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Customer Loyalty in Uncertain Times

Customer loyalty has always been a crucial part of the consumer-business relationship. From the small local deli to a nationwide coffee chain like Starbucks, brands strive to create repeat customers through engagement and by providing the extra incentive of loyalty rewards for those who continue to come back. And while the pandemic has clearly revealed the massive importance of loyalty for neighborhood businesses, brands everywhere are learning more and experiencing rapid shifts in customer loyalty. Many factors abound: a younger generation that is less attached to brands, coupled with a variety of pandemic-related limitations that have reshaped shopping, entertainment and lifestyle habits. Many brands are now looking for new ways to generate that ever-so-valuable loyalty.

Customer loyalty was on an upswing prior to the pandemic, despite the fact that younger generations tend to exhibit less loyalty in their shopping habits. A Morning Consult survey indicates that Gen Z remains the least loyal, possibly in part because an affinity for ad-free media (like Spotify or Netflix) means they are less exposed to marketing than other generations. Gen Z is also less tied to nostalgia. Either way, younger consumers are more willing to experiment; 70% of those between ages 35-44 are willing to try new brands, with only 32% of those above age 65 ready to venture into the unknown with their purchases. These trends were already establishing themselves before March, when Covid-19–related lockdowns and changes in spending took hold.

Out-of-stock goods is one factor that impacted consumer loyalty this year. A combination of preparation- and panic-buying drove many products from shelves. Even Amazon ran out of some products, forcing customers to abandon their chosen brands for alternatives. According to McKinsey, more than 36% of consumers have tried new brands since March, with product availability as the number-one reason. Legacy brands and private labels have benefited with a growth rate of 80% during the pandemic.

Is there a difference between habit and loyalty? Adweek says “yes” and reports that loyalty, being more akin to fandom, is harder to break. We know that Gen Z values product integrity and a demonstrated commitment to social responsibility from brands.  Subscription services have been integral to many people’s happiness during covid-19, with about 25% of Americans relying on one. 85% of those people expect to continue paying for a service after lockdown, according to Marketing Dive. The pandemic has built new audiences for many brands, and marketplaces may permanently shift in their favor. McKinsey reminds us, however, that loyalty and behavior are different across different consumer segments — say, those who lost work compared to those who didn’t — and so brands should try to stay in sync with changing times and changing audiences. Really understanding consumer segments and building authentic relationships should help brands survive changing times and retain newfound customers.

Per the Morning Consult survey, nearly 72% of people expect to return to their pre-pandemic shopping modes and habits when the crisis is over, which is welcome news for brands that have seen a decrease in demand since March. Navigating the challenges of 2020 requires a new level of persistence and clarity from brands. Emotional connections with customers, seamless transactions, and close attention to feedback are keys to maintaining hard-earned loyalty through these uncertain times.