From punch cards to points, loyalty programs are common among food retailers and restaurants. But as consumer habits continue to shift at a rapid pace, are they really the most effective way to establish loyal customer bases moving into the future? Just like most other aspects of the food industry, customer loyalty is going through an evolution that is moving brands away from the traditional ideas of loyalty programs.
“We’re transitioning from the era of conditional preference to true loyalty,” said Harsh Jawharkar, vice president and head of marketing and partnerships at Narvar.
A lot of brands have been confusing loyalty with conditional preference because they’ve simply been conditioning consumers to buy things to get points, but that’s not true loyalty, Jawharkar said. Today’s consumers are more sophisticated, they are more equipped and they have a healthy sense of skepticism, which makes more traditional loyalty programs less effective. In seeking true loyalty from shoppers, brands must transcend the points aspect and venture into the experiential, he said.
“Loyalty is a multi-variant function,” he said. “It’s what your brand stands for, it’s the experience that you have with that brand, whether online, whether in store and also post-purchase.”
Overall, diners want loyalty programs to reward them quickly, they want programs to feel personalized to them, them want them to be simple to understand, they want to feel like they are being recognized by restaurants and other food brands for giving them their business and they want to feel engaged by the programs, according to research from Deloitte. And while traditional points-based loyalty programs might not be the most effective type of program any longer, that doesn’t mean they’re not important. Nearly 60% of restaurant diners who belong to a loyalty program would agree to serve as a brand ambassador for a restaurant, Deloitte found. That kind of consumer engagement is vital moving into the next phase of food loyalty.
In order to win the loyalty game, brands have to communicate all the facets of what they stand for to consumers, from physical retail to digital channels and beyond, Jawharkar said. According to consumer research from Narvar, most customers simply want to feel like brands and retailers appreciate their business. Making customers feel valued is the first step to establishing true loyalty, he said, with experience coming next.
Most brands are doing a substantial amount of research about their customers, which is an important part of reaching the next step in loyalty, but it can be very hard to get between the numbers and really understand human emotional behavior, Jawharkar said. Businesses have to get to a point where they understand the end-to-end customer journey. True loyalty can’t come before that because retailers and brands must make it easy to shop, communicate and consume in a joyful way.
As loyalty increasingly moves beyond cards, points and other traditional programs offered by food retailers and restaurants, the landscape of loyalty has shifted to focus on how brands can best satisfy the needs of their customers, according to research from FMI and Precima. To do so, they must first get to a place where they understand the needs of shoppers on a granular, timely and frequent basis, and they must focus on consistently executing the actions that allow them to fulfill their shoppers’ needs.
Additionally, the research found that retailers and other food companies must take a multi-generational view of achieving the next level of customer loyalty, meeting the needs of shoppers today while planning for how their needs will change in the future.
For Jawharkar, Domino’s has taken significant steps toward achieving true customer loyalty through the experience they offer their customers. Their product offering isn’t necessarily the most unique, but they deliver their product with consistent quality and consistent (and frequent) communication.
“They have competitively differentiated themselves…through how they communicate,” he said.
Trader Joe’s is also a brand doing the right things to capture food shoppers’ true loyalty, according to Jawharkar. While Trader Joe’s private label offerings are part of what sets them apart from other retailer, it’s the way they fit those offerings into the lifestyles of their shoppers that makes shoppers feel more loyal toward the brand.
“They have figured out, beyond product, how to embed themselves into the lifestyle and daily busy working lives of their consumers,” he said.
In the end, true loyalty does start with a product, Jawharkar said, but the next step is engaging consumers in multiple scenarios that span across digital and physical channels and creating brand experiences that fit into their lifestyles and value sets, and doing all that on the consumers’ terms. It’s about finding the right content and the right experiences at every possible touch point, he said.
“Consumers are emotional, they are more sophisticated and they have choices, so that’s the era we face,” Jawharkar said.
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