The cost of living crisis is biting and we don’t need to look hard to find evidence of this. The Guardian’s business tracker following the recent Black Friday paint’s a telling picture. Three of the leading stories are; the Tesco CEO calling for more targeted support, consumers cutting back on spending and retail footfall on the day itself being way below pre-pandemic levels.
Unfortunately, this is indicative of more to come in 2023 and it is putting retailers and brands under pressure like never before. Under the weight of these macro pressures, we’re going to see some major changes in retail, particularly with regards to loyalty as both brands and consumers seek to maximise every avenue.
That in mind, here are seven predictions for the coming year:
- Brand switching will be on a rise as consumers look for better deals
As consumers’ disposable income shrinks due to rising prices of food, fuel and other essential items, brand switching is inevitable. This is because shoppers spend more time and energy looking for the best deals and ways to save money. According to Toluna’s recent research, 68% of consumers’ spending has been impacted by rising prices and living costs, which is considerable. Brands will do their best to prevent losing customers to competition via rewards and offers and emotional connections.
- Cashback will increase in popularity
Together with rising inflation, instant and monetary rewards have been well sought after. We’ve seen a rise in enquiries for cashback loyalty schemes from businesses worldwide and Google Trends confirms for this to be reflected in the consumer demand too. The chart below shows a consistently high search interest in cashback reward programs in the past 12 months. This once again shows that easy to grasp reward concepts that require little effort are popular among the consumers.
- Brands will look for reward partnerships
Reward partnerships have mostly been popular in sectors where it’s difficult to use own products and services as rewards (e.g. finance, insurance, telecommunications). The tightening budgets of marketing departments will however drive demand for reward partnerships outside of traditional industries. Loyalty programs and loyalty points can be a financial burden on any company, in particular when the cost of rewards lies solely on one brand. This is why we predict that reward partnerships will be popular, as they help to relieve some of the redemption costs.
Additionally, from a consumer perspective, they provide a more varied and targeted value to customers. Brands offering rewards from other companies recognizes the complex needs and wants of the customer. It means you as a brand show that you value customer loyalty beyond the scope of wanting brand-related rewards.
- The dawn of FMCG/CPG loyalty
FMCG and CPG companies have historically been unable to directly drive customer loyalty without heavily relying on third party sellers and non-trackable advertising. Whilst social media and innovative approach to campaigns have allowed these brands to start communicating directly with their end-customers, customer loyalty in this industry is still in its infancy. Nevertheless, there are now new technologies erupting that will provide the opportunity for FMCG and CPG brands to understand their consumers better on an ongoing basis. There has been a lot of interest in such solutions lately and we predict the results of this will start to dawn in 2023.
- Gamification & new-world rewards
In 2022, we started seeing global brands offering NFT rewards and web3 experiences as part of their customer engagement and loyalty offerings. Surprisingly (or not), they have become very popular amongst consumers and continue to drive engagement, buzz and PR. This is hence likely to continue and become a more common part of loyalty programs in 2023, along with other forms of gamification.
- Even more seamless experience
The trend of increasingly smoother loyalty user experience will continue. Brands will be exploring new technologies and solutions that help them provide the best possible experience. This means integrations and single sign-on (SSO) connections that allow a true omnichannel experience to consumers, are non-negotiable now. No more siloed technologies and clunky systems.
- Emphasis on savings & providing value
As we’re slowly but surely entering recession, struggling with the energy and cost of living crisis, brands will need to highlight increasingly more how they are helping consumers save money and get better value. Emotional loyalty will be crucial in winning the trust and dollars of consumers. Since money is also tight for companies, brands must hone in on the extra value they bring to the table, such as personalised offers that hit the spot, helpful content that answers consumers’ questions, and tangible savings they can make through collecting points or cashback.
Time will tell if these all come to fruition but one thing is for certain, we’re going to see some serious disruption in the next 12 months. While this will lead to pain for some in the short term, it’ll likely lead to an improved retail ecosystem in the future.
