Loyalty Could Be a Brand's Golden Ticket in a Down Economy

At the outset of The Great Depression in 1929, Betty Crocker encouraged home bakers to collect "box top" clippings and mail them in to redeem discounts and rewards. Just before the so-called “Regan Recession,” in the U.S., American Airlines launched a first-of-a-kind frequent fliers points program.The current economic challenges might not seem like the appropriate time to focus on cultivating long-term brand loyalty. However, taking a page from the history books and offering customers the value and connection they seek—while at the same time collecting data to target them with more relevant offers—could be just the ticket brands need to see them through the downturn. Customers are hungry for it, too, and it's not just about price. Recent research from Havas found that while 59% of people are cutting back on spending, 63% say their expectations of brands have increased when it comes to the value and meaning they bring to their lives. Showing up for customers Among those rethinking loyalty is Pete Markey, chief marketing officer at Walgreens-owned British retailer Boots. Launched in 1997, the Boots Advantage card, offers shoppers points in return for money that can be spent in store. It has garnered more than 15 million users in its 25-year lifespan. Boots revealed changes to the program this year that will see cardholders earn fewer points per pound, instead receiving discounts on more items and 10% off Boots’ private label products. Boots began the “Price Advantage” campaign last year offering exclusive pricing and personalized discounts to shoppers based on their purchasing habits, which Markey said has been performing "very well." The updates are clearly aligned to Boots’ repurposed marketing strategy to support consumers at every stage of life, whether it’s buying lipstick for a party or collecting an urgent prescription. While the Advantage Card changes proved divisive when first announced, Markey said it had become clear during market research that attitudes toward loyalty have shifted in recent years. “Customers want immediate value and immediate benefit, so that’s what we’ve moved towards,” he told Adweek. He said this was being driven not only by the increasing cost of living, but also the impact of other loyalty initiatives pivoting toward instant gratification. Supermarket giant Tesco, for instance, now offers immediate discounts for its Clubcard subscribers. Boots' Advantage Card has been heavily championed in big budget TV ads, returning to screens last year as a “central pillar” of Boots’ strategy for the first time in 25 years, with a focus not only on value but on showing up for customers in crucial moments. Over the past 12 months, the loyalty program has added an additional 1.1 million users, with the marketing ROI against it delivering $2 for every $1 spent. Boots' Advantage Card initiate counts over 15 million users, and is a central pillar of its marketing strategy. The next step will be integrating the product into marketing campaigns across every vertical it sells—from health to optometry. For marketers grappling with where their reward scheme should sit, Markey says listen to your shoppers about what matters to them and what role your brand plays in their lives. “Don’t get stuck with inertia – it’s so easy to say: ‘we’ve had something for a long time, let’s keep it the same,'" Markey said. "You need to lean into the insight and recognize and reward it with action." The retail battleground If 2022 was tough on people’s bank accounts, financial pressure shows little sign of abating in 2023. In fact, spending less on essentials is top of mind for consumers dipping into their savings to offset the cost of living. In the U.S., the annual rate of inflation is easing, but a looming banking crisis and increasing food prices are diminishing confidence. Over in the U.K., households are being squeezed by higher interest rates and record grocery inflation, which according to Kantar is set to see the average annual household food bill increase to £837 ($1,035). This means retailers are scrapping for every penny. Kantar found reward cards to be a vital tool in attracting and retaining shoppers, with nine out of 10 people saying they already owned at least one loyalty card and usage set to rise. Fraser McKevitt, head of retail and consumer insight at Kantar’s World Panel market research arm, said most major grocers are already tapping into this trend. U.K. grocer Asda is rolling out its loyalty scheme nationwide, while Tesco has overhauled its existing Clubcard benefits. Budget challenger Lidl has reimagined its “Lidl Plus” mobile app—bringing an element of gamification to the process with scratch card prizes and other features. Walmart+ now allows members to earn points on targeted items. Sainsbury’s Nectar card, which spans 19 million people across the flagship brand as well as its Argos brand, has also gone down this route, taking the focus from coupons toward hyper-personalized discounts based on what people have previously put in their cart. Nectar, the loyalty card offering of supermarket Sainsbury's, has forged a strategic partnership with British Airways “Store cards have emerged as an important way to provide value amid the high cost of living with the grocer offering cheaper prices, coupons and points for people who scan them at the till,” McKevitt added. It’s not just retailers adapting and modernizing their loyalty offerings. Brands across many categories are seeking ways to strengthen their relationship with consumers at this pivotal moment, adding to their own data goldmines in the process. These include Ulta Beauty, Target and Kroger which use the first-party data collected via loyalty schemes to power their retail media network and give on-site advertisers access to more nuanced audience segments. A new look for loyalty In the early part of the 21st century loyalty cards left wallets and keychains bulging with logo-adorned plastic. Now, rewards programs are typically wrapped up in apps, giving marketers the ability to sharply target and time promotions. McDonald’s CEO says it app (home to its loyalty scheme) is ' is now its single biggest driver of digital adoption. At the start of 2023, McDonald’s CEO Chris Kempczinski said consumers downloaded the McDonald’s App—host to its MyMcDonald’s Rewards program—more than 40 million times in the U.S. The initiative offers discounts on everything from Big Macs to McFlurries, and allows consumers to earn points on their purchases and then trade them in for menu items later on. MyMcDonald’s has expanded to 50 markets, with Kempczinski telling investors a better personal connection with McDonald’s "increases visits and frequency.” Rival Burger King has also entered the arena, growing its Your Burger King app to more than half of its U.K. franchises. PlayStation has thrown its hat in the ring with PlayStation Stars, which lets gamers earn rewards as they play. 3 Inspire Brands CMOs Share Their Secret Sauce for Building Customer Loyalty and Engagement Other brands are partnering to provide customers with better value for their money. In 2022, Starbucks teamed up with Delta Air Lines for “Reward Together, which allows their combined 100 million-plus members to earn one airline mile for every $1 spent with the coffee chain. Nectar has teamed up with British Airways for a similar “coalition” based on the U.K. national carrier’s Avios points. For Amir Rasekh, director of Nectar360, there’s an opportunity for retailers to explore various partnership models across different levels of household spending that add to the customer experience. “When we look at who we want to partner with in this space, we look at who could help us create a customer journey that’s really engaging," he said. "We don’t want to limit ourselves to a traditional way of thinking about loyalty."

Customer Experience

Loyalty Programs Could Be the Golden Ticket for Brands in a Down Economy

Marketers reevaluate role of rewards programs as consumers tighten their belts

Rebecca Stewart

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Rebecca Stewart