If retailers want to drive revenues, they need to get more “emotional.”
Tapping into consumer emotions have the strongest impact in driving loyalty, according to a new study from Capgemini. Retailers that can foster higher emotional engagement with consumers could potentially increase annual revenues by 5%, according to the report, “Loyalty Deciphered — How Emotions Drive Genuine Engagement.”
Yet, a stark disconnect remains between executives and consumers when it comes to how well organizations are making emotional connections. Eighty percent of executives feel their brand understands the needs and desires of their consumers, only 15% of consumers agree.
As emotions become a key driver of loyalty, it proves that current loyalty approaches are broken. An earlier Capgemini report found that 28% of consumers are abandoning loyalty programs without redeeming any points, and over half (54%) of loyalty memberships are inactive. One key reason is that many of today's loyalty programs attempt to buy consumer loyalty through monetary rewards only.
Emotional engagement, specifically, honesty and trust, trumps rational factors and brand values when consumer choose where to shop. Eighty two percent of consumers with high emotional engagement would always buy the brand they are loyal to when making purchasing decisions, compared to 38% of consumers with low emotional engagement. In addition, 81% of emotionally connected consumers will not only promote the brand among their family and friends, but they will also spend more. In fact, 70% of consumers with a high emotional engagement spend up to twice as much with those brands.
Emotionally engaged consumers are loyal to the brands they love and willingly act as ambassadors to family and friends. They want brands to be engaged and reciprocate their loyalty in two-way interactions (86%), but they also enjoy giving back to a brand (81%). Consumers also want differentiated shopping experiences both online (75%) and in-store (73%).
"Consumers are immune to transaction-based loyalty programs of the past, so a retailer's engagement with consumers needs to shift from being transactional to more emotional and meaningful,” said Kees Jacobs, Consumer Goods & Retail Lead, Insights & Data Global Practice at Capgemini.
Females and males equally represent emotionally engaged consumers, but millennials (58%, aged 18-36) and consumers in urban locations (53%) comprise the largest proportion. Italy (65%) and Brazil (57%) have the most highly emotionally engaged consumers followed by U.S. (56%) and Spain (51%).