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Customer Loyalty Is More Uncertain & Valuable Than Ever; Here’s How to Get It Right

Shopping has changed dramatically since 2020 when COVID-19 upended economic and behavioral norms across the globe. Some retailers welcomed a slew of new customers while others lost long-time shoppers due to inventory challenges and poor customer experience. Today, as retailers continue to grapple with the new realities of the COVID-19 world, online customer loyalty needs to be a top goal.

“We’re not going to see that giant wave of new customers that we saw in 2020 and 2021,” says Adam Blair, Editor of Retail TouchPoints, speaking on Retail Uncharted. “Retailers need to take positive action to keep those shoppers that sampled them during the pandemic. Loyalty should be a top priority.”

In this episode, Adam speaks with Sidecar’s Senior Director of Growth Mike Perekupka, about the biggest trends and opportunities in customer loyalty. He also shares findings from Retail TouchPoints’ 2021 Customer Loyalty Benchmark Report. The report surveyed retailers on the challenges they face growing customer loyalty and the tactics that are driving success, particularly online.

During the podcast, Mike asks Adam:

  • How has COVID-19 changed customer loyalty?
  • What can retailers do to mitigate the supply chain’s impact on customer loyalty?
  • What retailers are effectively building customer loyalty online?
  • What have been the positive impacts of COVID-19 on customer loyalty?
  • What is the biggest factor limiting customer loyalty–price competition or poor data management?
  • What is your number one piece of advice for retailers looking to grow loyalty online?

On the positive and negative impacts of COVID-19 on customer loyalty:

Adam: We’ve all seen the tremendous surge in e-commerce that happened with the pandemic. An Accenture study of consumers in 19 countries indicated that formerly infrequent e-commerce shoppers, those who use the channel for less than 25% of their shopping, increased their online purchases by 343%. That’s nearly three and a half times.

Overall, the battle for loyalty is much more difficult in the e-commerce domain where you know that your competition is a click away. It’s easier for a consumer to compare prices, product selection, and, what became particularly important during the pandemic, product availability and fulfillment alternatives.

On the plus side, you had retailers like Joann, the crafts company. They had a boom with people who wanted to make their own masks or they were looking for activities they could do during lockdown. I spoke to their Chief Customer Officer Christopher DiTullio last month, and he said “Through efforts to provide masks within the communities that we operate, we got millions of new customers into our ecosystem.”

Obviously overall a negative, but there were some winners, or at least retailers that did better than you might even expect during a pandemic.

On the importance of customer loyalty post-pandemic:

Adam: I would say, it’s even more of a priority than it was prior to the pandemic, or it should be. You have those retailers that lost customers oftentimes through no fault of their own. They are laser focused, or they should be, on keeping those that have stayed with them or wooing back those that have strayed away.

The most savvy and forward-thinking retailers that gained new shoppers, particularly in the e-commerce space, are realizing that they can’t depend on waves of new customers. What I’ve heard is that e-commerce will continue to grow and be a bigger portion of retail altogether, but unless something terrible happens, we’re not going to see the giant wave that we saw in 2020 and early 2021. They need to take positive action to keep those that sampled them during the pandemic. Loyalty is still very much is, or should be, top of mind for retailers.

On managing supply chain bottlenecks and improving customer experience:

Adam: I recently did an article where I spoke to a number of retail and supply chain experts, and they recommended a number of things that retailers can do. One thing that they can do is tracking demand signals. One of the first people I interviewed said, “It’s a supply problem, but it’s also a demand problem.”

With lockdown, people are buying less services because they can’t go out to the theater or restaurants, so they’re buying more things. More things need to be produced and sold. If retailers can get a better sense of what people want to buy and those demand signals–not just what, but where they are, how many they might want–that’s important. But it must be accompanied by communicating those insights internally to their own warehouses and distribution centers.

And, if possible, they need to push it even further up the supply chain, because the clogs we’re seeing are not just about container ships stuck circling ports offshore. Some of them are about merchandise that’s just in the wrong place. It’s on a store shelf and it should be in an e-commerce distribution center or vice versa.

Another thing they can do is use customer data. Much of it is available via their loyalty programs, along with analytics that are powered by artificial intelligence. With that data, they can research allowable substitute items for things that are out of stock. There’s some shoppers that will only accept items from a particular brand, but others might be open to comparable items from other manufacturers, and knowing who is who can help retailers save the sale.

Another thing is just simply to leverage your loyalty program, if you have one, to communicate things, like during the holidays, a price guarantee if you place a pre-order. In general, retailers should proactively communicate with shoppers about the delays and out of stocks.

And finally, retailers can limit their promotional activity (speaking of counterintuitive). During the holidays, it’s usually slashing prices and Black Friday sales, etc. But one of the experts I interviewed said, “If you know you’re going to be out of stock in three weeks, why in the world would you put an item on sale?” I thought that was an interesting twist on sort of business as usual.

On successful loyalty programs that retailers can learn from:

Adam: Sephora, the beauty retailer, is frequently cited as having just a great customer experience and superior loyalty program. This wasn’t directly tied to their program but it speaks to the multi-channel aspect. The retailer instituted what they called home chat during the pandemic.

A colleague of mine interviewed their GM of e-commerce. She said, “I envision a future where you have a favorite person you chat with for online support, the same way that you might have someone at the store who you seek out.” That’s the ultimate in personalization and making you feel special.

Another good example is David’s Bridal. They introduced what they call the Diamond Loyalty Program. It offers a wide range of rewards: curated goodie bags up to a free honeymoon getaway. It also allows members of the bridal party to contribute to the couple’s loyalty program which helps them earn rewards more quickly.

I thought that was brilliant because it’s, again, counterintuitive. You shop at a bridal place maybe once, maybe twice, in life. What good is a rewards program? But if you involve more people, and it’s a big wedding, you can really get something going there. Obviously, from David’s Bridal’s point of view, if people get involved when they’re having a wedding or a special occasion, they’re going to think positively about David’s Bridal for other occasions too.

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