By Katherine Black
In a new KPMG study, “The Truth about Customer Loyalty,” we asked close to 19,000 consumers across 20 countries – including 2,000 in the U.S. – for their views on brand loyalty. Their responses clearly show that loyalty is not dead, but it is evolving and there is a lot of headroom for change.
When it comes to the U.S. market, in particular, their responses debunked three myths about customer loyalty that I frequently hear:
Myth #1 - Loyalty is all about a program
Some 57 percent of U.S. consumers say they are enrolled in at least one loyalty program and more than 40 percent told us that, several times a week, they make a purchase that earns rewards/benefits. However, when asked what defines loyalty for them, these same U.S. consumers don’t even rank loyalty programs in their top five answers. Fifty-nine percent of global consumers say that they are loyal to a brand because they feel a personal connection with the company, and that loyalty includes recommending a brand to a family or friend.
Myth #2 – Millennials are not loyal and do not belong to loyalty programs
A vast majority of the U.S. millennials we surveyed (87 percent) are enrolled in at least one loyalty program – the most of any age group – and they’re the most active users of the programs in which they’re enrolled. Over 90 percent of millennials feel that companies should reward loyalty. But, a whopping 95 percent of millennials in the U.S. feel that companies need to find new ways to reward their loyal customers. While they are always on the lookout for new types of rewards, discounts and special pricing are still the top benefits they seek, making value a critical component of any loyalty program.
Myth #3 – It is not worth it to build customer loyalty
Our study shows that, globally, when a consumer is loyal to a brand 86 percent will recommend it and 46 percent will remain loyal even after a bad experience. An accomplished retail CMO recently told me that he did not worry that much about loyalty because they had great retention rates – and he was right, they did. He was keenly interested in reducing his cost of acquisition, though. Given the high likelihood to recommend a brand or retailer when a consumer is loyal and the strong influence this has on purchase decisions, building loyalty is not just about retention, although that is also a big benefit.
In all, loyalty is critical to brand growth and as important as ever, but organizations need to rethink their existing loyalty programs to reflect the needs and expectations of their customers. It is not as simple as copying an existing loyalty program and putting it into market.
Katherine Black is an Advisory principal and Consumer & Retail Strategy Co-Lead for KPMG. For more information or to arrange an interview, please contact Andreas Marathovouniotis.