Like many other aspects of our lives, COVID-19 has disrupted the brand-consumer relationship.
With the majority of physical retail stores closed during national and local lockdowns, online shopping became the norm.
Today, in 22 of the 46 countries we track, the proportion of consumers who say they’d rather shop online than in-store is greater – even in mature markets, like the U.S., UK, Germany, and Italy.
This has led to an overly-saturated and increasingly competitive online space.
Brand loyalty as we knew it is now a thing of the past.
Brands need to pay attention to the new shopper dynamic, which means dialing up the right factors in the online space.
Don’t let one click steal your customers. Here are four actionable insights from our Zeitgeist research in the UK and U.S. to help businesses foster shopper loyalty in a hard to predict consumer climate.
1. Customer loyalty is more fickle than ever.
With 8 in 10 consumers in the U.S. and UK having changed their shopping behavior in one way or another in the last 3 months, it’s clear the effect of the pandemic will be profound and lasting.
Most of all, people have started looking for a bargain to a much larger extent than before:
- Almost 4 in 10 are actively searching for discounts and offers more often.
- Around 3 in 10 are buying cheaper products more frequently.
This savings-oriented consumer mentality has had a profound impact on shopper loyalty.
In the past three months, over a quarter of U.S. internet users have been trying new brands, and close to a fifth have been visiting different retailers.
These figures jump significantly among those actively looking for discounts, which shows consumers won’t think twice about switching loyalties in this climate if they’re not satisfied or supported financially by a brand or retailer.
This is to be expected. In the U.S., by and large, people’s financial situations have changed for the worse since the pandemic began. In fact, the number of U.S. consumers who said they’re struggling in late July was double that of the UK (11% vs. 5%).
This might be due to the fact the UK has one of the most robust furlough schemes for its citizens – which has now been extended to the end of March 2021 to coincide with the newly introduced national lockdown.
But looking for savings and not finding it in your usual go-to brand is only part of the story: a fifth of consumers have also started buying from independent businesses more often, meaning that smaller local stores have stolen a sizable chunk of dominant retailers’ customers.
What brands should do: Consumers expect a lot from brands at this time – not only from a product availability point of view, but also when it comes to supporting them through the crisis. The fact that 31% have purchased a product on credit in the last four months suggests consumers are looking to brands for financial aid, whether that’s via promotions, discounts, or rewards.
Smaller businesses, often unable to afford these financial offerings, shouldn’t be discouraged. As we saw earlier, consumers are already supporting independent retailers – especially those considered socially responsible, with a strong brand purpose.
2. Gaining brand loyalty goes beyond just adjusting the price.
Not all product categories are made equal when it comes to retaining or losing brand loyalty during the pandemic.
Discretionary FMCG categories, like clothing and shoes, as well as personal care items like cosmetics, skincare, and fragrances are most at risk of losing shopper loyalty.
From our coronavirus research in July, we found that clothes in particular were one of the first products consumers scratched off their shopping lists, only behind travel tickets and flights.
This consumer sentiment has translated into a significant drop in sales, with the fashion sector witnessing a 20% decrease between February and July.
Our October research tells a similar story. Almost a third of people have cut back on purchasing clothing brands and a quarter have done the same with shoe brands, meaning businesses in this space will have to work extra hard to earn consumers’ loyalty back during the recovery phase.
The reasons why consumers have abandoned certain brands aren’t limited to financial hardship though. The same portion of people in high and low income groups say they’ve cut back on purchases because they’ve found a cheaper alternative.
And although the most popular reason why consumers have switched loyalties is indeed driven by savings, if we look beyond price, we see there’s more to the story.
Spending the majority of our day at home and limiting social activities has meant that we might no longer need a new outfit for a Friday night out; even if we do, it’s much less frequent than before.
It’s clear that as consumer needs and priorities change, so does demand. But it’s not all doom and gloom, because brands in this space have an opportunity to adapt.
What brands should do: Brands need to reposition their offerings to win back recurring customers. ASOS, for example, was quick to capitalize on the surging demand for casual wear, resulting in a 329% rise in profits.
In fact, the whole fashion industry has been struggling to meet the demand for comfortable and looser clothing, meaning shopper loyalty will go to those with the capacity and agility to supply the right products at the right time.
3. Physical attributes are still relevant for CPG shoppers, even when shopping online.
Necessity, presence, and price are certainly large factors in retaining customer loyalty at this time.
But the fact that a larger share of total commerce is now online means there’s another challenge to address, and that’s how consumers make purchase decisions on these channels.
If choosing one product over another once largely depended on physical attributes like packaging, size, and general look and feel, moving online means these factors become less influential – at least that’s the general assumption.
In reality, physical attributes are still very relevant to shoppers – even online.
Two of the factors that most stand out for online grocery shoppers when purchasing everyday household brands are the look/feel of a brand’s packaging, and the materials/ingredients used.
Online channels will need to go the extra mile to provide this information at consumers’ fingertips. While doing this will improve the customer experience online, ecommerce players can entice consumers further by incorporating other key factors.
For example, when it comes to groceries and everyday household items, loyalty schemes are looked upon favorably. Online grocery shoppers are 26% more likely than average to say loyalty schemes are important when purchasing a new household brand.
We shouldn’t forget that groceries are recurring purchases, meaning loyalty is easier to foster if consumers see a long-term monetary benefit from repeatedly buying from a brand.
We see much less enthusiasm for loyalty programmes in the U.S., however, where only 7% of online grocery shoppers say it’s important, compared to 22% in the UK. This could be because retailers in the U.S. are ahead of the UK for attaining loyalty via subscription-based services instead.
Interestingly, food and grocery subscription services are the second most popular category U.S. consumers are interested in subscribing to in the next 3-6 months, just behind TV streaming subscriptions.
What brands should do: With online grocery shopping gaining popularity, a subscription business model will take brand loyalty to the next level.
Walmart in the U.S. and Tesco in the UK have both launched a “Plus” subscription service, with the latter reporting an almost £9 average increase per shop during the trial. Those quick to experiment with these offerings will be well-placed to foster shopper loyalty during the pandemic.
4. Now is the time to up your interactive game.
Another challenge brands are faced with when selling primarily online is the ability to communicate the value of their products effectively on these channels.
AR (augmented reality) has, so far, been slow on the uptake. But with 5G adoption gathering momentum and in-store shopping taking a back seat due to the pandemic, AR shopping experiences have a unique window of opportunity to scale up.
User demand for the tech is higher than ever too.
Around two-thirds of UK and U.S. consumers show interest in trying AR experiences.
This sentiment is especially prominent among buyers of high-ticket items, like cars and furniture, where buyers are often deterred from making an online purchase before seeing the product in person.
But the technology is equally as desirable in the FMCG sector, with 74% of personal care shoppers expressing an interest in trying AR.
The beauty industry was already making use of AR features pre-COVID, but the pandemic has accelerated this trend, with MAC reporting a threefold increase in engagement with its AR try-on over a 2 month period.
Testing products physically may not be viable due to hygienic reasons, especially in the beauty and cosmetics industry. For these reasons, AR has the potential to go fully mainstream this year.
AR is now an accessible solution for smaller D2C brands too, following the introduction of the new “YouCam Makeup” app in Shopify.
What brands should do: If AR was a nice-to-have feature prior to the pandemic, it’s now solving real pain points for consumers and businesses – and it’s in demand from both sides. Brands shouldn’t miss out on building that extra layer of interactivity in the shopper experience; not for the sake of it, but if it provides real value for the customer.
Each of these steps alone might bring brands closer to fostering shopper loyalty, but it’s the combination of all of them that will create an exceptional customer experience worth coming back to.
Ultimately, brands need to think creatively and act quickly to showcase the value of their products online in a way that separates them from the noise.