Retail
Loyalty Movement Report: Retail
Loyalty Movement Report: Retail
Introduction
In our previous report, Redefining Customer Loyalty, Cardlytics defined loyalty as a consumer’s preference for a merchant over its competitors, analysing spending across six industries to measure customer loyalty and spending patterns with both loyal and non-loyal customers.
But customer behavior isn’t fixed - customers shift between loyalty segments over time. Understanding these shifts helps identify churn and informs strategies to nurture relationships and move customers to higher loyalty segments. In our UK Loyalty Movement Report, we dive into customer behavior in the Retail category to better understand engagement over time by analyzing more than £245 billion in consumer spend behavior.*
Retail Category Loyal Customers
On average, 64% of a merchant’s customers are not actually loyal. But the loyal segment has a much higher share of wallet (79%) than a not loyal segment (21%).
Top Customers (top 20% of most frequent transactors) show a strong uptick as loyal vs not loyal customers. But the loyal customer segment shows more than 3x higher share of wallet.
Findings
We looked into purchase data across Retail in the UK over the last 8 quarters (Q1-23 through Q4-24) on a quarter by quarter basis to see whether even the “most loyal” customers showed changes in their purchase behavior.
Retail Loyalty Movement
Overall, quarter over quarter, 25% of customers tend to remain in their existing segments while 37.2% increase or decrease their loyalty to a merchant. Yet there is much more extensive customer loyalty movement within the “not loyal” segments.
Segment movement
The Tied segment (part of the Not Loyal group) demonstrates the most volatility — with just 7% remaining stable and 29% moving up and 29% moving down into other segments.
Retail Leaky Bucket
Retail brands are acquiring new customers yet even more existing customers are moving into the lapsed tier. This cycle can be reversed by continuing to nurture existing customers.
Diving deeper into the individual segments tells us:
- Loyal customers and those that Prefer the competition are the most stable segments, with 38% and 42% respectively staying in the same category from one
quarter to the next. This indicates a strong commitment to brand preference — whether for your brand or a competitor's. - Customers in the Tied segment exhibit the highest level of movement, with just 7% remaining Tied quarter-over-quarter. These shoppers are the most susceptible to influence and represent a key opportunity for brands aiming to tip the scales in their favour.
- Interestingly, Loyal customers still show a 25% lapsed rate, which is comparable to the Tied segment’s 36% lapsed rate. This suggests that attrition among Loyal customers may not be driven by brand disengagement, but rather by natural gaps in purchase cycles — for example, customers who buy apparel less frequently.
Definitions of Customer Segments
Loyal Customers:
- Loyal: Only shop with a specific brand, or have the highest share of wallet with a given brand and relative rank is lower than all other brands in consideration set
Not Loyal Customers:
- Tied: Similar relative ranks to 2 or more brands regardless of share of wallet ranking
- Prefer: Lower share of wallet and higher rank than other brands in their consideration set
- Lapsed: Shopped historically but do not shop currently, as defined by the analysis time period
- New: Shop currently but have not shopped historically, as defined by the analysis time period
Takeaways
Marketers know it’s more costly to acquire or re-acquire customers than to keep existing ones engaged. When brands neglect current customers, they risk losing them and undoing past investment yet the reasons why a customer might “lapse” is different depending upon their loyalty tier. Loyalty is fragile and demands ongoing effort as competition is always close by. To stay top of mind, marketers must continuously nurture relationships, understand customer needs, and offer seamless experiences. To foster loyalty with your customers, consider these recommendations:
- Use an “always on” strategy to keep customers engaged, regardless of purchase
frequency. - Regularly update/refine customer segments and adjust reward offers to keep
them engaged. - Use targeted campaigns to boost loyalty and revenue.
Cardlytics can deliver a comprehensive Customer Loyalty Analysis with insights into customer behavior and movement across defined loyalty segments. Contact us for more details.