February 17, 2017
Brick and mortar's two best bets for improving customer loyalty in retail
By Annie Mueller
For retail execs, deciding what to spend time on is the biggest question of each day. There are many demands, many opportunities, and only so many hours in the day. One of the top priorities for any executive has to be increasing customer loyalty. Keeping and improving customer loyalty in retail is what helps a brick-and-mortar brand increase revenue. That's because a retained customer is worth much more than a new customer.
Let's look at a few important data points about newly acquired customers vs loyal, retained customers.
- Existing loyal customers are 50% more likely to try new products and spend 31% more than new customers (1).
- It is 6 to 7 times more expensive to get a new customer than it is to keep one you already have.
- The probability of conversion from a new customer is 5% to 20%, whereas the probability of conversion from an existing customer is between 60% and 70% (2).
- Increasing your customer retention rate by 5% will, on average, increase profits by 25% or more (3).
The big question for retail execs is this: What turns a customer into a loyal customer?
First things first: customers are not going to be loyal to a brand just because. Customers need a reason to be loyal, because brand loyalty is not the consumer default.
- 3 out of 5 customers will give up a "former favorite brand" if they can get a better service experience elsewhere (4).
The two best ways to improve customer loyalty in retail
1 / Shared values
Brand loyalty is based on shared values, as perceived by the consumer.
"A Corporate executive Board (CeB) study published by the Harvard Business Review, which included 7,000 consumers across the United States, United Kingdom, and Australia, showed that loyalty to brands is almost impossible to achieve without one key element: Of those consumers who said they had a strong brand relationship, 64% cited shared value as the primary reason. Shared values are by far the largest driver of brand loyalty. According to the CeB, who researched the topic of brand loyalty for more than a year, consumers everywhere stated that they were loyal "not to companies, but to beliefs." Most consumers aren't particularly loyal to any one business, but they are loyal to what the business stands for (5)."
Sharing your values as a brand creates a connection between your brand (as an entity) and your customer (as an individual).
2 / Simplified decisions
The CeB research found another variable that was a big driver of "stickiness" - stickiness meaning that consumers are "likely to follow through on an intended purchase, buy the product repeatedly, and recommend it to others."
The main variable that creates more consumer stickiness? Decision simplicity. Decision simplicity refers to "how easy it is for consumers to gather and understand (or navigate) information about a brand, how much they can trust the information they find, and how readily they can weigh their options. The easier a brand makes the purchase-decision journey, the higher its decision-simplicity score."
How much does decision simplicity matter? According to the research, brands in the top 25% of the decision-simplicity scores were 86% more likely to be purchased than those in the bottom 25% of the score. They were also 9% more likely to get a repurchase and 115% more likely to get a customer recommendation (6).
Two key phrases to remember for your brick-and-mortar brand
We can boil all that information down into two short phrases that you can use to guide your strategy for improving customer loyalty. In retail, take all strategic marketing and customer service options and hold them up next to these simple but important ideas:
Stand for something.
Make everything easy.
Stand for something
Standing for something does not mean your brand needs to make a statement on every political, economic, or moral issue of the day. It does mean that your brand needs to stand for something and be consistent on that stance.
"What your company stands for doesn’t have to be lofty or grandiose, but you do have to plant your flag somewhere that matters (7)."
Make everything easy
Making everything easy for the customer does not mean removing conflict, ignoring the competition, dumbing down the information, or in any other way treating your customer as if they are stupid or lazy. Your customers aren't stupid or lazy; they're just overwhelmed by information, bombarded by marketing, and tired of trying to sort through too much data and too many options.
Your brand mission is to make understanding, trusting, and purchasing your product simple. If you want it done, make it easy. Make comparing options easy by providing the information yourself. Make purchase easy on website, app, and in store. Make feedback easy by creating multiple easy points of contact.
Time to take action
- Define one thing your brand is for and its converse (one thing your brand is against). Write a foundational piece of content exploring this pair of opposites: the who/what/when/where and, most importantly, why of what your brand is for and what your brand is against. Include the short-term and long-term effects of each option (to show the value in your shared value).
- Create a resource comparing your product (or your brand, your commitment, your values, your customer service approach) with your competitors' so that your customers can easily see their options without having to leave your site (or app, or store) to go searching for them.
We can help you make in-store shopping (and finding, and buying) easier for your customers (without creating more work for your marketing staff). Get in touch to find out more.