Loyalty in question: Brands need the human touch

Explore why businesses might be pulling the wrong levers to guarantee customer retention.

Succeed in challenging times

In turbulent times, it’s only natural that consumers should become more financially cautious.

Brands now face the challenge of retaining those customers as they begin to tighten their belts. With a challenging economy expected to last some time yet, this is no short-term fix. Both brands and consumers are adapting to the situation, but are brands getting it right?

For the 2023 Evolution of Commerce Report, PayPal commissioned Forrester Consulting to conduct two surveys among Enterprise Businesses and Consumers in five global markets: Australia, France, Germany, the United Kingdom and the United States. We wanted to know exactly how businesses and consumers react to the economy, their preparedness and priorities into 2023.

In this report, we explore what it means to be loyal, and what brands should be doing to make sure they can keep customers on their side, without breaking the bank.

Loyalty comes from value and authenticity

The truth of the matter is, it costs less for a business to retain customers than to acquire them. While commerce brands should always seek to grow their organization, making sure they are able to keep the ones who have already bought is a solid strategy, particularly in a difficult economy.

Unsurprisingly, then, many consumers care most about companies having a built-in loyalty program where they can be rewarded for their continued purchasing¹. However, at a time when no-one wants to waste money, making sure they are buying an authentic – and therefore quality – product, is also high on their agenda (62%)¹.

Indeed, elsewhere in our research, it was discovered that over half (51%) of global consumers will not buy from a brand if they don’t provide specific information about a product’s authenticity¹. Even for those that do, this is no time to rest on their laurels. Respondents to the survey also indicated that they expected even more improvements in authenticity information and priority customer care over the next five years¹.

What capabilities do you need to boost conversion in the future?

• Build-in loyalty programs - 65%
• Information about product authenticity  - 62%
• Priority customer care for loyalty members - 55%

The human touch makes the best touchpoint

With so many potential channels to interact with customers, and the advantages of automation becoming ever clearer, it is tempting to default more and more to a fully digital way of doing business. But, while customers appreciate the immediacy that digital channels can bring, they are struggling with the digital-only approach.

In the past half year, 35% of global consumers said chatbots hadn’t resolved their problems satisfactorily, while 30% struggled to reach a customer service representative¹. It seems that brands acknowledge they need to stay in touch with customers, but are targeting them in the wrong way, as a further 29% of consumer respondents to our survey believe they were getting too many emails from commerce brands¹.

Too much of the wrong contact could have an impact opposite to the one companies intend – driving customers away instead of keeping them close. Between a quarter and nearly a third of consumers would either stop buying, visiting, or recommending a brand if they were pestered or unable to get the right form of customer service.

Companies could ‘right the wrongs’ or simply improve their existing relationship by offering even more value to the customer. Free shipping and returns would reduce the strain on squeezed budgets for nearly half (49%) of consumers, while 44% would welcome more promotions and deals¹. They’re still patient when it comes to getting hold of the right product, however, as 28% would willingly go on a waitlist for items that are out of stock¹.

Customers prefer human interaction over other communication methods¹:

• Live chat too automated - 35%
• Difficult to connect to customer rep via phone - 30%
• Too many emails from a brand - 29%

If human interaction isn’t offered, consumers are¹:

• Less likely to visit the brand
• Less likely to buy from the brand
• Less likely to recommend the brand

Value those that value your brand

To succeed in a difficult economy, it’s imperative that brands’ match their customers’ greatest needs. As we have seen, to secure their loyalty, customers want brands to offer built-in loyalty programs, give confidence in product authenticity and be there when they need them.

On one hand, it’s encouraging that our research shows brands, too, are working on their loyalty offerings. On the other, however, there are significant areas where businesses are not answering customers’ immediate needs. There’s no doubt that commerce brands are on the right track in some respects. Over two-fifths (42%) revealed that they have already implemented a structured loyalty program, while 36% of businesses say they are focusing on building emotional connections with consumers². It’s to be hoped that they understand they need to do this with a human and not digital-only touch.

However, businesses also reveal that they expect to change focus to offer experiential rewards (45%) and create referral programs². Here is where their interests begin to diverge from their consumers’. Focusing on lead generation takes the emphasis away from retention and on to acquisition, which – given the current economic climate – could be a mistake.

Businesses are focusing on lead generation²

Implemented:

• Structured loyalty program
• Establish emotional connections
• Highlight company values

Planning to implement in the next 12 months:

• Experiential rewards
• Customer referral program
• Membership perks

Sustainability is important, but no guarantee of loyalty

Brands are prioritizing sustainability to build brand value and appeal to changing consumer trends. However, they have mistakenly identified it as a driver for loyalty in the immediate term.

With the current financial pressures, sustainability is not a significant loyalty factor for consumers, and if brands continue to prioritize it, they risk losing market share.

Nearly three-quarters (72%) of businesses are prioritizing aligning their organizations with charities and sustainability initiatives². Nearly as many (68%) say they are also implementing initiatives to help their customers through the current economic crisis, but this is different to standard loyalty programs and may well fly under the majority’s radar².

They are focused on these two initiatives because a further 34% believe customers care about the company’s political and societal stance². But, given the evidence earlier in this report, they may be better served improving existing chatbots and making it easier to connect with live customer service representatives. Indeed, when asked about the tactics they were using to secure consumer loyalty, businesses leaned in the direction of more technology, not less as 59% believed data analytics would give them the edge, and a further 51% were looking to create a frictionless shopping experience².

Brands are prioritizing the wrong approaches in an attempt to win customers and maintain loyalty²:

• Supporting charities and sustainability initiatives - 72%
• Implementing initiatives to help customers survive the economic climate - 685
• Utilizing technology to collect and analyze customer data - 51%
• Creating frictionless shopping experiences - 59%

Brands think highlighting their stance on social issues wins customers and that more technology will help maintain customer loyalty². However, they should be bringing the focus back to product authenticity instead.

Bring priorities back in line with customer expectations

Currently, customers are focusing their attention on value-added built-in loyalty, product authenticity and good customer service. While commerce brands are on the right path with structured loyalty programs, they are wide of the mark in thinking that social responsibility will drive loyalty in this climate.

Level up your brand

From add-ons to authenticity.

Before diving into adding more digital functionalities and building in extras like experiential rewards in their loyalty programs, commerce brands should bring the focus back to product authenticity. By reassuring customers that their money is being spent on quality goods, they are likely to retain more customers. Proving authenticity means providing extensive product details, making sure the information is easy to locate and comes from an authoritative source.

Provide service to the customer.

Additionally, brands must make it easier for customers to get in touch with queries, potentially by improving chatbot interactions but ideally by providing access to human customer service representatives where possible. Retention is all about value and confidence. By addressing customers’ priorities more closely, brands will be much better placed to weather the challenging economic climate and set themselves up for growth in the future.

Where commerce meets consumers

PayPal has remained at the forefront of the digital payment revolution for more than 20 years.

With more than 435 million active global accounts in 200+ markets, PayPal understands consumer preferences, shopping behaviors and checkout optimization — and can help tailor your online experiences to grow and retain your customers. To find out more, download the insights here.