In an economy that offers consumers a staggering array of choices, cultivating customer loyalty is more challenging than ever. And yet, the enthusiasm around several recent opportunities for consumers to buy shares in their favourite brands show us that loyalty is most definitely not dead.
With its friendly, alliterative brand name, aesthetically pleasing social media presence, and accessible price point, Freddie’s Flowers has built an enthusiastic following across the UK. So when the floral delivery service embarked on a fundraising campaign to support growth, it turned to its 100,000 subscription customers. The offering (aptly named a “flower bond”) delivers returns to investors twice a year, in the form of either flowers or cash. It raised £1 million in just two weeks.
Freddie’s flower bonds suggest that devoted followers of a brand are willing to invest not only emotionally, but also financially to its success. Which begs the question, does offering investment opportunities to mass affluent consumers inspire greater brand loyalty?
A new study from Columbia Business School suggests that it might. Researchers found that among users of a trading app that offered shares of a company’s stock as a reward for shopping with the brand, users’ weekly spending on those brands increased by 40% per week on average. The researchers also observed that familiarity and loyalty were key drivers of spending behavior. And as younger investors enter the market via apps and digital platforms, many look to their favorite brands for investment opportunities.
For tech-savvy customers, investing in the platforms they use on a regular basis can be an attractive opportunity. As the COVID-19 pandemic elevated consumer demand for takeaway food in London, Deliveroo’s underlying gross profit for 2020 increased by a staggering 89.5 per cent over the previous year, according to the company. Despite the company announcing that any customer who placed an order with the service will as eligible to register their interest in applying for shares, its IPO was not straightforward. The brand was heavily hit by criticism of how it treats employees and the impact of users as shareholders remains to be seen.
In the fintech space, London-based PensionBee is also banking on the idea that offering customers a stake in its future growth will drive loyalty. PensionBee is planning to list on the London Stock Exchange later this year. In advance of its IPO, the company is offering customers the chance to become shareholders. PensionBee founder Romina Savova told the Financial Times, “Providing our customers with an opportunity to share in our growth journey has always been a key motivation in our reasons for listing.”
Brands like Freddie’s Flowers and PensionBee present compelling case studies on whether investing opportunities can effectively bolster brand loyalty. This is a particularly intriguing question in the financial services sector, where consumers may not be as inclined to form emotional attachments to brands. Will inviting users to become shareholders strengthen customer relationships? Does a financial investment beget an emotional one? Conversely, could persuading mass affluent consumers to buy a stake in these companies backfire if their performance dips? Time will tell whether or not this strategy causes customer loyalty to bloom.