It’s an indisputable fact that rising cost-of-living prices are undermining customer loyalty.
According to Forbes, 25% of consumers are spending less on the brands they usually buy. That’s a big price to pay – when consumers are loyal to a brand, they spend 86% more than when they are not loyal.
But for the retail industry, loyalty and advocacy – and ultimately increasing LTV and repeat purchases – is becoming harder and harder to influence.
What’s the state of play right now?
In one of our recent “sunlounger” podcasts, our lead data scientist Ed shared his thoughts.
“There are two ways that consumers are adapting their buying behaviour…
- They are buying from the same brands, but switching to lower-priced items. For example, instead of buying coats and handbags as gifts, they’re buying jumpers and purses
- They are switching to lower-priced brands”
According to Antavo’s Global Customer Loyalty Report of 2023, “55.9% of respondents envision the role of customer loyalty as essential in overcoming the inflation crisis. Also, 67.7% plan to significantly increase their investments in customer retention. Customer acquisition is generally seen as a less favourable investment.”
How can brands increase customer loyalty during a cost-of-living crisis?
“Loyalty is actually just a habit,” Ed continues. Consumers believe that they are more rational than they actually are, but in reality we buy the same items from the same brands purely because of habit.
“As humans, we have a very strong sense of consistency – both of internally feeling the need to be consistent, and also wanting to appear consistent to others.”
What does this mean for loyalty and advocacy? If a customer has outwardly stated an affiliation with a certain brand to their peers and social groups, they will need a much stronger reason to switch to another brand.
There is also a certain stigma amongst social groups about changing brands specifically because of price. This is reinforced amongst communities where several people have recommended or purchased from that brand.
The key lies in changing community attitudes
Therefore, brands looking to cultivate a loyal customer base should focus on community behaviour rather than individual behaviour.
By detecting where the strongest communities exist for a particular brand (using Herdify’s AI portal), marketers can direct marketing activity to these locations to increase loyalty and advocacy.
Activations focused towards strong brand communities are more likely to reinforce brand connections and promote the “keeping up with the Jones’s” effect. Content can then be created to support a loyal narrative that showcases the brand’s value.
Ultimately, by harnessing community loyalty, brands can maintain the consistency in buying behaviour that is the foundation of customer retention.
