Using Customer Data to Build Loyalty in a Price-Sensitive Market

Using Customer Data to Build Loyalty in a Price-Sensitive Market

With the cost of living soaring and consumers being left with less disposable income, it's no surprise that brands are increasingly relying on price cuts, promotions, and discounts to attract customers. VML's Future Shopper Report 2024 found that “Price of the Item” is the most important factor influencing online shoppers' decision making, whilst “Brand” was only ranked in sixteenth position.

While this tactic might offer a short-term sales boost, it can become a slippery slope towards a loyalty crisis. The constant barrage of discounts, no longer confined to traditional shopping holidays, creates a race to the bottom. Consumers, conditioned to expect deals, become increasingly disloyal, flitting between brands in pursuit of the lowest price.

So how do we break free from this unsustainable cycle and cultivate lasting customer engagement? Or as the DMA's "How to win back customers and (re)build loyalty" report asked last year, "what does your price promotion exit strategy look like?" While there's no magic formula, data-savvy brands are finding success by focusing on two key strategies:

1. Uncovering Value Beyond Price:

While price reigns supreme, the Future Shopper Report also highlights that exceptional experience and service are critical factors influencing customer decisions, closely behind price. This presents a real opportunity for differentiation. By leveraging customer data, brands can gain a nuanced understanding of individual preferences and motivations beyond price sensitivity. This allows for the crafting of personalised experiences, tailored communication, and unique value propositions that resonate deeply with customers.

2. Shifting from Short-Term Tactics to Always-On Engagement:

Instead of trading-plan driven discounting, leading brands are pivoting to personalised, always-on retention and reward strategies. By leveraging customer data, they can identify high-value customers, predict churn risk, and tailor incentives accordingly. This approach allows for a more strategic allocation of resources, maximising impact while minimising margin erosion. Imagine offering personalised discounts based on purchase history, rewarding loyalty with exclusive experiences, or surprising customers with early access to new products – all fuelled by the insights gleaned from their data.

The path to sustainable growth lies in building genuine, value-driven relationships with customers. By harnessing the power of customer data, brands can escape the discount trap and cultivate lasting loyalty that transcends price.

We'll be exploring these themes further in this year's Customer Engagement research, releasing at our Customer Engagement Conference on Tuesday 19 November, crucially canvassing the opinions of both consumers and marketers as we unpick how to reward loyalty without getting trapped in a downward spiral of price sensitivity.

By Hannah Gardner-Javid, CRM & Loyalty Manager at VML and Deputy Chair of the DMA Customer Data Council