The cost of living crisis is forcing brands to reappraise their marketing and loyalty strategies as more and more consumers seek out cheaper deals as they rein in their spending.
That is one of the key conclusions of the latest DMA Customer Engagement Report, entitled “How to Win Trust and Loyalty”, which reveals that, across all categories tested, most consumers have made changes or are planning to make changes to their spending habits.
For example, nearly two-fifths (39%) of consumers who spend on eating out are cutting back on this compared to nearly a fifth (18%) who have stopped spending on this completely. Meanwhile, 21% of consumers who drink out of home have stopped already, and 21% of consumers who spend on fitness or sport have axed spending on this.
The report maintains that these pragmatic mindsets are sculpting what engagement methods and loyalty drivers are most effective. Half (51%) of consumers now agree that they often change their mind about what brands or shops to use as a result of deals or offers.
DMA Customer Engagement Committee chair Scott Logie, who is also managing director of REaD Group Insight, said: “The research reveals consumers are more likely to have cut back their spending than to have stopped spending completely.
“This places consumers in an interesting mindset where they are prioritising their needs and questioning existing habits and loyalties. Consumers still want to be loyal to the brands they love and they also want to retain the habits they have built up.
“However, that may not always be possible in these unprecedented times, so offers and cheap prices are becoming increasingly attractive. For brands, that creates a challenge, to stick or to twist, to keep doing what built up loyal customers or to chase possible switchers with offers.”
Consumer spending on holidays and media subscriptions seems to be more protected, as 38% and 42% are not expecting to change their current spend.
Those consumers who are planning to cut back will put further pressure on existing loyalty mindsets as they start to change their spending habits, the study reveals.
Feelings of disloyalty have increased among consumers over the past two years – 41% of consumers claim that they feel less loyal to brands and companies than they did a year ago, in comparison to 34% stating this in 2020.
In terms of the types of mindsets consumers best associate with, there has been notable growth observed in “Habitual Loyals” (consumers displaying loyalty to everyday items over more expensive items), rising from 17% to 21%.
“Active Disloyals” and “Situational Loyals” (consumers displaying loyalty when purchasing more expensive items) have declined slightly, from 21% to 18% and 11% to 9% respectively.
These changes are likely the result of consumers placing a spotlight on non-essential purchases while personal finances are strained.
DMA director of insight Tim Bond said: “The UK’s cost of living crisis provides a significant backdrop to any recent changes observed in consumer attitudes to loyalty. But change doesn’t have to be a bad thing if brands are responsive and actively seeking opportunities for how they can best serve their customers.
“While we have seen an impact on discretionary spending and shopping habits, this hasn’t stopped all consumers from feeling loyalty – just the most effective ways for brand to earn and retain it.”
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