The emergence of group buying sites and the emphasis on a cheap deal is making it increasingly difficult for businesses to engender loyalty. But there are tools to help you keep customers coming back.
Retail insights specialist Dr Stephen Saunders, of The Shoppologist, says loyalty is the holy grail for businesses. “Loyalty is something that everyone in business is constantly trying to achieve, but it’s a lot harder to encourage your customers to show loyalty these days.”
Saunders says showing loyalty to their favourite businesses is important to some customers, but far less important to others. “Fewer customers are showing their loyalty in this day and age, which makes loyalty far more valuable than ever before.”
Andy Bateman, CEO of consumer insights firm The Leading Edge, agrees. He says loyalty can be a complex beast for business.
It’s not uncommon for wealthy consumers to buy cheap household items in bulk at discount retail outlets but then stock up on expensive items at the weekend farmer’s market, Bateman says.
“There are shoppers that regularly shop up and down the value scale, which is another reason why it is far more difficult to understand what value really means.”
Loyalty can mean something different to each business, so the first step is to understand what it means to you and how it applies to your business.
Loyalty could be defined as your customers spending more money with your business, or it could mean wanting them to spend more frequently. It could also mean you want your customers to refer others to your business.
Saunders says that customers are far less inclined to put up with anything that isn’t authentic as brands proliferate. “You’ve got to make sure that you treat customers as people and not as numbers in a database. It’s all about having relevant conversations and relevant offers for your consumers.”
Retail expert Brian Walker of The Retail Doctor says trust plays a big part in whether a consumer will be loyal to a business. “To trust a business, a consumer needs to know that it will do what it says it’s going to do and that there is consistency in the offering,” Walker says.
“We also find that loyalty is rewarded when the experience is truly unique for the consumer. Also, businesses that consistently offer exemplary service often find it easier to engender loyalty.”
And businesses that take the trouble to get to know their customer and undertake micro-marketing have far more success, he says.
There are plenty of businesses which have managed to crack customer loyalty, and have reaped the benefits.
Walker says UK fashion retailer Zara, which has just landed on Australian shores, has a loyal following because the brand delivers what it promises: top fashion without the big price tag.
Apple is another brand with a cult following because it is on the cutting edge of technology and has created a unique in-store experience.
Saunders named stationery brand Kikki.k and skincare brand L’Occitaine as also working hard to engender loyalty via its communications.
Large brands often enjoy a loyal following simply because their returns policies are more attractive, Walker says.
But certain sectors find it more difficult to achieve a loyal following, according to Bateman, including the automotive sector and financial services. “The automotive sector has less than 50% repeat buy rates, which makes it a particularly tough sector to engender loyalty.”
Some service industries, such as hairdressing and beauty therapists, also traditionally find it more difficult to retain loyalty. However, top-quality service can win the hearts and wallets of consumers.
Businesses looking for ways to win the loyalty of consumers should firstly ascertain what aspects of their business works well, and what doesn’t.
Bateman admits loyalty can be a difficult thing to measure. “You need to think about your product and try and understand how it offers a solution to your consumers. If it’s a service for example, what are people trying to get out of your offering?” Bateman says.
Randomly selecting customers and questioning them on their thoughts of your business could be a good start. He also suggests organising a mystery shopper or an exit survey.
“True customer research just isn’t in the budget for many businesses, but it should be,” he says.
Next, conduct some of your own research by looking at how businesses within your sector approach the issue of loyalty, says Walker.
Based on the pitfalls in your offering and your own research, start formulating your plan. Walker says be specific when putting pen to paper during the planning stage. “You need to make sure you’re precise about what you want to achieve.”
Larger businesses should consider investing in a dedicated loyalty manager to look at this side of the business, he says.
“And businesses should always be looking to improve their offering and should never presume that your customers are happy.”
However, businesses need to keep in mind that once they have committed to a loyalty campaign, it is difficult to remove it from your business strategy. “You’ve got to make sure that you stick with whatever you decide to implement in your business. You need to be in it for the long haul,” Walker says.
Traditional loyalty programs are an obvious place to start for businesses looking to improve customer loyalty. There are around 200,000 loyalty programs operating in Australia, which makes it extremely difficult to stand out from the crowd.
A lot of businesses fall into the trap of creating complex offers or tiered discounts, which people are unlikely to bother taking the time to understand.
When setting up a loyalty program, the experts suggest businesses consider what data they might want to capture about your customer base. Remember, customers are more willing to give some personal information to a business if there’s something in it for them. The ideal program will increase sales and redemption.
And while other companies can be a great resource, a business needs to run the program in-house for it to succeed. Get some advice on how to run a program from a few different providers, but make sure you’ve got control of the reins from the outset.
James Atkins, Vantage Marketing director, says a loyalty program needs to be something that the customer wants to be part of. “It needs to excite and motivate them so it becomes a discussion piece with their friends. Have new elements, offers and events that give a real buzz to what you are doing. But remember, it needs to be in line with your brand, and fun.”
If a business doesn’t have the finances to set up a loyalty program, other steps can be put in place to engender loyalty. Try learning the names of your best customers, says Walker. “If you really want to get a lesson in loyalty, visit your local green grocer. These are the businesses that usually know their customers by name and ask after their customers’ family and offer advice in-store,” Walker says.
There are a number of things businesses should consider when trying to provoke loyalty.
An Ipsos Loyalty survey found that:
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