From points to personalisation: Exploring the evolving landscape of customer loyalty

All retailers will know that loyalty is notoriously hard to win, and equally is easily lost. Innovation in the retail sector has intensified competition, as customers expect seamless, intuitive experiences and purchasing journeys – and they will seek out retailers who provide them, both in store and online. Taking all of this into consideration, it’s not surprising that achieving sustained customer loyalty is a prevailing challenge for many retailers.

American Express recently partnered with Retail Week to bring together a group of senior UK retail executives and industry leaders, to explore the challenges retailers face in winning the loyalty battle, and to capture insights around potential strategies for success.

With sales volumes under pressure, our findings, captured in a new report, highlight that retailers must have an acute understanding of the factors influencing where shoppers spend their money, and the most effective approaches that will win and nurture customer advocacy. With this in mind, here are the key loyalty lessons we uncovered.

A nuanced approach

It’s no secret that price is a key driver of loyalty, but our research of 2,000 UK consumers found a far more nuanced approach is required to build lasting engagement. Our survey revealed product quality, value for money and customer service hold significant weight among shoppers when it comes to choosing where to spend. For example, over half (51%) of those surveyed said they stopped shopping with a retailer due to poor product quality and unhelpful staff.

Our research also revealed cost of living pressures are amplifying demand for value for money, with 72% of those surveyed saying it is now more important to them in the current economy. However, retailers must recognise that value goes beyond price points. For example, one of the retailers we heard from said that inspiring loyalty requires “structuring shopping experiences, diversifying products and ranges, and offering flexible ways to pay to add real value for customers”.

From points to perks – loyalty rewards that keep on giving

Loyalty programmes are becoming increasingly vital for retailers, a trend accelerated by the current economic environment. We’ve seen a shift in strategies in response – with several major retailers now offering immediate benefits to shoppers who sign up, such as price discounts on everyday items.

Take Boots as an example; it adapted its loyalty programme with new ‘Price Advantage Deals’ to cater for customers who “don’t want to save up their points, but would prefer to spend their money now”. Our research suggests initiatives like this are well received, as more than half (53%) of shoppers say they now prefer instant savings over accumulated points.

It seems that their approach is paying off – in the summer, Boots reported Advantage Card customers had saved almost £50m since January 2022. Rewards that give shoppers immediate savings are a powerful motivator for them to return. Our research revealed that consumers are now signed up to an average of four different loyalty schemes, meaning there is a huge opportunity for retailers to offer meaningful savings to customers and encourage repeat visits.

However, a ‘good’ loyalty programme in the eyes of shoppers requires other elements beyond instant savings, according to our research; factors highlighted as the most important are simplicity (38%), the opportunity to redeem points (37%) and getting a good return on spend (36%).

The personal touch: how customisation elevates loyalty

Amidst fierce competition, our research highlights that retailers who offer personalised shopping experiences, balanced with authentic communication, will build engagement. Over two fifths (43%) of shoppers now expect customised marketing communications. Consequently, 40% of respondents say they are open to sharing their data in exchange for more personalised experiences, presenting a huge opportunity for retailers to really understand customers' purchasing behaviours, and to devise smart engagement strategies in response.

But while personalisation is important, cadence in customer communication must also be considered, and retailers must tread carefully as to not cross the line. One of our roundtable participants said the challenge for retailers was being “convenient but not creepy” - and that “striking the right balance between personalisation and privacy is crucial in maintaining customer trust”. This is backed up by our research; over half of consumers (54%) say they unsubscribe to emails if they feel their data is being exploited.

Loyalty influencing long-term success

While improving customer loyalty won’t solve all the challenges that come with squeezed sales volumes, it can deliver a tangible business advantage. Our research identified that different customer groups are motivated by a range of factors, meaning there is no one-size fits all approach. It’s clear the winning formula to creating customer advocates comes from balancing appropriately personalised communications, simple and genuinely rewarding loyalty schemes, and a customer service that leaves a positive lasting impression.

At American Express, we partner with retailers to enhance their customer loyalty strategies; from unique customer insights informing targeted offers, to rewarding customers for their spending, we’re helping businesses deliver best in class customer experiences to set them up for future success.

Read the report Lesson in Loyalty: How to turn customers into advocates