TL; DR: See why emotion drives the strongest customer loyalty and by what methods you can take advantage,
Brands need to understand what motivates loyalty from their customers. Numerous research studies have identified three main classifications of customer loyalty:
Behavioral loyalty: The customer shops with a brand because it’s convenient. Their loyalty is driven by habit rather than a genuine connection to the brand.
Rational loyalty: Customers shop with a particular brand because of price, for example, but will switch to another brand if they can find a more affordable option.
Emotional loyalty: Customers are emotionally engaged, feel delighted by the brand, and would advocate and recommend the brand to their friends and family. These customers will spend with a brand no matter what.
How is your loyalty program performing? Take this assessment to see what areas you need to improve.
Research from Forrester concludes that emotion is the biggest driver of loyalty in many industries. A study by CapGemini found that there are significant brand benefits to nurturing a relationship with emotionally invested customers.
Emotionally loyal customers spend more. According to the research, 70% of emotionally engaged consumers spend up to two times or more on brands they are loyal to, compared to less than half (49%) of consumers with low emotional engagement. Brands that engage customers meaningfully in ways that illicit customer emotion have the potential to increase basket size, purchase frequency, and gain significant profit. The research finds that emotional engagement with consumers could drive a 5% uplift in annual revenue.
Emotionally loyal customers have their favorite brand top of mind. The research finds that 86% of consumers with high emotional engagement say they always think of the brands they are loyal to when they need something, and 82% always buy from the brand when they need something. This compares to 56% and 38% of consumers with low emotional engagement. Brands that are able to establish an emotional relationship with customers are able to beat out the competition and maintain significant wallet share from their customers.
Get the details on Oracle Red Bull Racing's loyalty program and how it forges an emotional bond with fans by bringing them closer to the action.
Emotionally loyal customers will promote their favorite brands. The research finds that 80% of emotionally engaged consumers will promote brands they are loyal to among their family and friends compared to 50% of the less engaged. By focusing on emotional relationship building, brands can increase wallet share and turn their best customers into their biggest advocates.
In order to build these emotional connections with their customers, brands must learn what customers expect from them in return for their emotional investment. CapGemini identified the following customer expectations: two-way interactions, real-time and varied interaction opportunities, differentiated shopping experiences.
How can loyalty programs today engage customers in the ways the build emotional loyalty? Martin Mehalchin Partner at marketing and sales strategy consulting firm Lenati says, “Digital marketers have come to realize, and research has shown, that emotion is a key driver of the most profitable customer behavior, influencing customer spend, loyalty, advocacy and customer lifetime value. We encourage our clients to use empathy mapping and other design thinking techniques to identify and understand emotional drivers such as values, self-image and achievement of life goals and then target those drivers with their program strategy. This emphasis on emotional loyalty is behind the rise of programs that emphasize membership and access to experiences over a traditional points economy.”
Find out how to retain more customers with Oracle CrowdTwist Loyalty and Engagement.
Brands that can demonstrate value to their customers beyond service and product offerings have the potential to form a deeper connection. One way brands are adding value and differentiating from the competition is by using surprise and delight tactics to show gratitude to their best customers. A simple gift, free product, or exclusive promotion is a great way of extending thanks to a loyal customer. Through analysis of loyalty program trends and behaviors, brands can identify the best customers to target with surprise and delight.
Customers want personalized experiences. A company’s understanding of their individual and personalized customer care influence their loyalty. Using data collected in a multichannel loyalty program, brands can engage customers in relevant, meaningful ways that create a positive experience.
Just as customers expect a more personalized experience, they also expect brands will leverage the data they've shared to predict their next likely action with a brand. By 2020, 51% of consumers expect companies to anticipate their needs and make relevant suggestions. Brands can add value for customers by demonstrating they understand their needs and are committed to creating a better brand experience for them. Sophisticated loyalty program technology providers provide predictive modeling capabilities which captures customers’ contextual and behavioral data and models it to predict next-best-actions in their journey.
What other technologies can help? See how to anticipate customer needs with a customer data platform (CDP).
Customers want to be rewarded for their loyalty. From elite rankings to special events and unique experiences, it’s essential to offer one-of-a-kind rewards and customer experiences that make members feel special, valued, and appreciated.
Loyalty programs that offer exclusive, one-of-a-kind rewards such as an invitation to a VIP event help to make customers feel part of an exclusive community. Alternatively, offer early access to sales or limited-edition rewards to make customers feel appreciated and build greater emotional attachment to the brand.
Making investments in your customer loyalty initiatives to drive an emotional connection will significantly increase customer value, grow spend and engagement, and even attract new customers to your brand.
How is your loyalty program performing?
Customer loyalty comes from a pleasing customer experience. Find out how to create one and retain more customers with: