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IREU Top500 The Customer Report: 2018

IREU Top500 The Customer Report: 2018

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GUEST COMMENT Raise the bar with customers or risk losing £120bn from defections

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GUEST COMMENT Raise the bar with customers or risk losing £120bn from defections
GUEST COMMENT Raise the bar with customers or risk losing £120bn from defections
It’s a fact: customers are bored. Our research on the Unfaithful Consumer found that 55% of shoppers are tired of using the same stores and brands. This is hardly surprising when today’s consumer has the choice of an unprecedented level of brands, all vying for their attention across a multitude of touchpoints. In order to remain competitive, it is crucial that retailers are adept at connecting with their customers and providing services which encourage repeat purchase. However, our research has shown that, far from being loyal, many UK consumers are unsatisfied with their shopping experience.

With a third of consumers finding shopping more frustrating than five years ago and more than half of all shoppers using a greater number of retailers than five years ago, these are worrying times for the retail community. The threat of a disloyal consumer base could have serious implications; our research found that brands which are not able to maintain customer loyalty risk losing more than £120bn of consumer spending in total from shoppers defecting to other retailers.

The sectors suffering most from a lack of consumer loyalty are clothing (where 61% of consumers are shopping around more), footwear (58%), and food and grocery (52%). The particular challenge grocers’ face is finding a point of differentiation from their competitors; a difficult task when they broadly share the same product offering. Whereas consumers are more inclined towards the tangible appeal of the in-store experience when considering electronic or clothing purchases, the rise of online grocery shopping and the convenience it brings to busy households means grocers must find innovative ways to attract consumers. The online market is set to become even more congested as the buoyant Aldi announced in March it would be expanding into selling non-food items online.

In the post-recession era of considered consumption, consumers are financially-conscious (65% have to be careful in terms of spending) and time-pressured, so good value and convenience have taken priority. Retailers have had to quickly evolve to meet the mindset of the modern, empowered consumer; our research found that 19% of consumers would defect from a retailer if it lacked an online ordering facility. Further, with social media now providing a public, direct hotline from the consumer to the brand, the need to provide good service has never been more crucial.

All these factors, combined with supply side considerations such as a more intense focus on price, a deflationary retail environment and an even greater choice of products and services mean that retail growth will be much harder to achieve over the next ten years. It is therefore vital that brands are able to secure customer loyalty and attract shoppers to spend at their stores.

The challenge that online retailers face is cutting through consumer indifference by demonstrating their understanding of the consumer and providing tailored goods and services which enhance their online shopping experience, as well as offering new in-store experiences such as mobile beacons. The more a retailer can provide a point of difference from its competitors, for example though a low-cost price strategy or same-day delivery service, the better chance they have of establishing a loyal customer base. Amazon has mastered this with its Amazon Prime service, but this level of distribution is only a realistic option to retailers of its scale; smaller retailers face a bigger challenge in fulfilling their customers’ expectations.

The experience retailers provide for the customers will be crucial to this success; we’re far from the days when they only had to worry about managing the infrastructure of their high-street stores, the transition to an omnichannel model requires retailers to seamlessly integrate the on and offline customer experience.

Today’s vast online and offline retail environment has meant that it is incredibly difficult to maintain a brand loyalty that was previously taken for granted. In a world where 56% of consumers look for personal recommendations before deciding where to shop, retailers need to do more to develop their business with a customer-centric ethos. This doesn’t just mean knowing what customers want to buy but truly understanding how and where they want to buy the product or service, their motivations and reasons behind the purchase and what they want from their overall shopping experience.

Fundamentally, customers’ needs haven’t changed in 100 years – but their expectations have. Retailers must think carefully about how to reach customers and reappraise traditional marketing techniques – many of which are still relevant, but are less impactful and influential in today’s environment than they once were. With social media a very effective tool to extend reach and target specific end-users, brands should look to shift a portion of their marketing budget away from traditional media such as television and print and place this towards digital media. This wider understanding will help retailers secure and lock in loyalty in the era of the unfaithful consumer.

Guy Chiswick is managing director, Webloyalty Northern Europe

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