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Loyalty Matters More Than Ever In Today’s Market
Source: McKinsey & Company
According to a 2020 McKinsey & Company survey, 73% of consumers tried a different brand as the pandemic took hold. Backing this data up, PwC says 50% of people switched brands in 2020, with 65% saying they’ll stay loyal to their new selection.
Inflation has helped intensify this trend.
Through August 2021, 70% of consumers switched to a new or different brand than they used pre-pandemic.
How Can Companies Keep Customers Loyal?
A December 2021 survey by eCommerce marketer Yotpo reveals that 69% of consumers consider loyalty programs the primary perk brands can provide to keep them loyal.
We expand on this, alongside an idea, in today’s main story.
Between the chance of another COVID wave, inflation, rising interest rates, a housing crisis and the potential for a recession by 2023, it can be confusing, if not intimidating to decide where to put your money.
So don’t simply buy what you know, buy names you see yourself and others being loyal to during this period of almost unprecedented fickleness and beyond.
If this uncertainty portends another economic shock, it’s these stocks where you’ll likely feel confident to add to your position on downside. Probably temporary downside triggered by the type of overreaction we’ve seen in the market for as long as we’ve been alive.
Starbucks’ Coffee Stinks, But I’m Addicted To It Anyway
Howard Schultz retakes the lead at Starbucks today as CEO Kevin Johnson has clocked in for the final time.
While most of us would be lucky to get a month’s severance when we leave a gig, Johnson’s most recent stock sales generated more than $43.2 million.
Now something most of the rest of us probably have in common.
I drink coffee everyday. First thing in the morning at home. No fail.
Then, on most days, I hit the street and have another cup.
I can’t stand most of the coffee at Starbucks. It goes right through me. However, I can stomach and kinda like its nitro cold brew. So there’s this…
My rewards balance in the Starbucks app. I’m loyal to a brand whose product I don’t even like that much. And whose store sits literal steps away from three other arguably better coffee shops on the shopping street near where I live.
Why am I so loyal?
Call me a sucker, but Starbucks got me with the gamification of its app.
Visit multiple times within a few days or add a pastry to that cold brew order – earn bonus points.
Yes, as a proud Gen Xer, I’m falling for this millennial shit.
Imagine Being This Loyal AND Liking Their Coffee
Throughout the first half of 2021, an average of 21% of Starbucks’ customers made return visits within three days. Ten percent came back within a day. And, most importantly, just 1% of these Starbucks’ guests were spotted at another coffee shop in the interim.
Source: Gravy Analytics
Starbucks’ own data backs this up.
Active Starbucks’ Rewards members were up 21% between 2020 and 2021 to 26.4 million. The company added 1.6 million new active members in Q1/2022 alone, with 53% of all rewards members driving sales in the U.S.
In China, where the company now has more than 5,500 stores, rewards members total 18 million. But here’s the kicker – that’s a 2.6 million annual increase (impressive even without a pandemic). And those loyal Chinese customers account for 75% of sales in the country.
Starbucks’ Reward members visit the company’s stores three times more than nonmembers.
Starbucks Prepared For The Pandemic More Than A Decade Ago
Granted, the word pandemic probably never left Schultz’s lips at the time. However, he made key digital and mobile hires in 2008 (Stephen Gillett) and 2009 (Adam Brotman) to build the company’s app and reward program.
Between the launch of the app in January 2011 and late 2012, Starbucks recorded 100 million mobile transactions. In 2021, the company said mobile transactions accounted for 26% of U.S. orders.
The Bottom Line: Only Apple has more mobile payment users than Starbucks.
This should tell you something.
In particular, the Starbucks ecosystem is every bit as sticky as Apple’s. Maybe even more so, given that you can pretty much only do one thing with its app.
Plus, it’s a solid user experience. Simple. Seamless. Order ahead. Walk in or drive through. Grab your drink. Go.
It makes sense people – present company included – are hooked.
From an investment perspective, there are never guarantees. However, if you’re going to hitch your wagon to a consumer-facing stock in today’s environment, your best bet is to go for industry leaders with loyal fan bases
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