How do you drive growth in a muddled economy? Kelly Brown explains why customer loyalty is the best path to capture share of wallet, the biggest hurdles to anticipate and how to overcome them.
The modern shopper is calculated, prudent and detached. They expect more from their favourite retailers, demanding consistency across your channels, efficiency from your service and a relationship with your brand.
But with bargain-hunting consumers hopping from source to source, and a retail recession on the horizon amid inventory, pricing and interest rate uncertainty, retailers are looking for new ways to go above and beyond to stand out in a crowded market.
So, it's no surprise that retailers’ most cited growth opportunity for 2024 is strengthening loyalty programmes.
Customer loyalty and retention is the best path to capturing market share and maximising profits because:
Retaining customers costs less than acquiring new ones - customer acquisition costs have increased a whopping 222% in the past decade - and returning customers are more likely to spend than new customers.
As more customers opt out of being tracked, retailers need a persuasive reason for consumers to readily share their details when engaging with different channels or touchpoints.
In return, retailers get a clearer picture of customer activity, behaviours and preferences, and can deliver more personalised and seamless experiences.
However, it’s a challenge to develop engaging loyalty programmes that attract and retain loyal customers while still ensuring you deliver customer value and drive profit margins.
Here are the four biggest challenges retailers face as they build customer loyalty and how to overcome them:
1. Creating a customer service mentality
One of the most significant shifts that retailers must take to retain customers is creating a strategy and culture that thinks about how to best serve them.
It’s about investing in the things that make their customers happy. It’s about addressing and resolving customer issues or concerns quickly and effectively. And it’s about going the extra mile for customers to maintain good relationships, with an extreme service mentality deliberately designed into your culture, hiring processes and business model.
But it’s a challenge to bring together the customer-centric view of marketers and customer service teams, with the product-centric view of sales and merchandisers. To deliver a truly unified customer service, these teams need to be deeply integrated and connected.
The solution: Create cross functional teams and provide the tools they need to provide exceptional service
To integrate and connect these functions you’ll need a unified platform that gives you a single source of truth for all inventory, order and customer data. With all your customer details captured and stored in single unified commerce hub, you can recognise customers consistently, wherever they shop with you.
Your marketing, sales, merchandising and customer service teams can build a unified strategy and bridge the functional gaps traditionally limited by different tools, technologies and approaches.
Your store teams can view this information to offer personalised service and recommendations that encourage conversion at point of sale. And by providing an exceptional customer service, you’ll strengthen relationships with happier and more loyal customers.
2. Delivering greater value through integrated loyalty, pricing and promotions
Most retailers already provide value to customers through loyalty tactics, pricing strategies and promotional offers. However, with ever-increasing channels and customers demanding more from their favourite brands, many can’t integrate these activities for a unified CX.
While 94% of retail leaders are deploying multi-channel strategies, only 65% say their pricing and promotion strategy is consistent across all the channels. That leaves a significant 35% with inconsistencies in pricing and promotions. And few look at combining their loyalty and pricing tactics to create a unified and differentiated customer experience.
This lack of a unified value proposition can lead to disjointed experiences for customers. At worst, it results in consumers spending less when they shop or switching to a competitor.
The solution: Unify your customer data and inventory for a differentiated CX
To integrate your loyalty, pricing and promotions, you’ll need a unified commerce platform that combines data from every system and channel across your organisation.
You can then start increasing your numbers of loyalty members by offering rewards and experiences that improve and expand the reach of loyalty programmes. Exclusive pricing promotions - such as percentage or cash discounts for loyalty programme members – can create more loyalty customers, who often make more frequent or larger purchases than non-loyalty members.
3. Unleashing omnichannel experiences through stores
With the ability to see, touch and feel products and assess alternatives, stores remain the dominant sales channel, still generating more than 70% of sales and expected to continue to grow at 4% year on year. Stores are also the best channel for driving loyalty. Store conversion rates are typically 20-40% - around ten times more than ecommerce channels (only 2.5-3%).
But at a time when 75% of retailers can’t connect their online and in-store transaction data, they struggle to deliver the cohesive, consistent unified experiences customers now expect.
And despite stores being the most preferred medium of engagement, they have lower trust scores then digital channels, indicating a significant opportunity for retailers to use stores to boost customer trust.
The solution: Modernise your point of sale for elevated in-store experiences
To transform your stores to be the driver of customer loyalty and retention, your store retail systems must transform as well. A modern point of sale is now the anchor for a unified commerce platform that unifies online and store data with back-end systems so that you can create a cohesive and consistent omnichannel experience.
These systems let you create the personalised and tactile experiences customers now demand, such as accurate stock positions by store (including out of stock, in stock and on order), in-store pickups, fast fulfilment via stores and staff recommendations based on wish lists and order history.
They not only elevate the overall shopping experience to increase customer retention and loyalty but also equip you with a more nuanced understanding of shopper profiles, and a competitive advantage by offering a personalised and complete omnichannel experience.
4. Driving personalisation at scale
Today consumers don’t think in terms of channels. They now expect a “one-brand” experience that lets them shop at any time, using any channel, from any device, at the best price.
And with consumers today also wanting more bespoke experiences, retailers are looking for ways to personalise at scale. They are transitioning from mass-market approaches to strategies that delight consumers with personalised product recommendations and tailored interactions.
But if you’ve got siloed backend systems and processes that mean your customers must deal with inconsistencies and gaps, you simply cannot offer a seamless and personalised customer experience.
The solution: Combine mass, at-scale touches with micro, personalised experiences
The ability to see each customer’s shopping preferences and purchase history across all channels is critical for building personalised shopping experiences.
With a unified commerce platform providing a holistic view of your customers, you can better plan your loyalty, pricing and promotion strategies and get the right offer or message to the right customer, at the right time and right place.
These personalised messages and offers should supplement mass, at scale touches to keep customers engaged. By balancing strategies across occasions (such as mass-market events like Click Frenzy and Black Friday) plus personalised messages (such as a birthdays) you can keep customers engaged. By creating remarkable customer experiences that meet or even exceed consumer expectations, you can ensure customers return, again and again.
Want help to modernise your loyalty programme?
As you transform your customer experience to retain loyal customers, increase market share and maximise profits, your retail systems must transform as well. If you’re looking for help to develop your loyalty and personalisation capabilities, get in touch. We’d love to help you develop more meaningful relationships that deliver profitable growth.
If you’re driving the CX transformation at your retail business, our unified commerce maturity model is the perfect tool to create your roadmap. Learn about the capabilities you need to create a rich mix of omnichannel experiences.
