Prior to the global pandemic, most consumers engaged with brands according to their wants and needs, which were tied to predictable factors such as life stage, income, and interests. Then, the pandemic hit and caused a seismic shift in consumer behavior.
Suddenly, wants were deprioritized and everyone’s needs were the same. Customer-to-brand engagement lifecycles were levelled, and many sectors struggled to adjust. Now as we emerge from the pandemic’s wake, brands are trying to understand which consumer behaviors will remain, and which will revert to their pre-pandemic state.
A recent Forrester Research suggests that constant consumer change is a defining element of the “new normal.”
According to Forrester’s Consumer Energy Index Survey, US Consumers,November 2020, only 16% of US online adults believed that they would revert to a pre-pandemic sense of normalcy after COVID-19 cases subside; 75% agreed that the pandemic and related events would drive long-term changes in their behaviors and preferences.
To keep pace with a constant state of change, Forrester Research suggests that marketing leaders focus on monitoring three core categories of change:
- Ongoing: Changes in consumer attitudes and behaviors that increasingly influenced businesses before the pandemic and accelerated through the crisis
- Morphing: Changes in consumer attitudes and behaviors that were mounting before the pandemic are shifting
- Nascent: Certain attitudes and behaviors emerging from the pandemic that have reset consumers’ expectations of brands
With the pandemic in the rear view, we're seeing evidence that Forrester Research's predictions have converted into behaviors in our client data.
Each of the following examples of customer behavior change are pre- and post-pandemic snapshots of Kognitiv SmartJourney® strategy and consulting engagement clients. While customer demands within these programs were unusually aligned during the pandemic, their effects varied greatly based on the industry they’re in.
Client Program A
The pandemic had a significantly negative impact on a B2C commodity client, whose business relies heavily on a high purchase frequency. When the pandemic hit, demand for their products dropped dramatically. The average consumer simply didn’t have a need for it during the height of the pandemic and their lapsed consumer base increased by 12% over the previous year. However, the portion of their customers that still needed their product, used that product more – increasing their overall spend by 5%.
This is a great example of nascent behavior as these customers maintained their spend levels and frequency coming out of the pandemic.
Client Program B
Conversely, the pandemic delivered massive growth to a B2B client whose business provides supplies to critical care businesses. When the pandemic hit, demand for their products went through the roof. Amplified by supply chain shortages, their customers found themselves in a ‘need state’ and thankful for the supply certainty Client B was able to provide. It was a win/win.
However, coming out the pandemic with greater supply chain stability, and concerns about an oncoming recession, their customers appear to be shifting back to a ‘want state’. They’re showing signs of becoming more conservative in their spend levels, beginning to show signs of price sensitivity and decreased engagement with the brand. Overall, year over year, new customers are 26% more likely to get stuck while onboarding and are 38% more likely to stop spending altogether - long enough to lapse completely.
These customers are an example of morphing change in behavior. Prior to the pandemic, the client was aware that engagement levels were dropping, and more customers were lapsing in their program but weren’t sure why, as their internal data was insufficient to reveal this trend
Now, they have a much clearer view of where they need to adjust their customer experience to course correct and improve program and revenue performance.
Client Program C
Finally, for another high purchase frequency B2C client, this time in the specialty retail sector, the pandemic delivered exponential growth. Millions of new consumers started shopping the brand because of new pandemic lifestyle trends.
Unlike the previous clients, who suffered a loss of demand during the pandemic or a loss on engagement and decrease in spend coming out of it, this client experienced a high degree of growth and emerged from the pandemic stronger than they entered it. While customers aren’t entering the program at the same rate, their members are growing within the program, spending 8% more year over year, and lapsing less.
These customers are a perfect example of nascent change in behavior. The customers acted on a desire they had considered but not actioned until the pandemic arrived and chose to make a long-term change in their behavior, resulting in a very happy ‘new normal’ for all parties.
So, what can brands take away from this?
1. Customer behavior is always changing, it’s just a question of how quickly and in what ways. With so many moving parts to monitor in a marketing strategy, it’s tempting to treat loyalty programs like a crock pot. It is an option for brands to “set it and let it simmer” for long periods of time but eventually most brands approach a point of rapidly diminishing returns. Setting regular review periods for program performance ensures that you’re staying in step with the needs and wants of your customers and won’t get caught behind or surprised by shifts you didn’t see coming.
2. Market conditions have the power to accelerate behavioral changes and drive new ones. It’s tempting to think of the pandemic as a one-off event, where effects won’t replicate in the same way in the future. But, doing so exposes the health of your brand and your business to significant risk. Recessions have a powerful effect on consumer spending patterns. While they don’t affect all customers equally, as with the pandemic, they can significantly shift behaviors and drive entirely new ones for audience subsets. Brands that don’t assume the status quo will carry them through will be best positioned to convert challenges into opportunities for new growth.
3. Brands that do best measure customer behavior as closely as they do transactions. Tracking transactional data is a powerful practice that can help you effectively manage your inventory levels, see purchasing trends and help you predict future purchase patterns. However, understanding why your customers are buying something is just as important as the product itself. Transactional data is inherently historical in nature so it can really offer insights on patterns of the past and therefore can’t deliver attractive engagement opportunities unless they’re combined with a firm understanding of that customer’s behavior. Offering a brand advocate a discount for a product they see the value in paying full price for doesn’t just leave money on the table, it diminishes the brand equity you invested in building in the eyes of that customer as well. Knowing what individual customers value and which experiences to offer them based on that value is the key to driving peak program performance.
Know where your customers stand and where they’re going next.
All client program intelligence applied in the article above was obtained through our industry leading customer lifecycle milestone methodology SmartJourney®.
SmartJourney® is a powerful, platform-agnostic blend of Kognitiv’s strategy and analytics capabilities. Our methodology provides a lens and a framework that assesses your program’s efforts, tracks ongoing success, and ensures brands can see where they can continue to evolve strategies for growth, so your loyalty program delivers - and continues to deliver - maximum value to your business.
For more information on our SmartJourney® methodology, about our loyalty program strategy and design services, you can get in touch with us by filling our our contact form here.