Are recessions the best times to redefine brand loyalty?

The rising cost of living continues to cast a shadow over daily life for most consumers in New Zealand, according to the latest EY Future Consumer Index.
The 13th edition of the EY Future Consumer Index (FCI 13) shows around nine in 10 New Zealand consumers are cautious, concerned or downright pessimistic about their financial position.

In October, EY teams surveyed more than 22,000 consumers in 28 countries, including 500 in New Zealand. The research provides extensive insight into consumer behaviour, with a deep dive into spending intentions around the end-of-year sales season.

The December quarter is always the busiest¹ in New Zealand and fortifies retailers for the leaner winter months. But four in 10 New Zealand consumers (41%) are expecting to spend less this festive season than they have in previous years. Nearly half (49%) said they plan to shop less for non-essentials and close to three quarters (72%) said they will be more focused on value for money in the future.

While our litmus test of consumer sentiment was taken before the recent general election, the trendline is pointing in a clear direction. Nearly two thirds (62%) of consumers expect the cost of living to rise further in the next six months, and they are responding by tightening their belts.

1. Think beyond points
   
   Brands are beginning to reimagine their loyalty approach to include a suite of holistic offerings and value-adds, like incentives for word-of-mouth recommendations, subscription-based services that offers exclusive events or experiences, bonus contest entries, bulk discounts, and early access to products and services.
   
   The important lesson here is that loyalty is much more than customers swiping their cards and collecting points. Loyalty strategies allow brands to show loyalty to their customers, not the other way around. How do you understand your customers’ existing or future needs, and then interact appropriately? This is a very different mindset, but one which builds trusted and enduring relationships.
   
   
2. Communicate with clarity
   
   The endgame of every interaction shouldn’t be a sale. Some interactions can be simply a chance to forge deeper connections with your customers.
   
   Savvy brands and retailers recognise this, but they also face a conundrum: How do we identify the signals to communicate with our customers at the right time, rather than bombarding them with emails? It’s true that the success of email blasts can be measured in click throughs and sales conversions, but there is no longtail of sustainability in this approach. This simply trains customers to wait for the next best deal – and it might not be your company that offers it.
   
   Customers want clear and open communication. In fact, nearly three quarters (74%) of customers² say honest and transparent communication is more important to them now than it was before the pandemic. How do brands and retailers respond? With authenticity. This could be sharing how your products are sourced, how data is collected or how your organisation is tackling some of the big picture challenges, like climate change.
   
   
3. Experience is everything
   
   People no longer head to the shops simply to purchase products. They go for the experience – and that explains why 61% of customers will switch to a competitor³ after just one bad experience. In fact, one survey found 60% customers⁴ would prefer to sit in a traffic jam than face a poor customer experience. If customer experience is everything, then even bad experiences can be turned around. We know customers are 2.4 times more likely to remain loyal⁵ to a brand if problems are solved quickly. The smart response for brands and retailers is to keep a very close eye on key customer experience metrics, and course correct with speed and purpose.
   
   
4. Harness the power of personalisation
   
   With an abundance of choices available, all brands must stand out from the crowd. Personalising the shopping experience is a potent strategy to establish lasting connections. Leveraging artificial intelligence and automation to analyse customer behaviours help businesses to tailor recommendations, content and loyalty rewards. The artificial intelligence conversation currently underway in the retail sector is very similar to the previous hot topic of big data. It all comes back to consciously collecting information readily available to understand the needs, behaviours and wants of customers and then to respond appropriately. Ask yourself: What is the best way to use the information we already have to enable better customer experiences?

The best time to launch a new product can sometimes be during a recession. One recent study, published in the Journal of the Academy of Marketing Science⁶, found consumer products launched during a recession survived 14% longer, on average, than comparable products launched during non-recessionary periods. Why? Because there is less noise in the marketplace, which makes it easier to differentiate products and attract consumers’ attention.

The natural instinct during times of economic constraint is often to double-down on the short-term focus: cut deeper into price or costs to hit the weekly sales or profitability target. The retailers and brand custodians that can lift their heads up, look to the horizon and invest in the future, will have a head start when the economic worm begins to turn.