rewards, such as exclusive events or early access to new products, which can resonate more deeply with customers. These experiences can create emotional connections, fostering a sense of exclusivity and privilege that can be more impactful in driving loyalty than monetary incentives alone.
Digital loyalty and rewards platforms are more than just tools for customer retention; they can help to transform the entire retail experience. Retailers can create a more personalised, integrated, and agile approach to customer engagement with digital programs that pave the way for stronger, more enduring customer relationships. This strategic focus on customer-centricity, bolstered by digital innovation, is crucial for retailers to succeed in a market where customer loyalty is a precious and fleeting commodity.
Anurag Vasisth is co-chair and group CEO at Loyalty Now.