In-Store News: Customer Loyalty in a Post-Recession World

Discussion
Jun 16, 2009

By Sarah Hutchins

Through
a special arrangement, presented here for discussion is an excerpt of a
current article from In-Store News,
a U.K.-based online news portal specializing in retail marketing and design
stories.

Retailers will need to
focus on keen pricing, rewards for loyalty and paramount customer service
to keep consumers happy in the post-recession world.

According to Experian’s
latest Insight Report, consumers are less loyal and more doubtful
about retailers than before. Additionally, more than 80 percent of shoppers
are increasingly aware of the price of goods and services. Both sentiments
are likely to stick around after the recession.

“In the post-recession
U.K. we are going to see the rise of the promiscuous, bounce-back consumer,
one whose loyalty has to be won and re-won every day,” says Future
Foundation planning director Joe Staton.

In the grocery sector,
U.K. consumers are already scaling back. A Nielsen study found 32 percent
of shoppers will continue to cut back on food expenses after the recession.

This focus on value has
decreased brand monogamy. Historically brand-loyal consumer groups are
demonstrating “volatile and promiscuous” shopping behavior.

“The recession will
mean different things to different people, but there are some things that
are certain,” says Bob Bayman, a director and partner of brand consultancy i-am Associates. “If you have customers, you must keep
them.”

It costs five times as
much cash to get a new customer as it costs to keep a current one, yet
Mr. Bayman says many retailers are more focused
on winning new shoppers than establishing loyalty.

Regardless of the economic
climate, he says, losing customers and spending extra money to try and
attract new ones is a waste of precious resources.

Experian’s report listed
three elements key to winning bounce-back consumers: Price, loyalty and
service.

Post-recession consumers
will be more price-savvy so brands will need to keep costs transparent,
highlight benefits and revisit all-inclusive and package deals.

Sainsbury’s “Feed
your Family for a Fiver”
campaign and expanded Basics range with many £1 items has helped grow the
company’s like-for-like sales 4.5 percent. Already 70 percent of customers
buy into Basics, making it the chain’s fastest growing sub-brand this year.

Caring for a consumer
during the recession, however, will not guarantee loyalty later on. Reward
points schemes, personalized discounts and targeted one-to-one communications
will help establish customer allegiance.

Bounce-back consumers
will be able and willing to look for the best customer service experience
in addition to good value.

“True customer loyalty
comes out of an emotional bond,” says Mr. Bayman. “So
therefore think of building a brand that has character, human traits and
personality. This leads us to giving unconditionally without expecting
or talking about a deal.”

Discussion Question:
How might customer loyalty and retention change after the recession ends?
What strategies will best win back customers post-recession?

Please practice The RetailWire Golden Rule when submitting your comments.

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19 Comments on "In-Store News: Customer Loyalty in a Post-Recession World"


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Gene Hoffman
Guest
Gene Hoffman
11 years 11 months ago

Consumers say there’s no mystery: “Serve me better than anyone else could serve me–period; please me everyday with quality-value-competitive pricing; make my visits fun and comfortable; reward me for my loyalty; focus on me and my wants because you think I am ‘special’. Do this on every visit and I will stay out of Walmart and other stores.”

Phil Rubin
Guest
11 years 11 months ago

The recession is going to accentuate those who are doing it right and those who are doing it not so right, both in terms of loyalty, pricing and service. Where consumers are doubtful about retailers it is usually deservedly so. They often make loyalty too cumbersome, an excuse for high prices or worse – both (e.g., Kroger in the US).

Recessions come and go and of course there is a lag effect where retailers’ inefficiencies (and ineffectiveness) will be subject to more severe punishment than usual.

Loyalty is about building relationships (i.e., trust is vital) and habit. Make it easy and valuable and customers will respond – it’s not rocket science but rather being able to operationalize the things we do as people, for the benefit of business.

David Biernbaum
Guest
11 years 11 months ago

Customer loyalty is dissipating for retail chains for a number of reasons. In large part this is due to a serious lack of differentiation. It’s gotten to the point where competitors have almost exactly the same interior design, floor plan, schematics, product assortment, the same promotions and price reductions at the very same time, and even the same color sign and logo. I loved it when Walgreens signs were “green.”

Ryan Mathews
Guest
11 years 11 months ago

It all depends on the duration of the downturn. If it ends by year-end, consumers ought to be up to their old disloyal behaviors shortly. If it drags on for another year we may see real shifts in buying/spending behaviors.

Dick Seesel
Guest
11 years 11 months ago
Cross-shopping behavior might be a recent phenomenon in the UK but it has been observed for many years in the U.S. The same customer who shops at Macy’s or Nordstrom for apparel thinks nothing of driving to the power center across the street for the mall to stock up on consumables at Walmart or cheap-chic housewares at Target. And the increasingly narrow focus of the department stores has become a payday for specialists like Best Buy. The bigger question in the U.S. isn’t whether cross-shopping will survive the recession (of course it will), but which retailers have gained market share in the past 18 months. Will Walmart continue to thrive at the expense of Target? Will shoppers continue to favor Kohl’s at the expense of traditional mall anchors like JCPenney and Macy’s? Will warehouse stores and off-price retailers keep their share of the customer’s dollar? The likely answer is “Yes,” if consumer behavior is truly at a point of significant change. If “the new normal” drives more saving, less discretionary spending and a more budgeted… Read more »
Bruce D. Sanders, Ph.D.
Guest
Bruce D. Sanders, Ph.D.
11 years 11 months ago
Both the source article and your report of it use the term “bounce-back” customers. My clients have found value in an implementation of this–bounce-back coupons that give a substantial discount. The idea is to reinforce in the customer a habit for coming back soon. For some time now, shoppers have become more targeted in their buying, to the point where researchers use the term “precision shopping.” My impression is that the recession has increased time pressures and so increased the extent of precision shopping. One of the objectives of the bounce-back coupon is to get the customer looking at everything the store has to offer. They learn how they can get more of what they want without needing to go to another store, and the search with the coupon adds excitement to the shopping experience. A more strategic objective for retailers to keep and win back customers post-recession is to change from a focus on loyalty to a focus on advocacy. I don’t know that I’d call customers promiscuous to their faces, but the article’s… Read more »
Jill Z. McBride
Guest
Jill Z. McBride
11 years 11 months ago
Cost-conscious grocery store habits U.S. consumers developed during the faltering economy are destined to have a long-term impact on national shopping behavior, according to research results issued by retail analytics firm Precima. A stunning 82% of U.S. consumers in a nationwide survey said they intend to keep cooking at home instead of eating out even after the economy improves and they have more money to spend. Also, 80% said they’ll continue to cook at home instead of buying take-out meals; 84% said they’ll keep looking for specials in store flyers; 80% said they plan to use coupons as much as possible and 78% said they’re determined to make fewer trips to the store in order to save on gasoline. The Precima survey asked consumers to identify shopping practices they’ll continue and those they’ll drop if the economy improves. Significantly fewer respondents intend to continue to buy generic or store brands (54%) or continuing to switch from favored brands to value brands (44%). In another provocative result related to brand loyalty, only 32% said switching to… Read more »
Camille P. Schuster, Ph.D.
Guest
11 years 11 months ago

Retailers need to give consumers a reason to be loyal now and tomorrow whatever the marketplace is doing. Why should consumers shop at your outlet? What is the value for them? The question doesn’t change.

Mark Baum
Guest
Mark Baum
11 years 11 months ago

Phil, I completely agree and I think you nailed it. Superior retailers are using the recession as an opportunity to gain an edge on the competition by intelligently managing their costs–which also means reassessing all customer relationships and identifying the customers that will continue to be profitable. Companies can’t cater to all customers and the sooner they realize this and cut the line from unprofitable, highly-transactional customers, the better prepared and more flexible they’ll be after the downturn.

The model is changing. In addition to identifying their core customers, we’re seeing retailers shifting toward more of a convergence model. CPG companies, retailers, and financial services partners are starting to come together more than ever for shared benefits of valuable consumer insights. Each of these partners brings unique capabilities to the table and, once they sit down at the table together (don’t underestimate the difficulty of this) we’ll start to see some of these companies jump ahead in terms of customer relationships.

Marge Laney
Guest
11 years 11 months ago

This recession is really no different than any other; it’s just happening now and its stink is fresh. Consumers will be hesitant and careful post-recession until they feel their feet firmly on the ground. Initially, their buying habits will still be value driven with maybe a few splurges here and there. After that, zoom, until the next hiccup. My hope is that the post-recession consumer grows more critical of poor service and votes with their feet when they have the option.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
11 years 11 months ago
Even with a recession, customers are looking for more than just the lowest price. If that was the case, Walmart would be the only game in town. Retailers have a real opportunity to not only retain their current clients, but attract new clients by offering not only competitive pricing, but an above an beyond average customer experience. Hollandia is a nursery in Bethel, CT the town next to mine. They are not the lowest priced compared to Home Depot, Lowe’s, Walmart and Target (all less than 10 miles from their two locations). That said, Hollandia does an amazing business because the shopping experience is like no other store (nursery) in the area. No question the recession has impacted their bottom line but as the economy picks up, people will purchase their bushes and flowers from Hollandia Nursery and other well-run nurseries around the country because they want that extra care and special experience when they shop. Value without experience is just cheap and easy for any retailer to replicate. Value with a unique and exceptional… Read more »
Gene Detroyer
Guest
11 years 11 months ago

The economic shock of recession, particularly this one, has caused consumers to explore alternatives. For example, Walmart’s largest growing demographic is those with incomes over $100,000. For now, Walmart may satisfy the needs of these new shoppers with price, but if the new shoppers find that the service and ambiance at Walmart meets their needs, they will very likely stay. How many retailers greet you when you enter?

What is troubling in the retail industry is that many of the retailers are at risk, because of their less-than-value offerings. They have not invested that difference in customer care. As a customer, where am I likely to get a quicker response, Macy’s or Walmart?

And let’s not miss the opportunities online retailers have. The ability to buy without the expense and time consumption of driving to a store is significant. Online retailing continues to grow (+12% YTD) vs. brick and mortar (-0.6% YTD). Many of those customers will rarely return to brick and mortar.

James Tenser
Guest
11 years 11 months ago
The deterioration of shopper loyalty is a long-term entrenched trend that is merely being nudged along by the economics of the moment. Let’s face it folks–we’ve been training shoppers to split their purchases among multiple outlets for decades. In that context, no individual retailer is essential to any shopper before, during or after the recession. Here in the U.S.–still the most over-stored nation in the world, despite recent closures–shoppers are adjusting their habits to meet current realities. Some are buying more store brands. Many are cooking more at home. Some are reducing the number or distance of trips. Most of this has little to do with loyalty–unless you mean loyalty to one’s own well-being and family. One point made above is worth amplifying: In the present retail world, there is a huge opportunity for smart positioning. You can’t sell it all to every shopper, so you have to decide which shoppers you want to cultivate most. The criteria should be behavioral, not demographic, and I believe you’ll be reading about some important new insights along… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
11 years 11 months ago

There’s nothing about pricing and promotions that creates loyalty. All it does is train customers to shop for the lowest price, and customers have become well trained.

Loyalty is built one customer at a time through positive and memorable customer experiences. “Customer experience” may be the industry’s latest buzzword, but it does speak to a critical differentiator in consumers’ minds. It comes through engagement between employee and customer. It is a personal experience, and while technology can augment the experience, in the end it’s the human interaction that’s most significant, and memorable.

Unfortunately, as retailers have slashed store level payrolls, they’ve lost sight of the fact that these employees, under-trained, under-compensated, and under-appreciated, are their ultimate ambassadors, for better or worse.

Kai Clarke
Guest
11 years 11 months ago

This article points out several obvious points about retail that are no-brainers: customer service and price. Price becomes more important when money is scarce, and that is what happens in a recession. This has also been a trend for many years…look at the growth of discount stores, clubs, and the largest retailers (i.e. Home Depot, Wal-Mart, etc.). They are growing even in down economies because they deliver first on price, then on customer service, in that order. This is what consumers want and what retailers need to deliver. When they do, they will have the same kind of success that these retailers (and others) will have, including driving customer loyalty on a regular basis.

Mark Price
Guest
Mark Price
11 years 10 months ago
While consumers clearly are tightening their belts and reevaluating their purchases for price-value, they are also, in general, facing a decline in customer service. That decline is driven by retailer lack of investment in staff and inventory. The decrease in staff often results in poorly-trained staff and high retail staff turnover, while the reduced inventory investment results in excessive out-of-stocks. The key to increasing loyalty in this challenging time is to balance short-term profitability with a longer-term picture: 1. Invest in your people–they are the only real permanent asset you have. Your staff directly impacts not only AOV, but also more importantly the retention of your customers. 2. Invest in inventory or present alternative approaches to inventory management. Consider these approaches:* Reserve inventory for Best Customers for a limited time* Provide a web kiosk in-store and offer no shipping costs for orders placed when products/sizes are out of stock* Leverage other local stores’ inventory* Even recommend that customers fill their needs at alternative stores if you will not have the product that fits their needs… Read more »
Mark Johnson
Guest
Mark Johnson
11 years 10 months ago

To argue that loyalty is dead or is dying would be false. The importance of effective loyalty, reward and engagement marketing strategies cannot minimized. Yet the key is effective interaction, dialogue and response to what the “voice of the customer” is.

Mike Osorio
Guest
Mike Osorio
11 years 10 months ago

One clear truth of the post-recession period will be a continuing lack of the easy credit that allowed consumption to grow seemingly without limit. Consumers will usually be spending only this month’s available cash vs. overspending on their credit cards. Retailers will be fighting for a slice of a smaller pie for the foreseeable future. Therefore, the necessity for developing meaningful customer experiences becomes paramount in the fight for loyalty. There is no single solution or set of solutions. Rather, the successful retailers of the future will first, truly believe in delivering a great customer experience. Words won’t cut it–management must demonstrate commitment to this through their actions and investments in customer-centric environments, services, technologies, etc.

Second, successful retailers will continuously listen to their customers in every way possible: focus groups, surveys, blogs, Twitter, and more.

Finally, successful retailers will never forget they are merchants–and continuously deliver products that surprise and delight their customers. Sounds easy, doesn’t it? We’ll see….

Mark Johnson
Guest
Mark Johnson
11 years 10 months ago

I agree with Phil. I think you are seeing a fundamental shift in the behavior of Americans. Customers want value, interaction, and control of the dialogue/discourse with their brand merchants’ perspective.

Merchants, brands, employers need to listen to their constituencies, and make sure the manner in which they communicate with their end-users is consistent in time, form, fashion and method with how the consumer wants to receive it.

We need to quit paying lip service to “the voice of the customer.”

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