What Does it Take to Build Customer Loyalty in Today’s Retail World?
Gaining (and maintaining) customer loyalty can significantly boost revenue for retailers. However, as the needs and demands of today’s consumers change, customer loyalty is not as easy to come by. Research by Access Development reported that 79% of customers would take their business to a competitor within a week of experiencing poor customer service. This equates to an estimated $1.6 trillion in revenue loss due to customers switching brands as a result of poor service.
In the past, offering coupons and discounts was enough to keep customers continuously coming back. Coupons still certainly have their place in the loyalty mix, but today’s retailers must adjust their strategies to focus on the customer journey and customer experience as a whole. From initial point of contact all the way through to after the purchase, retailers must constantly focus on customer retention. And, when done right, retailers can see big payoffs, boosting profits by as much as 20% (Beagle Research Group).
Customer Loyalty Programs Generate 12% – 18% More Revenue for Retailers
Customer loyalty programs are still big business. Members of retailers’ customer loyalty programs generate between 12% – 18% more revenue for retailers than do customers who are not members of the loyalty programs (Accenture Interactive.)
According to the research, “The key areas that retailers focus most on in terms of their loyalty programs are program growth and revenue production metrics – such as membership growth rates (cited by 45% of respondents), share of transactions by members (42%) and number of transactions per year (36%) – as well member value metrics, such as retention rate (40% and customer long-term value (37%).”
Loyalty programs must also evolve in order for brands to stay relevant with consumers. While many retailers think that their loyalty programs are differentiated, consumers think otherwise. Over two-thirds (71%) of retailers surveyed said that their program was differentiated from competitor programs. However, consumer opinions differ on the matter. Approximately one-third of each retailer’s loyalty members cross-shop at another competitor within the same channel, and 44% of consumers believe that it would be easy to replace a retailer’s loyalty program with a competitor’s program.
Get to Know Your Customers – It’s All in the Data
Building customer loyalty means providing an exceptional experience. In order to do this, retailers must really get to know their customers – their likes, dislikes, channel preferences, product preferences, and so forth. This is the age of hyper-personalization. Consumers today expect their favorite brands to collect their personal data and use it to deliver personalized offers.
In a survey by digital marketing agency AgilOne, more than 70% of consumers agreed that they expect personalized experiences with the brands they interact with. Other findings from the report include:
- More than 50% of consumers in the U.S. and UK expected ecommerce sites to remember their past purchases.
- Among U.S. shoppers, the most popular personalized experiences were emails offering discounts on products they previously viewed (66%), alerts when products they like are on sale (57%) and VIP customer appreciation rewards (51%).
- Consumers in the U.S. were generally more likely to expect online retailers to personalize experiences than those in the UK. For example, whereas half of Americans said they would like to receive a new customer welcome greeting, only 34% of UK consumers agreed.
- Millennials, or shoppers aged 18-34, were much more likely to appreciate almost all forms of personalization, with 52% expecting brands to remember their birthdays compared to just 20% of shoppers aged 65 and over.
Personalization of emails is much more popular and well received than personalization of display advertising, with 66% of U.S. consumers and 57% of UK consumers welcoming email retargeting, but only 24% of U.S. consumers and 17% of UK consumers welcoming web-based retargeting.
Tap into the Power of Third-Party Data
Consumers are producing mountains of data. First-party is the foundation of your marketing strategy. This is your internal data that is collected about your customers while you engage with them on channels such as websites, email, mobile applications, and other first-party channels. When a customer enters his or her contact information into a web form and clicks ‘submit’ that information automatically becomes a part of your first-party data. It’s the most valuable because it’s the only data that’s free of cost, and since it’s provided voluntarily by the individual it makes it the safest data also. But, while very important, first-party data is only truly powerful when it’s combined with its data cousin: third-party data.
Third-party is external data available for purchase by data providers who source and aggregate the data into applicable sets that can be applied to your first party data bases. This data is integral to personalizing the customer experience and fostering brand loyalty because it provides hundreds of data elements that no consumer would fill out in a single form. With only a few first-party data elements, third-party data sets can be appended to correct and fill in missing elements such as email addresses, phone numbers, lifestyles, demographics, purchase indicators and more to strengthen your customer insights.
Your internal first party data is the cornerstone of strategic marketing. However, when first party data is used in isolation, marketers only have a partial picture of customers and prospects and cannot fully achieve an integrated customer view to personalize customer interactions and drive future revenues.
Successful retailers who have elevated themselves to brand favorites among their customers know that they must go above and beyond to exceed customer expectations. According to Synchrony Financial’s 2015 Customer Experience and Impact Study, more than half of shoppers say they would pay a higher price for the customer experiences they value most, and 77% of shoppers would in turn be more loyal to brands that provide an exceptional experience.
To learn more great tips and strategies on how to adapt to today’s omnichannel consumer expectations, download our free Retail Marketing Guide.