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Sustainable loyalty programs amid changing customers expectations

As environmental issues become impossible to ignore, demographics shift and customer expectations change, implementing sustainability is gradually becoming a core practice in the world of loyalty.

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Izabela Grochowska
‍Content Manager
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The relationship between sustainability and loyalty is somewhat understated. For years, the concept seemed to be used either in niche circles or as a convenient buzzword for companies to use to appear progressive.

However, this is changing. With the effects of the pandemic lingering, leaving their mark on consumer expectations, and demographic changes transforming the business landscape, sustainability is finally coming into its own. Volumes of research point to today’s buyers increasingly basing their purchase decisions and loyalty on company values, with sustainability being the key one.

These changes aren’t falling on deaf ears and many businesses are now incorporating environmentally friendly practices into their strategies and operational practices, and - most importantly - their loyalty propositions. As such, countless loyalty programs have been updated to ensure sustainability is being promoted.

Below, we take a look at the strengthening relationship between sustainable practices and loyalty, and examine the impact implementing them has on customer relationships and loyalty program success. We also go over some key examples of brands who have committed to waving the green flag.

Sustainability meets customer loyalty

Sustainability in the context of the loyalty ecosystem can be viewed through a number of different lens. The most fundamental way of looking at the concept is through that of customer loyalty, particularly the proven impact of brands engaging with green causes on customer engagement.

Now more than ever, we’re seeing values-motivated consumerism rise to the fore, as increasing numbers of consumers are compelled by their values when deciding what brands to do business with. Whether it be the environment, gender equality or racial justice, today’s buyers are ever so vocal about the values they deem important, not shying away from chastising and boycotting the brands they see as failing to do the right thing.

While the phenomenon of values-based buying is often thought to have gained traction as a result of the pandemic - which placed businesses under greater scrutiny - there are many factors that have come together to make sustainability a core concern among today’s consumers. Changing demographics are particularly significant.

According to research conducted by Rare Consulting, sustainability is a core concern for consumers when it comes to staying loyal to a brand.
According to research conducted by Rare Consulting, sustainability is a core concern for consumers when it comes to staying loyal to a brand. (Source)

According to a report by Nielsen, 66% of consumers globally are willing to pay extra for goods and services provided they come from businesses committed to sustainability. For Millennials, that number is higher, with as many as 73% of them basing their purchase decisions on sustainability factors.

Millennials and Gen Z see sustainability as a critical component of a business’ MO rather than a PR gimmick. For that reason, it’s also fast becoming a core purchase criteria that will see companies ambivalent about sustainability fall out of favor, with those taking an active stance likely to benefit.

As it stands, we are currently going through a shift in purchasing power, as Millennials and Gen Z take over from the previous generations as the world’s most influential consumers. While Millennials are coming into their prime spending years, Gen Z are proving to themselves to be the most financially savvy generation. The dominance of these two groups is only expected to grow, as the biggest intergenerational wealth transfer in history is currently taking place and $30 trillion dollars is set to be passed down from Baby Boomers to Millennials over the next few decades.

Given the above, and the fact that Millennials and Gen Z are proven to be more socially conscious than their parents and grandparents, any business looking to be successful not just today but in the future will need to contend with the rapidly changing face of their customer demographics and thus their preferences. In order to attract and retain customers, and build lasting relationships with them, embedding sustainability into the business model and corporate governance will be the cornerstone of customer loyalty.

Benefits of becoming a sustainable business

Even so, committing to sustainability is far more than a way to reel customers in and get them to engage with our products and services. Getting serious about it carries with it secondary benefits that have the potential to take the business to new heights alongside enjoying a loyal customer base.

McKinsey has found that sustainable business practices can reduce operational costs by up to 60%. Expenses such as water, carbon, raw materials are likely to become less of a burden on the business, allowing it to further profit from sustainability. McKinsey has also found there to be significant correlation between resource efficiency and financial performance, which makes sense given that operational costs eat into a business’ hard-earned revenue and decrease profit margins. What’s more, keeping track of resource use and demonstrating vigilance in how it is used/environmentally friendly stance can also lead to improved relationships with regulators, in addition to subsidies and tax incentives.

Another important benefit of implementing sustainability has to do with talent. Now more than ever, businesses understand the importance of talent versus short-term profit. After all, it is the people who make any kind of profit possible in the first place. Though the link between talent and sustainability may not be an obvious one, the two actually have a lot in common.

A business’ ability to attract, retain and engage talent is very often highly dependent on its sustainability stance. Given that Millennials are set to dominate the global workforce, this is not surprising. According to research by Fast Company, 40% of Millennials have said to have gone with a job due to the employer’s sustainability over the alternative. At the same time, 10% said they they’d be willing to take a pay cut to work for a sustainable company. While other surveys on the subject have often ended up with even higher numbers, the message is clear: sustainability is important to today’s workers.

Sustainable loyalty programs

Now that we’ve examined the multifaceted impact of sustainability, such as their significance in appealing to today’s increasingly values-motivated buyers; weathering the demographical changes that are upon us; as well as its benefits regarding other aspects of business operations, it’s time to explore the relationship between sustainability and the loyalty industry. What role do sustainable practices play in a loyalty program’s success and how can loyalty programs promote sustainable and environmentally friendly behaviors?

Although coverage of sustainability vis a vis loyalty programs remains scarce, recent research commissioned by YouGov in partnership with Mando-Connect helps shed some light on consumer attitudes and expectations with regards to the matter. The most telling piece of data that emerged from the study was that as many as 71% of British adults expect loyalty programs to promote sustainable causes and help people live in a way that is kinder to the environment.

Now, considering the wealth of research that points to consumers’ rising preference for sustainable products and services in addition to the belief that loyalty programs have an important role to play in promoting eco-friendliness, you might be wondering how you can go about implementing sustainability into your own loyalty offerings.

The good news is that there are many different ways you can embed sustainability in your loyalty strategy, and make sure you appeal to all of your customer segments. Below we take a look at some key tactics you can utilize in order to do so, as recommended by YouGov’s research.

  1. Rewarding sustainable behavior
  2. Rewards designed to help members live more sustainably
  3. Directly supporting environmental causes
  4. Partnering with brands that also care about sustainable causes
  5. Go 100% digital with your loyalty cards
  6. Offsetting carbon footprint
  7. Educate members about living sustainably
  8. Provide platform for members to discuss environmental and sustainable causes

Examples of sustainable loyalty programs

Costa Coffee

Costa’s loyalty program changed quite a bit following the pandemic. Though the coffee chain was the first in the industry to introduce points as a means of rewarding customers and saw huge returns on their loyalty investments, Costa felt it needed a refresh. With the coffee space becoming ever so crowded, points were no longer enough to appeal to the majority of customers.

That’s why in recent years the chain decided to take on board the results of its consumer research and give customers what they truly wanted. That is a simple loyalty proposition, a beautifully designed app and a greater emphasis on issues that went beyond the transactional and that were near and dear to their customer base’s hearts: sustainable causes.

While Costa had previously taken part in initiatives such as sustainable cup design, recycling, and using used coffee grounds as fuel for their stoves, these initiatives were never overtly integrated into their loyalty offerings. In comparison, their revamped loyalty program offers perks designed to reward sustainable behaviors among its customers, i.e. receiving a free cup of coffee faster when using a reusable cup (by buying four cups of coffee as opposed to eight).

Costa made sustainability a key part of their revised loyalty proposition, rewarding members using reusable cups with free coffee after just four cups (as opposed to eight).
Costa made sustainability a key part of their revised loyalty proposition, rewarding members using reusable cups with free coffee after just four cups (as opposed to eight).

Although this may seem like a small change, its impact has been significant. Not only is Costa enjoying increased sales and engagement with its loyalty scheme, but its data shows that customers have really taken to their sustainability offering, with those members using reusable cups visiting the store more often and spending more.

Regarding the coffee chain’s sustainability efforts, Jon Fisher, Head of Digital UK at Costa, stated that:

We hope that other businesses will be inspired by such actions to make changes to their own practices. As they do, we are sure that behaviours like bringing a reusable cup into the store will become the new normal. And to make this kind of change happen more quickly, we remain open-minded to the possibility of working collaboratively with businesses within our sector and beyond. At the same time, we continue to roll out other sustainable initiatives that we hope will be equally as successful.

Given that Costa was the first major coffee chain to introduce a loyalty scheme in the past decade, its commitment to being environmentally friendly sets a good example for others in the industry to follow.

Patagonia

Patagonia is an American retailer of outdoor clothing founded in 1973 in California. With hundreds of stores globally and a unique business model, the brand is a great example of how customer loyalty and advocacy can be built through shared values.

After all, few brands demonstrate such an unwavering commitment to its values - with sustainability being the core one - in everything they do. From marketing campaigns which encourage people to repair their Patagonia products in store instead of buying new ones, to going as far as suing Donald Trump for withdrawing protect status of 2 million acres of Utah land, the company has never shied away from taking a stance in the name of sustainability.

Patagonia’s “Don’t Buy This Jacket” marketing campaign encouraging shoppers to repair, reuse and recycle rather than purchase new items of clothing. The campaign led to a 30% spike in sales.
Patagonia’s “Don’t Buy This Jacket” marketing campaign encouraging shoppers to repair, reuse and recycle rather than purchase new items of clothing. The campaign led to a 30% spike in sales.

Some key actions that the retailer takes as part of its commitment to being environmentally friendly are:

  • Raising awareness of environmental causes and educating shoppers on ways to live more sustainably
  • Giving consumers the option to trade in their old clothing for credit toward their next purchase
  • Creating Fair Trade certified clothing
  • Supporting grassroots groups in battling climate change - Patagonia donated $100 million since its inception
  • Joining the “1% for the Planet” alliance, whereby 1% of the company’s annual sales goes towards preservation efforts

What makes Patagonia such a compelling example of the relationship between sustainability and loyalty is the fact that the brand goes beyond points. While it does offer some perks to enable consumers to be kind to the environment, it shows how loyalty programs can evolve from the purely transactional to a system where loyalty is more about forming a personal and like-minded relationship in which customers feel seen, known and understood.

With personalization now a hot topic, we can see that consumers want more out of the relationships they have with companies they do business with, and brand values are increasingly becoming the differentiating factor between competing brands.

Madewell

Madewell is another clothing retailer dedicated to social responsibility and doing business in a way that is sustainable. The company is involved in a wide range of programs and pledges aimed at minimizing their environmental impact at every stage of their operations.

A list of sustainable programs Madewell is involved in to offset its environmental impact.
A list of sustainable programs Madewell is involved in to offset its environmental impact.

Madewell believes in sharing their values with their customers and enabling them to do their part, too. That’s why the brand encourages its members to take part in a denim recycling program, of which Madewell is part of, with the goal of using its jeans to make housing insulation.

In order to take part, all customers have to do is donate their old jeans as opposed to throwing them away. In return, Madewell offers them a $20 discount on a new pair. Considering that the fashion industry is one of the worst offenders in terms of polluting the environment - contributing 2-10% of global carbon emissions - raising awareness of ways to offset that impact is critical.

Madewell is another great example of a fashion retailer taking accountability for their environmental impact and using its loyalty scheme to enable consumers to do so as well.

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There are many other examples of businesses across countless industries taking a look at what they can do for the environment. For example, in the beauty industry, Kiehl’s, Shiseido and others now give consumers the opportunity to recycle their cosmetics containers and either get a reward in the form of complimentary beauty products or a discount on subsequent purchases.

In recent years, Shiseido has committed to being more environmentally friendly, by introducing sustainable packaging.
In recent years, Shiseido has committed to being more environmentally friendly, by introducing sustainable packaging.

Across the aviation industry also, airlines are actively researching ways to offset their environmental impact through the use of their loyalty schemes. Etihad Airways, for example, rewards their customers in app for carrying less luggage. Most airlines now also give their program members the chance to donate their air miles to sustainable causes. This shows that even an industry almost synonymous with heavy carbon footprint can work “green” concerns into their loyalty offerings, helping the environment and also appealing to their customer base.

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