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.

Shifting consumer habits and brand engagement strategies

Ask anyone how the economy is doing these days and you’re likely to get an eyeroll. Recent numbers point to a continued strong job market, and consumer sentiment is shifting toward a more positive outlook, but are consumer purchasing habits in alignment with government reports?

While inflation has fallen considerably, it’s not a straight line to the 2% the Federal Reserve is seeking. Consumers still feel pinched by prices that rose quickly during the pandemic but have been much slower to fall. Shoppers are taking action. A recent Kroger consumer survey found nearly 50% of U.S. shoppers prefer to buy store brands, compared to 37% who prefer national brands. Retailers have noticed too, placing in-house brands more prominently on store shelves. For example, Target just announced a new line of 400 staples, some priced under a dollar, to bring shoppers into the store and compete with more expensive national brands.

Adapting to new consumer expectations

This shift poses a challenge for brands looking to maintain and grow their customer base. Savvy brands understand that to keep shoppers onboard, they need to work a bit harder. This is a pivot from two to three years ago when high demand and supply chain logjams had brands and retailers struggling to just keep products on the shelf. Today, a solid, modernized strategy for promotional campaigns remains key to brand engagement in 2024. Brands must focus on creating lasting connections with their consumers by providing tailored experiences that resonate with their evolving needs.

For some industries, this may involve a fresh outlook on loyalty programs. Points and members-only deals aren’t just for airlines anymore. Loyalty programs help brands gain better insights into their customers, offering more customized experiences that shoppers have come to expect. From free birthday gifts and tiered rewards to friends and family discounts, loyalty programs not only tie shoppers to specific brands, but also encourage them to spend more, further strengthening brand engagement.

Promotions as a key to staying competitive

Food and beverage brands are particularly affected by inflation fatigue. These brands face pressure from shoppers jumping to cheaper store brands, and they may be losing market share to new products. As states continue to legalize cannabis, the adult beverage industry is seeing an influx of CBD and THC products hitting the shelves, just as movements like Dry January grow and alcohol consumption declines among younger generations. Rebates and coupons are especially important in these industries to gain new customers and keep existing ones.

When price is a consideration between two brands, rebates or coupons might make the difference or entice a shopper to try something new. For current customers, these offers might give them another reason to stick with their brand.

Creating a successful strategy for 2024 and beyond

How you craft and implement your promotions strategy is key to success. Are you leveraging the latest technology to ensure not only value but also a positive experience for customers? Do you require customization? A white-glove experience for loyalty program members? Are there legal considerations specific to your industry, and how will they be met? And for any brand, are you compliant with all rules and regulations in every region where your campaign takes place?

A well-planned promotions strategy will help customers find your brand and provide reasons for them to become or remain loyal. As shoppers keep an eye on their wallets, no brand can afford to ignore modern approaches to brand engagement.

Ready to elevate your brand engagement strategy in 2024?

Contact us today to explore how tailored promotional campaigns can boost loyalty, drive sales, and create meaningful connections with your customers. Let’s work together to make this year your brand’s best yet!

Gain greater information gathering and sales through loyalty programs

Loyalty programs aren’t just for the travel industry. Manufacturers have been finding success through loyalty programs as well. This success comes in a number of ways, including learning more about their consumers. Most loyalty programs require consumers to provide personal information or create a profile, allowing businesses to track ongoing purchase behavior and gain a better understanding of their customers. By collecting this data, brands can identify purchasing patterns, preferences, and trends that they might otherwise not be able to access through retail partnerships alone. This valuable information can help manufacturers improve their offerings and develop more targeted marketing strategies.

Building stronger consumer relationships through loyalty programs

Once a brand or manufacturer gains deeper access to its end consumers, it can begin building stronger, more meaningful relationships. Loyal consumers feel a personal connection to a brand, which can lead to increased trust and repeat business. Beyond earning rewards, these consumers want to feel valued. Loyalty programs give businesses the opportunity to connect with consumers by offering exclusive promotions, early access to new products, or personalized recommendations. Communicating regularly and engaging with loyal customers ensures they feel appreciated and informed. In turn, these customers can also provide valuable feedback that helps businesses refine their programs, products, and services, fostering continuous improvement.

Loyalty program benefits: strengthening your brand and enhancing consumer engagement

The benefits of loyalty programs extend far beyond just offering rewards. They create a lasting bond between brands and consumers, enhancing overall consumer engagement. When executed properly, loyalty programs not only drive repeat business but also provide a wealth of consumer insights that can inform future marketing strategies and product development. These programs help brands better understand their customers and cater to their needs, improving the overall customer experience.

To learn more loyalty program benefits and our capabilities, ask your Arrowhead representative or contact us.