The COVID-19 pandemic has turned life upside-down – customer loyalty included. We have already seen the pandemic create huge changes in consumer behaviour. This is likely to continue for months or even years. What can we say so far about how COVID-19 has impacted customer loyalty? And what does the future hold?
The Early Arrival of the Future
Over the past six months, COVID-19 has accelerated and intensified trends that were already underway.
For example: loyalty, and the nature of how loyalty was created, nurtured and maintained, has become a more digital phenomenon than ever before. During the pandemic, everyone has turned to buying online. Everyone’s experience of (and interaction with) brands is taking place almost entirely digitally. Before the pandemic, there was still a reliable amount of in-person interaction with companies and brands: at malls, on billboards, and so on. But in recent months, many people’s loyalty has risen or fallen entirely online.
The digitization of loyalty has been encouraged by developments on the ground. We have begun to see huge drops in commercial real estate prices in cities such as San Francisco and New York. This industry could take a permanent hit, as millions of leaders and businesses realize that full-time WFH protocols are now an option. As such, foot traffic-dependent businesses, the ones that depend on people working in offices, are in serious trouble.
Who knows when such foot traffic-dependent businesses and brands will recover? To continue to create customer loyalty, those affected in this way will need to double down on efforts to reach people in a digital space, and maintain relationships despite the severe disruptions.
Adapting to the New Normal
Despite the doom and gloom, we are also seeing businesses find new ways to remain relevant and reimagine their business.
Case in point: The Four Seasons Resort Orlando at Walt Disney World Resort, along with other hotels in Florida, have opened “school-cation”.
They’re using unbooked meeting spaces to invite families to come to a resort vacation that includes distance learning for the kids. This is an inspired way to maintain customer loyalty by adapting to these strange times.
Not everyone can do this, of course. Take American Airlines. Due to the significantly reduced travel bookings, the airline company has been sending offers to their customers to shop through the American Airlines portal, and earn miles by shopping there (rather than on Amazon). While this is better than nothing, will most people go shopping through the American Airlines portal? Chances are, they won’t. Many people have more than enough miles already, and others won’t care much about miles, since they’re not flying anyway.
Similarly, Citibank has also appeared slow to adapt. In the past couple of years, within their loyalty programs, they’ve been moving toward offering VIP events and experiences. Not only are users earning points or miles on their credit card, but their status as a credit card loyalist entitles them to backstage events, VIP seats, and the like. However, during the pandemic, such events are postponed or made virtual. To continue to nurture loyalty will mean quickly pivoting to a different tactic.
Where The Four Seasons Resort has quickly adapted to the strange new reality, American Airlines and Citibank may need to think more outside the box if they don’t want to see customer loyalty to decline. As time goes on, we may well see that whether brands’ loyalty efforts sink or swim post-pandemic will come down to their powers of adaptation.
A Direct Loyalty Relationship
Another one of the things we are witnessing right now is brands who have depended on retail distribution partners now wishing to have a more direct relationship with consumers.
An example of this is Nike. For years, the famous shoe brand has been wishing they could establish more direct customer transactions and relationships, thereby increasing their margins. However, they have to be careful of offending their retail partners; they can’t just ask consumers to ignore their retailers and directly buy from them!
But now that everybody is buying things online, and bricks-and-mortar stores have become far less important, the company has announced that they are pulling back from some of their retail distribution partnerships. So for them, and for many other CPG type brands, the pandemic is an opportunity to build direct relationships without relying on their retail distribution net.
This, in turn, hugely opens up a brand like Nike’s loyalty-building possibilities. They can be more customized, more personalized, and more creative.
Meanwhile, in other enterprises, the pandemic has created a rise in loyalty “re-intermediators.” Companies like Doordash and Instacart, along with smart assistants like Alexa are becoming a new intermediary between retailers or brands and their customers. Take Instacart for example. A lot of grocery chains in the US have been partnering with Instacart to deliver to their customers. But this gives the data and the relationship to Instacart, rather than the grocery store. Instacart now owns that consumer-brand relationship. That may be efficient, but we don’t know what it does to the relationship between the customer and the grocery store. This could be a huge disrupter for loyalty.
The full effects of both more direct loyalty-building and re-intermediated loyalty building are yet to be seen. We shall have to wait and see. But both of these are fascinating disruptions that are sure to have long term implications.
How Deep Does Customer Loyalty Go?
Above all, and in all these previous examples, the pandemic has been a stress-test for consumer relationships and consumer loyalty. Some companies are at risk of finding out that what they thought was loyalty was actually more like habit, because they haven’t been giving people enough. Say, you’re a movie theater chain. Will customers still be “loyal” enough to wait for you to come back, or will they switch to building their own home theater system instead? We are about to find out.
What we know from history is that businesses that go above and beyond to treat their customers well will earn more enduring loyalty during a crisis. During the pandemic, we have seen lots of companies respond empathetically to the hardships of their customers. Certain airlines rapidly waived change fees; certain hotels implemented extremely diligent cleaning protocols. Savvy grocery stores instituted distancing, capacity limits, and compulsory masks early and visibly. Even some banks allowed people to miss mortgage payments and not pay late fees. These prosocial acts are certain to be rewarded with enduring customer loyalty.
Establishing a Trusted Relationship Is Key
The pandemic has proven what savvy marketers already knew: today, it is more important than ever to build loyalty in a sophisticated, warm, and customer-friendly fashion.
In terms of learning about how brands should react to the changes brought about by the pandemic, aggregated research doesn’t help much. We know people’s habits change: what we don’t know is which habits are changing permanently, and which could snap back. However, establishing a trusted, permissioned relationship in which consumers are rewarded or compensated for sharing their data can help companies identify those habits, and how they are changing. There’s almost no way to get that data except to ask people directly what their intentions are, and to share that with us brands.
That is what REACH aims to facilitate with the Loyalty Marketplace. Mere transactional loyalty has become insignificant. Trust is now more important than ever, and so is respecting and rewarding customers for sharing data. In a time where consumers are suddenly more discerning, sensitive, and powerful than ever, brands need to stop treating loyalty as a one-way street.
Brands seeking ways to foster customer engagement and loyalty going forward have to rely upon something different from the old mechanisms of quid pro quo. They need to step up and provide more equal partnership with their customers. This is the only way to learn about what customers want, need and expect. It is the only way to effectively build loyalty – now, and when the pandemic is over.
What do you think? Let us know your thoughts.