How Brands Can Build Better Customer Loyalty — It’s No Longer About ‘Perks’ and ‘Points’

For many retailers, customer loyalty programs are about one-upping their peers with perks and points. But does that really click with consumers?

No, according to Klarna. A new study by the payments provider and licensed bank found that shoppers are more likely to be won over by good customer experiences than by reward programs or point systems.

This shift in behavior has put a strain on many retailers.

Of the 250 retail decision-makers surveyed, 69% said they were working harder than ever to retain customers. Unlike a clear-cut promotions play or membership program, providing a “good experience” relies on several factors. Additionally, as retailers operate in more channels, ensuring a positive shopping journey becomes equally complicated.

The stakes are also higher: 55% of customers said that a single bad experience with a retailer would prevent them from returning. For the companies looking to gain the edge in this competitive retail landscape, the Klarna report suggested paying more attention to the details that customers really value, rather than to larger in-store activations and marketing ploys.

“Loyalty is no longer a ‘points’ program,” said Luke Griffiths, managing director at Klarna UK. “It’s clear that consumers want to align themselves with brands that can offer them a deeper connection and understand how they want to shop.”

These details include returns processes, a responsive customer service team and a smooth checkout experience. While 29% of the consumers surveyed complained that shopping is less fun than it used to be, ultimately, the report showed that customers care more about efficiency and quality. It also revealed that retailers perceived these issues to be less important to their customers than they reported.

Specific preferences vary between demographics. For instance, for brands and retailers trying to capture a younger audience, Klarna found that brand messaging was particularly important. Unlike older generations, millennials and Gen-Zers place less emphasis on value for money and more on brand values; 27% of younger respondents associated loyalty with shared values, compared to 18% of people over the age of 45.

The main reasons that retailers cited for struggling to keep up with these changing priorities included outdated technology and a short-term focus on sales. However, the survey reported significant investment to address this. Top areas for investment over the next 12 months: curated experiences (39%), additional payment options (34%), branded content (34%) and smoother online user experiences (33%).

Watch the video below to see why Allbirds is winning in this retail environment:

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