Episode 3

Lasting loyalties

Consumer behaviour, customer loyalty, and Chinese shoppers. Everything you need to know about strengthening customer relationships.



Kate Nightingale – Style Psychology

Consumer psychologist Kate Nightingale explains the behaviours sparked by the pandemic and how brands can build trust and grow loyalty.

Domenica Di Lieto – Emerging Communications

Domenica reveals the huge opportunity presented by resident Chinese consumers and explains how to create meaningful connections with them.

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Episode transcript

Colin: Building customer loyalty isn’t an easy task. Nor is it an exact science.
These days it feels we’re drowning in data. But there are still lots of blindspots when it comes to understanding consumers. Consequently, it can be hard to pinpoint what your shoppers want in order to retain their custom. 

Do you set up a loyalty program? Do you go all out on shopper experience? Do you start posting relentlessly on social media?

Any number and combination of factors could mean the difference between a customer abandoning their cart (or walking out your store) or becoming an advocate for your brand.

Adyen’s latest consumer research showed that 73% of shoppers will continue to support the brands they relied on during the pandemic - so now is a crucial time to make the right impression.

But the key to finding your unique strategy, as we'll find out today, is knowing what your customers want.

Kate Nightingale: The idea of consumer trade-offs is something that's very strong over here. Normally our trade-off is,  should I buy the product in my favorite colour? Or should I buy the one that's cheaper? But another trade off is,  should I go to that store, the restaurant and potentially get killed? Or should I not?

Colin: This is Retail Reawakened; the show that explores how retail and hospitality businesses can rise again in the aftermath of the pandemic.
I’m your host, Colin Neil, Head of Commercial at Adyen UK. 
Adyen is a global payments provider for retailers like Hunter, SuperDry and Fortnum & Mason, and food and beverage businesses like LEON, Joe & The Juice, and Hakkasan.

Before working at Adyen, I spent 30 years in the retail industry, including working as Retail Operations Director at Burberry.

In this episode, Lasting Loyalties, we'll be exploring the mindset of consumers to find out what inspires customer loyalty.

We'll investigate how their priorities and non-negotiables changed over the course of the pandemic and look to the future and ask what values and services they'll demand in return for their commitment to you.

Colin: To understand how to foster loyalty, you first need to understand the mindset of your customers.

To kick us off, Tony Longhurst, former director of IT at Fortnum and Mason, tells us about the early days of the pandemic and lockdown to give us a retailer's perspective on how consumer behaviour adapted and shifted in response to nationwide high street closures.

Tony Longhurst: Probably over a number of maybe two, maybe three months, it transitioned to purely online as everything started to slow down and then closed down. So as soon as people weren't able to get their favorite products by walking through the door, they transitioned quite quickly. And it brought with it a large number of new Fortnums customers who hadn't experienced the brand before. Had for whatever reason. So that was quite a rapid change, but it brought with it new customers and new opportunities.

Colin: And this story of online shopping adoption isn't unique to Fortnum and Mason customers.

Adyen’s research revealed that 25% of shoppers who had previously not purchased online migrated to ecommerce channels during the pandemic. So, even among the chaos of the closures, there was an opportunity for brands to increase their customer base.

But what was the psychology behind this shift?

And more importantly, why, as Tony said, did we start making more indulgent purchases and begin trying new things?

Consumer psychologist, Kate Nightingale, details how the mindset of shoppers changed over the lockdowns and explains the psychological phenomena behind purchasing decisions during times of uncertainty.

Kate Nightingale: So it definitely started with impulsivity. And that stemmed obviously from fear, anxiety, and uncertainty, which were driven by pure existential threat. Which, unfortunately - as the majority of existential threats are very temporary - this one wasn't. And we were reminded of it, you know, on average probably a hundred times a day. So obviously that impulsivity, which we saw in  a lot of kind of overspending  and a lot of kind of indulgence as well. Like, you know, drinking a lot, eating a lot things that we shouldn't be, you know, all those kinds of things, overindulging or nostalgic media content and all those bits and pieces, which obviously made us feel a little bit more in control and a little bit safer, which is great. That was a normal reaction. It is one of the very typical reactions is that we as human beings have to being reminded of our mortality.

Colin: But people didn't just become purely self-indulgent beings ordering takeaways and gadgets with abandon.

Another societal shift was occurring - communities were coming together.
Neighbourhoods clapped for the NHS, groups arranged volunteer food deliveries for the vulnerable, and enthusiasm for shopping and supporting local businesses grew. 

Adyen’s research found that 59% of UK consumers shop local to support local businesses.

Kate Nightingale: Once we kind of were almost like, you know, boozed out and media-d out and everything else, that's when another sort of reaction to our sense of mortality,  kicked in, which is being pro-social. And this is when we started seeing the oneness,  aspect, right? The volunteering, that community element that was popping out, that need to help and to support others started coming across. And then once we did a little bit of that, such as we shopped locally and we supported a sustainable brand and we maybe gave to charity and maybe volunteered, that's when we were like, 'Oh, we feel so good about ourselves. Let's overindulge again.'  And that was basically the whole process over a year or so ago that we had. And obviously the intensity of the wave started diminishing slowly. The more people kind of got used to navigating and find their own ways of controlling that situation. But nevertheless, you know, as soon as there was another announcement from government that, you know, scared us more, that's when we  picked up that intensity of those waves as well.

Colin: As Kate says, these patterns of behaviour came in waves as restrictions eased and intensified.

And as national and local lockdowns came and went, people's fundamental emotional needs were restricted along with them.

One of the most important was the need for belonging, which prompted people to interact with their local areas and shops as much as digitally, legally and physically possible

Kate Nightingale: Within our lives we have bubbles, right? We have environments, we have people, we have brands, we have countries and other things, places we like to travel. They are parts of our bubble that represent our identity. That creates kind of our general lifestyle that is suitable to our own psychological makeup. And the trouble is that, you know, that we were basically forbidden to go to a lot of places and interact with a lot of brands and people that are normally within our bubble. So what we needed to do is to figure out, okay, so this is the forced bubble that we have, how I can express my identity over that smaller bubble that I have, and perhaps create some other forms of interaction or some other kind of bubbles across like obviously online and virtual kind of conversations. Now, that is supported by the basic need of belongingness, right? So obviously heavily under-supplied before the pandemic, even worse during the pandemic and all the lockdowns. ,  That, you know, that need for intimacy and simple kind of physical-touch-intimacy or physical closeness is sometimes good enough to pretend to ourselves that we're not lonely. So you bump into someone on the street and it's kind of a little bit okay for a little bit because you don't feel so bad. Whereas, obviously, our physical contact is basically, we're naturally  far away from people, so that physical element of belongingness does not exist. The psychological and emotional element of belongingness was also non-existed for considerable amount of times because people we're afraid of each other, right. Even close friends and family.

Colin: And as well as fulfilling the need of belonging, shopping local offered consumers a feeling of intimacy and connection that, arguably, many had been missing even before the pandemic.

Kate Nightingale: So, obviously, starting to kind of play within that local realms and starting to discover certain things that you didn't discover about your neighborhood before, ,  starting to, you know, maybe bump into the same people in a park or starting to talk to your butcher. Those little things were stemming from such an in-depth need for intimacy and for being part of something that, that motivation together with, you know, with the richness of those interactions and, you know, and the lack of any other interactions that seemed better basically made us engage and made us value those smaller bubbles, even more. So needless to say, that's not going to go anywhere. And especially that it was already growing before the pandemic, because we were, you know, we needed more meaningful interactions. And those interactions that we had before the pandemic were starting to be less and less meaningful, especially those that were happening through any kind of virtual channels. So obviously. You know, all of that makes us more engaged, more ingrained in those local communities and that commitment, therefore that we give to those local communities is something that also keeps us in that strong relationship with them.

Colin: But how have consumers felt about shopping local? Will their lockdown loyalty remain post-pandemic?

Vox pop: The smaller shops have become more adaptable. A lot of them have looked at other ways of,  providing their customers. 
Vox pop: This is the first time we've been out in over a year. So teenage daughters, well, they're like on fire with having saved a small amount of money in lockdown - now spreading it and supporting local shopping.

Colin: Even though there were a few silver linings to be had from the pandemic and various lockdowns, the negative impacts were almost overwhelming.
After months of daily reporting on death tolls and infection rates, these fears won't disappear overnight.

And that's something that Kate believes will make consumers think twice before heading back to their favourite shops.

Kate Nightingale: It's not going to go straight away. When I'm looking at kind of how consumers are behaving now and predicting what is going to happen, the idea of consumer trade-offs is something that's very strong over here. So normally our trade-off is ,  should I buy the product of my favorite colour? Or should I buy the one that's cheaper? And that's okay. But another trade-off is ,  should I go to that store, that restaurant and potentially get killed? Or should I not? So, you know, so what is kind of important?  What do we put a higher value on? But it's not really kind of asking ourselves   what that customer really, actually wants to do or how they want to sort of continue behaving, but asking ourselves as brand leaders to basically create conditions where there is more value on the customer returning to the store, or, you know, going to their website and buying something than a risk of potential health threats, right? Now, there's obviously lots of different tactics that we can use for that. But it's about  diminishing the perception of risk and increasing the perception of value of, you know, of the more positive trade-off right.

Colin: Looking beyond the pandemic then, safety seems to be the name of the game if retailers want to strengthen their customer base and entice shoppers back.

Our report also confirmed safety would be one of the biggest worries for shoppers. 57% of consumers said they'd now be concerned about being in close proximity to strangers.

This means that businesses will need to do more than just keep a bottle of hand sanitizer by their doors to get customers feeling comfortable again.

Kate Nightingale: Another thing is to ensure that we provide a holistic understanding of sense of safety and we sort of adapt to it. So the trouble with, you know, with current understanding of sense of safety amongst consumer brands is thinking that we need to put gels on and, you know, and say that we're cleaning our products daily or whatever. That's not good enough because our sense of safety is directly related to our sense of control and directly related to our overall wellbeing. Therefore it has huge psychological and emotional components to it. And obviously increasing sense of control is one of those things that we can do to enhance sense of safety. ,  Intimacy and building trust is another thing that we can do, but we can even do smaller things like, you know, change the lighting for slightly warmer one, especially in a physical stores or even in our imagery, you know, slightly kind of , focus on our warmer colors of the brand. Change the language that we are using to be more conversational and slightly more emotive and empathetic. All of those things are naturally enhancing our sense of safety.

Colin: With an idea of how shoppers’ attitudes and priorities have changed over the past year -  we thought we’d take a closer look at one consumer market in particular.

Chinese shoppers have always represented a huge opportunity for UK businesses. And this goes far beyond tourism.

We spoke with Domenica Di Lieto, CEO of Emerging Communications and expert in Chinese consumers, to find out about the growing market of Chinese consumers living in the UK and the importance of understanding their specific needs.

Domenica Di Lieto: Before Covid hit in the UK, so let's just look at 2019, typically you could break down the Chinese market into three. The first market being inbound Chinese tourism, which predominantly in 2019 is largely made up of independent travelers from China coming over to the UK to come on holiday. Also, the other two segments of note, one of which is very important and still is, is Chinese students. And the third segment, which a lot of brands don't think about is those that are now graduated, have been living here a while, they might be have families here. So there's three, there's the domicile Chinese market, the student market and the tourism market. In terms of sheer size tourism, absolutely huge, ,  huge in terms of, not just scale of numbers ,  but also the amount of expenditures. But it tended to be quite concentrated around the summer and around Chinese new year. Whereas the second most important segment has actually grown since COVID, so that is the Chinese student market. We have seen the biggest influx of Chinese students. So it's up 24% from previous years. And I would say this to anybody out there; this is a massive opportunity. It's a, it's a bigger opportunity than tourism market. They're going to be here longer. They're going to become a brand advocate. They're going to tell their friends and families about the brand. They're going to spend more money. So the Chinese student market is now going to be probably the biggest opportunity for brands in 2021, 2022. And then, of course, you've got domiciled Chinese working and living in the UK.

Colin: With a growing number of tourists just waiting to come to the UK and with many more already resident in the country, Chinese consumers are a captive audience for British businesses.

But brands can't just sit back and wait for them to appear.

Like any consumer group, they need to be engaged with authentic messages. And, critically, they need to be assured that their shopping and dining experiences will be safe.

Domenica Di Lieto: So what should retailers, travel, hospitality, destinations do? The first thing is not stay quiet. In all honesty, I'm quite amazed at how many brands have just gone completely quiet and gone "there's no tourism, we won't do anything in China." Brands don't really seem to understand that they're still researching. They're deciding where they're going to go. They've had so much time at home and China is back to normal and they're just waiting to be allowed to go to Europe to go on holiday, so the first thing is to make sure you're engaging with them and telling them why they should come and visit your destination or your hotel or why they should shop with you. Secondly, make it authentic. So many brands are just thinking, I'm going to instruct to local agency in China and I'm going to spend money on a key opinion leader without it being relevant, without creating the content thinking about what you're saying. And it just sounds contrived. So authentic conversations with your customers in China. And the third thing is know who those customers are. Some of the most successful campaigns I've seen recently domestically in China, and we need to mirror that here, have really focused on how safe they are. So in other words, what COVID precautions they've got in place. That could be airports that could be hotels that could be retail. What they're doing to keep their customers safe. What they'll do if, God forbid, you do get COVID and you need to be looked after - the pastoral care side of it. That is absolutely almost like a hygiene factor that brands need to be doing. Forget about going over the top with the brand experience. That's an absolute must have both now and when you're engaging with other students who are already here or with tourists when they come over here. And so that sense of safety is going to be critical. And that would be after vaccines as well that it's not going to go away.

Colin: Working out what to say is only part of the solution though.

Communicating it to the right people is the real challenge.

And unless you have Disney-like marketing budgets at your disposal, running international TV ads will be impossible.

But retailers don't need to rely on such massive and costly marketing campaigns anymore because for Chinese consumers, social media is king.

Domenica Di Lieto: Social media is critical for any decision making in China, especially when it comes to travel decisions. They have equivalents of TripAdvisor. They have equivalents of Facebook. They have equivalents of Insta. So using social media very much to have a dialogue to create stories around how your brand is dealing with COVID-19 over here in the UK and how they can feel safe as customers. And it depends on your brand. If you're a very elevated luxury brand, you're not going to use a cartoon-esque type creative treatments. So we've done that with some luxury brands, such as hotel brands via video. Actually showing exactly what they've got in place. And if you are sort of mid-market and you're aiming, and at the student market, you can be a bit more comical about it. But essentially what you're saying is you're going to be safe when you're with us and we're going to look after you. But to wait until the borders open is the biggest mistake brands can make. When we're allowed to accept business here, it's going to be a very, very quick shift. We're then going to see a lot of tourism come here from having had none for 14, 18 months. Those brands that have been engaging and using it as an opportunity to build up relationships with these potential customers are the ones that are going to win.

Colin: Getting your brand message to the right people is also something that Thomas Evald, senior vice president of strategy and business development at Joe & The Juice values.

And for him, that means treating consumers not as one entity, but a group of individuals to make sure your communications are engaged with, not ignored.

Thomas Evald: I think in general, you know, people have different demands, they have different ways of using your brand and they have different requests. And what we see with, with generic marketing is a lot of people ,  you know, feel that they're not getting the right messages. So I think, you know, building segments and really treating each customer type different is, is super, super important and it makes people want to listen to what you're saying to them because it's relevant to them. So I think, you know, the world is really moving away from the very generic to the, to the customised.

Colin: But Joe & The Juice doesn't just rely on the usual social media channels to communicate its brand messages to its customers.

Using the Joe app, customers can pre-order food, pay in-app, and even collect loyalty rewards.

But as well as this, the team have developed a dynamic customer journey that presents users with relevant marketing information based on how frequently they use the app.

The result? High app-adoption and lots of loyal customers.

Thomas Evald: So I think in general, we're extremely proud of to see what the larger app has created and what we are so happy about is both, you know, the data showing it. So the frequency is going up. People are coming more, but also when we ask, you know, we just did a survey, you can through the app, you know, where we can now talk to our customers, and we see, you know, the hype where people are writing us 'Oh, I made it to yellow, gold. I made it to pink diamond.' So it's really becoming an emotional thing to have these tier levels. So I believe both from a data point, but also from an emotional brand point, we've really, we really have a strong position now in, in the brand.

Colin: As we've already found out from Kate and Domenica, keeping consumers happy post-pandemic is going to rely on making people feel safe.
And this is something Joe and the Juice focused on heavily in the early days of lockdown.  

Thomas Evald: We took the decision that we wanted to keep open because we believe that it was an important thing to serve healthy food to people, especially also in a pandemic, and that we were actually essential to people to have a way of getting to, to eat. So we kept open, but the requirements was basically, you could not walk into the store and order. So,  we had to close down the point of sale in the store and you can only order on the app. And what we did was we put a QR code in the, in the window, so everybody knew, you know, saying only order with the app, keep distance and so on. So people were lining up outside, they were downloading the app through the QR code. When they were then ordering the personnel were doing the orders in the store, and then they will leave in the orders by a table in the window. And then the customers could grab the food when the employee was, was walked away. So you never had any integration between the customers and the juicers. We then work further on that to, to build what we call the app pickup, which is basically ,  a wall in the stores. So if you order on the app pre-order, we will put the products on this wall and then you're not interfering with the people ordering in the store or sitting in the store. So you can go in, grab your stuff, go out without communicating with people, but also no interaction with people. So if you're afraid of COVID or you're just busy or whatever, you can basically come in without any, any physical interaction with, with our staff. 

Colin: Going the extra mile to make customers feel safe is meeting a real need. Adyen’s research found that 49% of UK consumers want brands to reduce person-to-person contact. 

This also encompasses payments, with 59% concerned about the hygiene of payment terminals and preferring contactless payment methods.

So, you’re communicating the right messaging to the right consumers, and making them feel safe. But what can you then do to ensure these customers stay with you for the long-term?

A great way of nurturing loyalty is by offering loyalty rewards. Just make sure it’s clear what you’re offering! 

Vox pop: I have got Morrisons, Tescos, TK Maxx. It's just a bonus at the end of it, by spending money with them
Vox pop: You don't often know what you actually get with the loyalty program. So  I have a few and sometimes I'm just like, what is this card even for? 'Cause they don't really clearly tell you. You just sort of get signed up for one at the checkout and use it occasionally.
Vox pop: The main thing - I'd want some discount. I'm just not very good with them. I never have them in my wallet when I need them. 

Colin: But easy-to-lose plastic loyalty cards or stamp cards are a thing of the past. Modern consumers want hassle-free loyalty points and that is where payment-linked loyalty comes in. 

But what is payment-linked loyalty?

Here to tell us more is head of retail and hospitality solutions at Adyen, Jan-Pieter Lips. 

Jan-Pieter Lips: The main purpose of a loyalty program for a retailer is to identify transactions. So it's basically asking customers to identify themselves with a plastic loyalty card, maybe they ask for your email address, maybe they ask you to scan a QR code. But straight after that, you're also asked to make a payment and that's also an act of identification. So really we are being asked to identify ourselves twice. Now with payment-linked loyalty is to combine those things. And to make sure that people's identity or loyalty ID is actually combined with our payment credentials. And it basically means you turn a payment card into a loyalty card. So it's much easier, much quicker. It's easier for the consumer because they don't need to jump through hoops. It's easier for staff because they don't have to spend time on asking people, email addresses, or to show a card. And for the merchant, for the retailer, it means they get more data.

Colin: In fact, 63% of consumers would be more likely to choose retailers that use this loyalty technique as David Wynne, CEO of digital transformation experts, Red Badger explains. 

David Wynne: I think you get experiences that just felt a bit broken. So, plenty of supermarkets where you want to go in and use your loyalty program and you go to the self checkout,  pay with your mobile phone using contactless, and then you still have to pull out a card and scan a barcode to get your loyalty points, your free cup of coffee, or whatever, feels like a very broken experience. And that's very unfortunate. I think other brands now are just starting to put loyalty into digital wallet as well. So, we've done a lot of work with Nando's building out their digital loyalty card which operates in your Apple wallet or, or your mobile wallet ,  in exactly the same way that your payment card does. So that's a great example where you've got one device that you can be paying and get your loyalty card in one place. And all of your chili points in that case, getting a push notifications, telling you when your next free meal is coming is a great seamless experience.

Colin: And as well as making it easier to sign up for loyalty schemes, offering payment-linked loyalty programs makes the omni-channel experience easier too by automatically adding on points whether you shop in-store or online.

David Wynne: So, there's actually a whole range of seamless experiences now, whether you're ordering at the table in the restaurant via your mobile phone, or home via mobile phone, or coming in to collect and paying and collecting your chili points via mobile phone as well is all one seamless customer experience. And I think that's what digital is about - is giving you that brand experience it's across all of your touch points, regardless of whether that's in store physically, online with your mobile or a combination of those two things as is increasingly the case.

Colin: And we'll hear more from David in the next episode of Retail Reawakened as we dive further into Ecommerce and the customer experience.
However, payment-linked loyalty relies on consumers sharing data with their favourite retailers, which many might think would dissuade them.

But according to Jan-Pieter, that's simply not the case.

Jan-Pieter Lips: Consumers don't mind sharing data, but what's really important when data is used in a personal way is that it's transparent, so people need to understand what's going on. So for example ,  sending them a notification when they've been identified ,  with a loyalty transaction with their payment cards ,  or just being very clear in how the program works. You need to give customers control, which means getting them to opt in, but also give them the opportunity to opt out. And there needs to be a benefit. So there needs to be something in it for the, for the consumer. And that's, that's the best way of dealing with the data.

Colin: Consumers might be happy to share data, but as we've heard, safety is going to be a priority moving forward.

However, Jan-Pieter says payment-linked loyalty is secure and safe.

Jan-Pieter Lips: It's really important, never to store actual payments data. So if you look at your credit card, your debit card, the long number on there, that is super, super sensitive. And if companies were to store that and somebody steals it, they can use it to make a payment. And this is why payments data has historically not really been used for insights because you don't want to put it as an identifier in the marketing system. But now we have tokens. And tokens are basically a long number that's uniquely linked to a payment card or somebody's payments account, but you can't use it for payments. So if somebody steals it, it's absolutely worthless. And that's the best way of protecting your data.

Colin: So payment-linked loyalty is easy, quick, safe and, most importantly, it's wanted by consumers.

And as Quirijn Meulenberg, data expert at Adyen, tells us making your loyalty scheme as seamless as possible is another way to boost a brand’s reputation.

Quirjin Meulenberg: Payment-linked loyalty, I think, is something that customers have expressed that they want for a quite a while now. And it's becoming more and more of an attainable goal for a larger population of merchants. If you make the loyalty an integral part of just making a regular payment, your recognition goes up, your shoppers basically use that loyalty program more so they're reaping the benefits of the loyalty program, right? So the more they use it, the more they can reap the benefits of it, the better it is for you as well, because you're maintaining your loyal shopper base and rewarding them.

Colin: Making loyalty programs run effortlessly alongside ordinary transactions makes the system more attractive to consumers. They'll be able to save money and time without the need to rummage for loyalty cards at the cash desk.
And seamless loyalty integration alongside practical efforts to ensure customer safety both physically and financially will be crucial.

But what’s important to remember is that these measures shouldn’t be temporary.

Over 62% of shoppers have said that their expectations of retailers have increased now they've seen how brands were able to adapt during the past lockdowns.

So simply offering loyalty cards and hand sanitizing stations won't be enough to encourage new customers or keep current customers loyal.

As the country reopens, businesses will need to think beyond loyalty schemes and safety measures - they'll need to consider the entire customer experience end-to-end.

Tony Longhurst: There's no rocket science. It's a genuine understanding of your customer and how they want to experience you and your products. So. Getting a sense of the market and realizing that all of your customers are going to be different. There are kind of typical customers, but the diversity is enormous.

Colin: That’s next time on Retail Reawakened

You’ve been listening to Retail Reawakened, I’m your host Colin Neil.
If you want to find out more about payment-linked loyalty, head over to adyen.com/ukretailreport and download Adyen’s latest research.

A big thanks to Kate Nightingale, Tony Longhurst, Thomas Evald, Domenica Di Lieto, Quirijn Meulenberg, David Wynne and Jan-Pieter Lips, for their contributions today.

And join us next time as we explore the importance of customer experience. We'll examine why retailers need to focus on their online user journeys as well as their in-store customer experience and we'll look to the future to see what the high street of tomorrow could look like.

I’ll see you then!

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