Fueling Brand Devotion Pays Off in Uncertain Times

High inflation, supply chain issues, and abrupt shifts in political and trade policy have made personal finances a primary concern for consumers, with 61 percent of Americans believing the U.S. economy is headed for a recession in the coming year.

While consumers prepare for an economic downturn, retailers should fine-tune their loyalty programs to leverage one of their greatest assets: connection to customers.

Loyal customers are the most likely to stick with your brand during a downturn, and a loyalty program is the primary vehicle for keeping those relationships strong. By truly understanding what your customers value, you can create experiences that keep them coming back — driving increased lifetime value, improved retention, and reduced acquisition costs.

Loyalty is the Solution

Loyalty programs deliver results by tapping into key consumer motivations: savings, emotional connection, financial control, and personalized experiences.

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• Savings appeal: As consumers become more budget-conscious, loyalty programs that offer discounts, rewards and exclusive deals help shoppers save money on purchases.
• Emotional value: The majority (72 percent) of U.S. consumers report feeling valued through loyalty programs, a statistic that dramatically illustrates their effectiveness.
• Budgeting support: Loyalty programs help consumers plan and manage their spending by accumulating points or discounts for future use.
• Personalized benefits: Effective loyalty programs can offer personalized rewards and experiences that are especially meaningful when consumers are looking for ways to make every dollar count.

Prioritize Retention

Strengthen loyalty programs by focusing on rewarding and retaining existing customers to stabilize revenue and reduce acquisition costs.

Sephora's Beauty Insider program demonstrates that a strong retention strategy can be a powerful engine for growth. By focusing on rewarding loyalty with a tiered program as well as creating personalized and exclusive experiences, Sephora has built a highly engaged customer base that's less likely to switch to competitors.

Build Trust Through Personalization

Deliver personalized experiences and communications that demonstrate you understand and value each customer’s individual needs.

Stitch Fix’s personalization helps customers discover new styles and find brands they might not have encountered on their own. The combination of technology and human expertise ensures the personalization is both accurate and empathetic.

Offer Value-Driven Rewards

Provide loyalty rewards that directly offset the impact of a tightened economy, such as exclusive discounts or bundled offers.

Target Circle’s value-driven rewards program provides easy access to savings, personalized deals, and community support. The program is designed to be accessible, relevant, and easy to use, and its auto-applied savings feature significantly reduces friction, creating a win-win situation for both Target and its customers.

Align Customer Needs With Business Goals

In an economic downturn, harmonizing customer needs with business goals is essential for survival and growth. After all, retention is more cost effective than acquisition. Here are some strategic actions that can enhance the customer experience and drive positive business outcomes, delivering value on both sides.

• Optimize loyalty program budgets by shifting resources to reward and incentivize high-value customers to foster loyalty and encourage future purchases.
• Align program communications with brand marketing. Consolidate content and offers to highlight your program’s value proposition and increase member engagement.
• Extend expiration dates on earned rewards to provide immediate value and flexibility.
• Allow members to maintain their status levels for an extra year to recognize their loyalty and commitment.
• Surprise with unexpected rewards like shipping upgrades or bonus points.
• Delight with special events or personalized experiences to create lasting memories and encourage deeper connections.
• Go beyond standard demographic data to analyze psychographics (interests, values, opinions) and understand the impact they have during a recession.

Turbulent economic times are stressful for customers and retailers alike. Now is the time to ensure your brand’s loyalty program offers the right mix of emotional connection, relevant experiences, and rational benefits to keep customers close during tough times and create lasting loyalty.

Jasmin King is manager, Strategic Services for The Lacek Group, a data-driven loyalty, experience and customer engagement agency. The Lacek Group is an Ogilvy One company.