Two-thirds of Australians have revealed inflation and the rising cost of living have made them leave behind brands they were previously loyal to in order to save money, according to research from customer engagement platform, Emarsys. 

The Customer Loyalty Index 2022 surveyed over 11,000 consumers across five countries, including 2000 Australians. The survey aimed to find out how customer loyalty is shifting following a year of pandemic recovery that led to inflation and an increased cost of living around the world.  

The Customer Loyalty Index

There are five loyalty types defined in the loyalty index:

• Incentivised Loyalty: loyalty developed through discounts, incentives and rewards
• Inherited Loyalty: loyalty built through association with other brands
• Silent Loyalty: customer loyalty without public advocacy or endorsement
• Ethical Loyalty: loyalty founded on emotional connections and shared values, and
• True Loyalty: every brand’s dream, unshakeable loyalty that’s built through brand love.

According to Emarsys’ loyalty index, a majority of Australians (52 percent) fall under Incentivised Loyalty, followed by True Loyalty (53 percent), Inherited Loyalty (24 percent), Ethical Loyalty (18 percent), and Silent Loyalty (three percent). 

“Our five loyalty types show that consumers are loyal, but that the driving factors can be different based on the type of shopper,” says Emarsys’ regional vice president APJ Kristyn Wallace.

“All five loyalty types can drive consumers to make a purchase from a brand, but the category retailers should be striving for is True Loyalty.” 

Loyalty in a time of tight budgets

In a year of financial hardship, the research found 37 percent of consumers now prioritise cost over brand loyalty. Twenty-one percent no longer feel they can even afford to be loyal. 

Price can be seen as either a constant motivator or deterrent for loyalty. Over two-thirds of respondents would be more loyal to retailers that offer discounts, incentives and rewards, while 55 per cent would lose loyalty to a brand that would increase their prices.

Recession-proofing your brand

Cultivating that True Loyalty is still key to success, tough times or not, says Wallace. To achieve this, brands need not just be customer-centric, but “customer obsessed”.

“A recession-proof business requires brands to amplify personalised communication with customers and accelerate the range of products offered,” says Wallace.

“Personalisation is about putting customers at the forefront of interactions and tailoring communications based on past behaviour, and any zero party data that customers have offered up. 

“Marketers should be housing customer data in one platform to have a 360-degree view of their customers. Having this complete view lends insight into which marketing triggers will resonate with consumers. This type of personalised communication is paramount to engaging with the intended audience.”

Optimising customer retention

Customer retention should be “top of mind” for every business as the threat of a global recession looms. 

“Even outside of recession, acquiring a customer isn’t a lucrative exercise for most brands until that customer makes multiple purchases. So, in an era where Australians are more likely to make a purchase based on price, it can be a quick and very expensive race to the bottom, when it comes to customer acquisition,” says Wallace.

“Retaining customers and fostering loyalty is a much more profitable endeavour, considering the fact that loyal customers tend to have a higher Average Order Value (AOV), shortened time between purchase, and will often spread the word about their positive brand experiences.”

Incentivising loyalty is still important

With customers won and lost on the basis of price, it would be unwise to ignore the sentiment toward lower RRP, says Wallace. Sales and loyalty discounts are therefore a good way to retain loyal customers and incentivise more frequent purchases and increased basket size. 

“Multi-purchase offers and post-checkout cross-sells can be an effective means of increasing AOV and widening tight profit margins,” says Wallace.

While this type of Incentivised Loyalty is currently most favourable among Australians, Wallace says brands should also be striving to create True Loyalty within their customer bases, for that real “emotional buy-in” from the consumer.