Building consumer loyalty is the key to driving repeat business, increasing profits and developing a consumer base of long-term, satisfied clients. A loyalty program designed around convenience, precision, speed and environmentally sustainable fulfillment and returns can help build brand loyalty and increase consumer lifetime value.
While most organizations understand this value of consumer loyalty, many have trouble finding and retaining loyal consumers. Some people like getting discount coupons, while some consumers prefer to get free and faster shipping, priority service, hassle-free returns, etc. (see Figure 1).
Supply chain plays an important part in the loyalty programs offered by brands. As per Gartner’s Consumer Priorities Survey in 2022, shipping benefits make up the third most preferred loyalty benefit that consumers want from brands (see figure below). An efficient supply chain impacts your consumers’ brand loyalty by ensuring improved inventory positioning, reducing stock-outs, on-time delivery, accurate order fulfillment, convenient returns and more.
Gartner’s Fulfillment and Returns Consumer Offerings Study conducted in 2022 across major fashion, apparel and footwear brands in the United States revealed that among the brands offering some form of loyalty programs, 70% of them have shipping benefits attached to their loyalty programs. This same study in 2021 revealed this number to be 44%. Similarly, on the reverse logistics aspect of supply chain, 22% of the brands offering some category of loyalty programs have returns benefits attached to loyalty programs in 2021. This number increased to 37% in 2022. This evidence proves that brands are realizing they can deliver greater value to their consumers through loyalty programs tailored around shipping and returns benefits.
Loyalty programs can create enormous value for brands. But that does not mean that loyalty programs are mandatory. Gartner’s analysis states that loyalty programs are popular in the retail industry and among CPG companies. But the surprising element here is that even 9% of the industrial and chemical companies offer loyalty programs (see figure below).
The key to executing successful loyalty programs lies in personalization, creating frictionless unified commerce experiences and aligning with the values of consumers.
Personalization
Consumers are aware that brands track their data and use it to recommend products or experiences to better cater for their needs. Regardless of how a consumer is shopping, they expect a highly personalized experience. But personalization also brings higher volatility and unpredictability in demand. Also, there are possibilities of changes to consumer orders much later in the fulfillment process. These expectations can be fulfilled by rethinking manufacturing from a centralized to a distributed model, segregating the supply chain at the origin of customization, reducing lead time and reducing raw material waste. “Nike By You” is a great example of mass customization. It allows consumers to personalize their own Nike products, including clothing and footwear, from colors and materials to style.
Unified Commerce Experience
Consumer loyalty has rapidly transformed into a unified commerce experience. Whether shopping at a brick-and-mortar store, engaging with customer service online or interacting with the loyalty app on their mobile device, consumers need a consistent and seamless experience. Supply chain leaders bring the ability to offer a consistent approach and alternative options to meet consumers’ shopping behaviors. These could be several methods of fulfillment such as curb-side pickup, deliver to a hub locker or time bound delivery to homes. On the flip side, consumers might choose to return a product at the store, return to a kiosk within another retailer’s store, go for packageless returns or try pickup return from consumers’ home. This level of flexibility in the supply chain can be achieved through proactive planning and defined actions. Nike, L’Oreal, Walmart and Amazon have evolved their approaches to inventory positioning and reverse logistics to support such unified commerce initiatives.
Aligning the Brand With the Values of Consumers
Today’s consumers are generally driven by how a brand supports a cause that they are passionate about. Brands focusing on sustainability can leverage this trend to build a loyal consumer base. Supply chain can act as a major enabler here. Consumers can be offered environmental incentives for choosing slower fulfillment methods. Timberland tested this approach by offering to plant a tree if a consumer chooses a slower delivery. They observed 14% adoption in six months leading to the planting of more than 55,000 trees. Consumers also welcome retailers who provide the option to consolidate their orders at checkout into a single shipment, ensuring reduced number of delivery trucks on the streets. We are also seeing a boom in the resale and refurbished marketplaces, reflecting the consumers’ willingness to prefer brands who provide an extended life to products.
To sum it all up, the future of loyalty programs will require a hybrid approach. Brands should merge physical stores with digital avenues to create a seamless experience and make loyalty programs adaptable. Loyalty is getting more difficult to acquire and hold on to. But a well-structured loyalty program tailored around fulfillment and returns benefits can exceed consumers’ expectations.
Debrup Jana
Sr Director Analyst
Gartner Supply Chain
Debrup.Jana@gartner.com
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