The State of Customer Loyalty & Retention 2023

In December 2022, Yotpo surveyed 3,800 global consumers on all things customer loyalty and retention — what makes a good post-purchase experience, what keeps customers loyal, and how customers expect to be treated in exchange for their continued business.

These shoppers spanned six age groups (16-17, 18-24, 25-34, 35-44, 45-54, and 54+), four generations (Gen Z, Millennials, Gen X, and Baby Boomers), and three countries (the United States, the United Kingdom, and Australia).

This past year’s macroeconomic environment has been tenuous, to put it lightly. After an uptick in splurge spending in 2021, this year has seen a definitive slow-down in consumer spending as recession worries continue to loom. According to McKinsey reports, U.S. consumers are choosing less expensive options, delaying purchases, and focusing on saving rather than spending. And we’re seeing similar trends across the globe.

As a result, customer loyalty and retention have been top of mind for many brands. While retention is a metric that defines a customer’s lifetime value, loyalty is what customers feel toward brands. The two go hand in hand in catalyzing brands’ long-term success, especially given customers’ renewed focus on value and quality.

Where does this leave us?

Last year, the state of brand loyalty was directly tied to customers’ emotions. Shoppers wanted to feel seen and recognized by the brands they love. In exchange for their loyalty, customers wanted a relationship with brands that surpassed the checkout page.

This year, with tensions high and wallets closed, customers expect that much more from brands. If you’ve gotten customers’ attention this year, congratulations. Now you have to figure out how to keep it.

Acquisition is checkers. Retention is chess.

In our survey, consumers made it clear that customer loyalty and retention are harder to win with cheap tricks and gimmicks, like overgeneralized messages and lackluster loyalty perks. With product prices going up, customers want to see that value made up in other places.

While our macroeconomic environment has changed, impacting customers’ sensitivity to price and value, there are strategies that motivate shoppers to stay loyal to brands. Customer loyalty isn’t set for life. Every time the economy shifts, on a micro or a macro level, customers’ loyalty to your brand is being questioned and challenged. It needs to be earned over and over again.

Customer retention is much more multidimensional than acquisition; retention demands you treat first-time, two-time, repeat, and loyal shoppers with nuance. And, the margin of error is that much smaller. Brands must craft exceptional post-purchase experiences, communicate effectively, and know their customers to their core to turn one-time shoppers into customers for life.

Oh, yeah. Customer loyalty just got a lot more complicated with a light recession and global price inflation thrown into the mix. Compared to last year, customers are finding it harder to stay loyal to brands when their needs aren’t being met. But, it’s not impossible to earn loyalty, and we can’t stress that enough — it just means understanding and offering the experiences customers truly want.

When asked what being “loyal” to a brand means to them, 35.2% of global respondents said they tend to buy from the brand despite cheaper options. It’s no secret that everyone is feeling the effects of price hikes. Everyday essentials like utilities, basic groceries, and rent have increased significantly in the past 12 months. With costs up, so is customers’ price sensitivity.

However, 65.6% of global respondents still said they tend to buy from the same brand to show their loyalty to the brands they love. But this loyalty comes with expectations; customers aren’t going to give their repeat business away for free, especially not in this macroeconomic environment.

Evidence shows that price is important, now more than ever. But brands cannot undervalue exceptional customer experiences during hard economic times.

When buying for the first time, customers are influenced by: 

• Product prices: 20.7% of answers
• Positive customer reviews: 20.1% of answers
• Product quality: 20% of answers

But what drives first-time customers to return? Oftentimes, effective marketing. When asked what brings them back to make a second purchase from a brand, 28.1% of shoppers answered, “There was a sale, and I found an item I liked.” 

On the surface, this feels like another discounting strategy. Oh, a sale! But, underneath, this second purchase had to start with making the customer aware of the products pertinent to them. When asked how they’d like a brand to engage with them between purchases, the majority (57.5%) of global respondents said they’d like to receive information about sales and discounts.

Via text, email, on-site banner, or social media: the brand needed to create relevant, personalized communications for these customers to come back. Discount fatigue in today’s climate is real, and customers need to feel confident in their purchasing decisions.

As expected, customer service also persuaded customers to buy again from a brand, counting for 22.2% of answers.

But don’t worry, it’s not all about price.

Customer loyalty during a recession (or the threat of one) isn’t fictional or fanciful. Fostering loyalty requires that you cater to customers’ shifting priorities. While discounts are important to help address customers’ spending concerns, respondents’ answers tell us that retaining a customer and nurturing their loyalty is about so much more.

Loyalty programs continue to capture price-sensitive shoppers’ attention, and they provide the rewards, like free products and discounts, and extra value that customers are seeking. They make customers loyal, despite recession fears, costlier products, and general economic woes because, in many ways, they make up for product price shortcomings.

When asked what they’ve done for a brand they’re loyal to, 43.5% of global respondents said they’d join a brand’s loyalty program. This continues to be customers’ most popular answer, topping our survey results for three years in a row.

Loyalty programs are essential to customer retention and catalyzing repeat purchases. Over 50% of global respondents said a loyalty program would make them continue purchasing from a brand, topping even good customer service (36.5%) and positive on-site search experiences (35.1%).

Investing in loyalty members prioritizes dependable profit over uncertain growth during a tumultuous economic period, as they’re high-value and reliable. According to the February 2022 Forrester report, The ROI Of Loyalty Programs, on average, loyalty rewards program members in the U.S. and Canada spend $99 more with traditional and online retailers than non-members within a typical three-month period. Based on data from our 2022 brand loyalty survey, loyalty programs influence over 83% of shoppers to buy again from a brand.

Reflecting on early 2020, another period of economic ambiguity, many brands turned to loyalty programs to bolster their business — and they’re all the better for it. By capitalizing on a sure win, loyalty members, these businesses focused on retention and high-intent consumer behaviors. For example, Homeworx, a home fragrance brand, launched a loyalty program during the pandemic to expand their D2C presence.

As a result, their program Club Homeworx has:

• Increased their retention rate by 25%
• Encouraged program members to make 4x purchases as non-members
• Driven 11x ROI within 90 days of launch

In fact, loyalty programs influence purchasing decisions so heavily, 45.4% of global shoppers said not earning loyalty points for their purchases made a bad post-purchase experience. No program, no points, no loyalty customers.

Today, customers expect one-on-one engagement, hyper-relevance, and connection from brands to establish long-term loyalty. We know personalization is an oft-used term in eCommerce, but global survey respondents hammered home how important it remains for customer retention. But even before personalization, brands must understand their customers’ fundamental needs and desires.

Feeling like a brand knows them influences 82.5% of global respondents to buy again from a brand. 

Digging deeper, we asked customers what a brand “knowing” them actually meant. Top responses included:

• The brand recommends products based on previous purchases (53.9%)
• The brand emails a customer when products are back in stock (45.2%)
• The brand uses a customer’s name in emails and texts (37.8%)

These experiences necessitate personalization, yes, but they also require a brand to understand how a customer likes to shop, the products they’re interested in, and what type of communication they prefer. Making good on these expectations requires connected, comprehensive data on your customers, as we’ll discuss in later chapters.

In today’s market, decision fatigue is real, especially as many brands are trying to offload excess inventory and bombard customers with often irrelevant deals and information. Rather than pushing customers toward decision fatigue with a generalized approach, brands must see their customers holistically across channels and touchpoints.

Loyalty programs and the data brands can garner from them offer a solution. Rather than a generalized marketing approach, you can tap into rich customer information and deliver the personalization and relevance that today’s customers crave.

The customer is the customer is the customer — on every channel.

No matter the interaction, time, or transaction, the customer is always the same — and your brand should recognize this. The customer is the same customer when they’re reviewing your products, engaging via SMS, talking to your customer service agents, and redeeming rewards at checkout. Would you want to reintroduce yourself when meeting the same person, time and time again? No, and neither do your customers. The customer is the customer is the customer.

For brands they’re loyal to, customers expect even more. Regarding personal information, customers expect brands to know:

• Their birthday (54.6%)
• Their name (52.7%)
• Their product preferences (48.8%)

Knowing when not to send a message is just as important as when to send a message

Not only does this recognition affect customers’ outlook on brands but also their behavior. Over 40% of global respondents reported that too many messages or “spam” messages would cause a brand to lose their loyalty. That “spammy” feeling often comes down to irrelevance. A customer can only receive so many text or email blasts before they start to feel a little chagrinned.

Personalization and relevance go hand-in-hand. To keep customers coming back for more, brands have to deliver curated experiences that actually matter to their customers.

It’s not enough to send a text message with a customer’s name attached. Instead, brands must rely on their data to engage customers with the right message at the right time. Communication with customers should often rely on real-time events, like when they abandon their cart, reach a new loyalty tier, celebrate a birthday, or place a high-value order. When the messages you send are linked to specific activities like these, they are more likely to engage your shoppers.

And this all makes sense — over 40% of global respondents associate “Recognition” with the brands they’re loyal to. 

Without the right data on customers, brands are suffering from critical blindspots, and customers are churning because of it. After purchase, brands are not engaging customers effectively. Without embracing both personalization and relevance, brands are overcommunicating the wrong information.

Customers don’t want constant brand communications flooding their inboxes. They want emails and texts that have significance to their customer profiles, past purchases, and future wants. Customers want messages they actually care about; nothing more, nothing less.

Over 55% of global respondents said brands annoy them when they send too many messages, which, to reiterate, will cause 41.1% of customers to stop being loyal to a brand altogether. 

Other annoying experiences of note include: when brands don’t acknowledge a customer’s previous purchases (30.4%) and the brand’s recommendations aren’t appropriate for the customer and their tastes (42.3%).

Customers don’t want to hear about every product drop or every retail store opening. They want outreach relevant to them, like:

• Information about their recent order details
• How many loyalty points they currently have — and when they’re set to expire
• When they’ve leveled up to a new VIP tier
• When their subscription will be renewed
• Product recommendations based on past purchases

In fact, 45.1% of global respondents said not receiving information like shipping dates and order details about their recent purchase would make for a bad post-purchase experience, causing churn. According to PwC’s Future of Customer Experience report, one-third of customers will leave a brand after having just one bad experience.

Brands are getting the post-purchase experience wrong more than they think, which in turn, impacts their retention metrics.
When asked what makes a bad experience after checkout, customers had a lot to say.

• Didn’t receive loyalty points for a purchase: 45.4%
• Received messages not relevant to previous purchases or checkout experience: 31.7%
• Received promotional messages related to an item already purchased or program the customer has already signed up for: 26.6%

So, what do customers actually want to know between purchases?

We’re so glad you asked. Post-purchase, shoppers want to know:

What do these relevant engagements look like to customers?

Each shopper needs to be met with the right experience, at the right time.

Olivia just made her first purchase. Incentivized with loyalty points, she leaves the brand a positive review and joins their loyalty program. A personalized email pop ups in her email inbox, recommending a few products based on her preferences and reminding her of her loyalty status. Olivia is interested in recommended products and purchases. She earns loyalty points and moves to the brand’s Gold VIP tier.

Jane is a repeat buyer and has just made a purchase of the same product. After leaving a positive review including a photo, Jane is segmented into an audience likely to subscribe to the brand’s products. She receives a text encouraging her to subscribe for additional savings and redeem her points. She subscribes to her favorite product and gets a discount.