Customer loyalty is everything. It is the Holy Grail, the pot of gold at the end of the rainbow, the green grass on the other side of the fence; it is what every retailer ought to be pursuing as the secret to success. It is absolute. Or is it?
The retail market is crowded, and the direction of travel is towards more choice and more outlets – but the consumer base can only grow so much. In the end, you have more vendors fighting over a similar number of customers. Of course, we all know that getting customers through the door was one thing, but getting them to come back again and again is another.
Many retailers thought they’d found the answer with loyalty cards. Following its boom in the 1990s – Tesco with its Clubcard points, Sainsbury’s (and many others) and the Nectar system, Boots – the coffee franchises cottoned on. Now, the deck of plastic cards stuffing the wallet have become apps, and everything can be stored on an iPhone, collected with a swipe or a scan.
But is it helping? The individual points are all but worthless in anything but enormous quantities. An individual Nectar point is worth ½ penny, and Sainsbury’s gives them away at the ordinary rate of one for every £1 spent, so they’re hardly being generous.
But it’s the effect on the consumer’s mindset. It is, however small an amount, literally free money – you’d be spending the cash anyway, regardless of whether you got the reward. And once you step on to the merry-go-round, you don’t want to get off. If your Nectar points are building up, why interrupt the accumulation by going to a different store which has a different scheme, and start all over again? It’s a golden ticket to brand loyalty.
"Getting customers through the door was one thing, but getting them to come back again and again is another"
But loyalty is a fickle friend. With the arrival of online shopping sites such as Amazon and eBay, the last 25 years have been difficult. Around one in five retail sales are now online, while in the US it’s about half that. So it’s now a significant proportion of sales transactions – though I bet you thought it was bigger. Most people do. Those figures mean that 80% of sales in the UK are still conducted physically, over the counter, in shops, which should be some comfort for traditional ‘bricks and mortar’ retailers who want to win back customers.
However, there’s a simple equation at work here. Technology combined with choice add up to a more sophisticated consumer, and this is where “cheating” – retail polyamory, if you want to call it that – comes into play. The days of a simple ‘look for product, find product, buy product’ process have gone. Today’s shopper knows the retail landscape, pitting digital and real world against each other.
Some goods may be bought online as a first choice: anything predictable, or bulky, or a ‘repeat purchase’. If you know you want a particular book, you’ll probably find it cheaper on the internet, unless a bookshop is holding a sale. But online shopping is poor for browsing. Amazon may use sophisticated algorithms to calculate what else you may like, based on previous purchases (though the results can be hilariously inaccurate), but it’s no substitute for half an hour spent wandering round a good bookshop and stumbling across a hidden gem. Equally, buying clothes online denies you the opportunity to handle fabric, to try on different styles, to see how an item fits (or doesn’t).
The problem is convenience and value, versus satisfaction and suitability. Shoppers use a bricks and mortar store to look at goods, to handle them, size them up, try them on, feel their weight, then take a photo and use the internet to find it cheaper. They might switch between brands: look at the books in Barnes and Noble, but order from Amazon. Sometimes shops offer discounts or vouchers for signing up to a mailing list. There are loads of forums where they swap voucher codes too. This places the customer, not the retailer, at the centre of the retail universe. But there’s no room for hurt feelings. This provides a golden opportunity for retailers to show customers what they’re missing.
Brands have to accept this kind of ‘brand disloyalty’ and adapt to it. They need to understand their customers, gain a profound insight into their behaviour, and model their strategy around it; because there is surely no future in expecting the customer to adapt to you. Wow them with your customer service, give away free samples, offer advice. Give them a voucher in-store to use online. Because in today’s marketplace, purchasing power is real power. So yes, your customers will cheat on you, but that’s okay. Because they’re cheating on everyone else as well – and they’re yours for the taking.