September 14, 2017

Are "Loyal Customers" Giving You a False Sense of Security?

Customer Loyalty

A repeat customer is not the same as a loyal customer. Just because someone is in your CRM system doesn’t mean they will buy from you again. Retailers need to recognize this — particularly during the holiday season — and shift more of their resources toward retention efforts that are appropriate and respectful. That aren’t just spam, in other words. 

The payoff can be huge. According to a joint report from Forbes and Sailthru, retailers and publishers that increased their spending on retention in the last one to three years had a nearly 200% higher likelihood of increasing their market share in the last year over those spending more on acquisition. 

Seems a bird in hand really is worth two in the bush. So, you’d better do everything in your power not to let it go.

Repeat after me: repeat customers require a different approach

For all the recent advances in marketing technology, it’s still surprisingly difficult for retailers to identify repeat customers. Periscope reports that 66% of consumers said they saw “no evidence” that stores they visit regularly know them as a consumer. Moreover, how much digital retargeting directed at so-called “new-to-file” campaigns actually goes to previous customers? (Answer: More than you’d guess, based on my experience.)

Sending mistargeted messages can be worse than not sending messages at all. Loyalty, after all, is based on reciprocity. If you don’t even realize that I bought from you before, why would I feel any obligation to buy from you again — particularly if I can get a better price someplace else? It’s at this point that many repeat customers move on and never make the leap to loyal customers.

Plenty of customers are eager to make that leap — if you give them the incentive. This is particularly true of millennials. On the one hand, research shows that 67% of U.S. millennials admit to switching one of their favorite brands in the last 12 months. This seems to suggest that there’s little reason to expend resources pursuing what appears to be a fickle demographic.

Dig deeper, however, and you’ll find that millennials are among the most loyal demographics. They’re just not interested in loyal for loyalty’s sake. Give them a reason to be loyal, however, and they’ll reward you with their repeat business, as other numbers confirm:

  • 62% of millennials said they tended to only buy a preferred brand compared to just 54% of the wider population (BizReport/American Express)
  • 39% of millennials will go out of their way to use a customized offer versus 32% of other age groups (American Express)
  • 85% of millennials are more likely to make a purchase if it is personalized to their interests, both in-store and with digital displays (USC Dornsife)

None of this is surprising to PebblePost. Our research has busted additional myths about millennials. People think millennials won’t respond to direct mail, for example, but our data says the opposite. They respond better than most groups. Millennials just want to be spoken to respectfully and on a personal level. Programmatic Direct Mail® allows us to do that to a degree other channels can only envy. We know who your repeat customers are and can help you speak to them in a way that will convert them to loyal customers.

Looking at loyalty from the other side

But there’s more to retention than simply identifying repeat customers. Overcoming the Amazon effect also requires a different approach to retail. As a start, retailers need to take a step back and look at commerce from the customer’s perspective.

One of the first truths to emerge is that brand loyalty is of almost no value to a retailer. Take shoes as an example. Let’s say I stop at a shoe store on my lunch hour and find a pair of my favorite brand-name shoes in my size at a good price and I buy them.

Does that mean I will now be a loyal customer who will buy all my shoes at that location from now on? Of course not. If I can get my next pair of those brand-name shoes online at a better price, I’ll buy them online.

The retail location needs to sweeten the pot. They can do this by offering free shoe repair, for example. Or a coupon that I can apply to my next purchase. Or a rewards program. (Research shows that 81% of consumers agree that a loyalty program makes them more likely to continue doing business with a brand.)

But it has to be a rewards program that’s both worthwhile and easy to manage. The same research shows that 57% of Americans will abandon a loyalty program if it takes too long to deliver rewards. Therefore, you’d better think your loyalty program through before you implement it. (Note to sandwich shops: a loyalty card that has to be stamped 10 times before the customer earns a free sandwich isn’t worth the trouble. I know — I have about 10 of those cards from the same place that have each been stamped once.) And as Sephora’s recent experience showed, consumers don’t react well when you try to scale back the rewards.

Still, a well-administered rewards program can be your best friend because a customer needs something beyond force of habit to bring them back to your store.

Hope for the holidays

Everything that I’ve said above applies to an even greater degree during the holidays. Partly it’s  a matter of scale: retailers do more business during the holidays.

But it’s also because holiday shoppers are even less inclined toward loyalty than shoppers during the rest of the year. And that’s because most holiday shoppers are buying for others rather than for themselves, which is a different experience.

Let’s say my grandmother is a quilting fanatic, and I go to a quilt shop to buy her a gift. Not knowing anything about quilting, I need guidance. Fortunately for me, the shop owner is also a quilting fanatic, and she recommends a gift that my grandmother loves.

Now I think I’ve got my go-to place to buy Grandma’s gift every holiday season. But when I go back the next year, the owner isn’t there and I end up dealing with a clerk who knows nothing about quilting and can’t answer my most basic questions. I leave frustrated and empty-handed.

Not a good sign for that quilt shop. According to Business Insider, it takes 12 positive customer experiences to negate the poor impression left behind from one unresolved, bad experience.

Or, to put it another way, it’s about 12 times easier to lose a customer than to retain one.

Sean Simon is PebblePost’s VP of Sales West. He has more than 20 years’ experience developing successful retargeting strategies.

Click to find out why there's no place like in-home for the holidays

Subscribe

Recent Posts