The Evolution of Consumer Behavior in an Uncertain Market
What motivates someone to make a purchase used to be as simple as how much you want or need it, and how much it cost. Those days are long gone, and now the science behind consumer behavior and customer retention strategies is a full-blown industry. There are a few constants but changing market conditions and how we live in the world around us means consumer behavior will always be a moving target.
The recent COVID pandemic upended not just what we thought we knew about consumer behavior, but also how much consumers and brands could pivot to adapt to shattered supply chains, health regulations and items that suddenly became “must-haves”. (Who knew we would be hoarding toilet paper, hospital-grade face masks and hand sanitizer?)
How 2025 Tariffs Are Reshaping Customer Loyalty Strategies
In 2025, tariffs, threatened tariffs, and retaliatory tariffs are once again forcing brands to think hard about how they engage with consumers, while continuing to deliver the products and value shoppers’ demand.
Tariffs are taxes that eventually roll down to consumers to pay once brands run out of options to mitigate costs. That means brands need additional tools in their customer retention toolbox to retain customers and grow market share. One effective tool is a well-designed loyalty program. Not only can it boost customer engagement, but brands with loyalty programs are also gaining important information that can help them deliver more value to their customers.
The Data Behind Customer Retention: Why 79% of Consumers Join Loyalty Programs
A recent PYMNTS study found 79% of consumers surveyed said they participate in at least one retail membership, subscription or brand loyalty program. For brands, retaining customers and growing sales revenue are primary drivers for developing a loyalty program, however, there are also advantages to programs that reward participants simply for staying active. In a competitive product environment customers have choices, meaning every brand has to work to keep and grow their market share.
Loyalty Programs: Costs to Consider
A good loyalty program comes with costs. These include designing a program that helps you achieve your goals, enhances the customer experience, and follows compliance regulations. There are costs associated with the benefits and rewards brands give customers who participate in the program, and of course the costs involved in letting customers know about the program. Finally, brands will need to work with a partner or find the resources in house to build a platform the brand or their partners can manage, evolve, and keep the program running.
Designing the program begins by understanding your goals. Are you trying to keep customers from migrating to lower cost options? There was a time when customers were fairly brand loyal once they settled on a product they liked, but the pandemic changed that behavior. A McKinsey study that looked at consumer patterns following the worst of the pandemic found nearly 40 percent of consumers faced with a shortage of the item they wanted to buy were willing to switch products or brands to get what they needed. More than 30 percent switched retailers. A good loyalty program can entice a shopper to sideline their newfound wanderlust and stick with your brand.
Building a Tariff-Resistant Brand Through Strategic Loyalty Design
Perhaps you are a B2B brand, and you face competition not just from other brands sitting on the shelf next to your product – but from their salespeople who are actively trying to woo your customer. This is where a well-designed loyalty program can incentivize your customers to stick with you. Discounts, prizes, and rewards are just as compelling for a B2B customer as they are for a B2C shopper.
Creating Memorable Brand Experiences That Keep Customers Coming Back
It might be tempting to simply ride on the coattails of someone else’s loyalty program. This is especially true for CPG brands. Major retailers have their own loyalty programs that can highlight various products, thus offering brands the benefit of retaining customers at a much lower cost.
However, a retailer’s loyalty program is designed to keep customers loyal to the retailer, not a particular brand. And any brand relying solely on a retailer’s program is losing out on one of the most valuable benefits of a loyalty program, the opportunity to learn more about your customer. Brands can consider flipping the script by designing a loyalty program in partnership with a retailer, giving brands control over the customer experience – and feedback. Arrowhead has worked with clients to design and manage loyalty programs with retailers that resulted in significant engagement. While the program benefited the partner retailer, our clients gained valuable insights that will help them strengthen customer loyalty moving forward.
Your customers want to be heard and loyalty programs can be a great way to engage deeper with these participants. A brand can establish actual dialogue to share new product ideas, get audience feedback and more, including customers early access to a highly anticipated release, inviting members to special events, a way to share product samples, and conduct market research with people who are already your customers. These go beyond price to offer consumers value they won’t find elsewhere.
The Name of the Game: Long-Term Retention and Growth
Plain and simple, loyalty marketing programs are about keeping people loyal to the brand. They can come in many flavors depending on your goals. Chief among them is offering value beyond just price. As competitive products improve in quality, it becomes increasingly harder to keep your customers – especially if your competitor’s price is lower. Loyalty programs are a great way to ensure you are using every tool at your disposal to engage your customers, offer them value, and understand how you can keep your customers moving forward.
