Retaining customers and winning repeat sales has never been more important as retailers face increasing competitive pressure. This is true now more than ever, since just a few retailers control such a large share of consumer shopping. The top 10 merchants generated 51 percent of revenues earned by all the brands on the National Retail Federation’s Top 100 Retailers list for 2017. In the online realm, Amazon.com now accounts for an estimated 44 percent of all e-commerce sales, and its piece of the pie is destined to grow.
However, despite fierce competition, merchants feel remarkably optimistic about the state of the industry — and of their businesses. Vyze recently surveyed more than 100 retail leaders nationwide and found that three in four merchants view the state of their business as very healthy (ranking seven points or higher on a 10-point scale). Merchants with loyalty programs rate their business health even higher than average (81 percent).
Digging deeper into loyalty, the survey revealed that loyalty program membership is the top method used to measure loyalty (64 percent), closely followed by repurchase ratios (62 percent). Traditional methods such as Net Promoter Score rank near the bottom, with only 43 percent of merchants tracking this metric.
While monetary incentives are still the top drivers of loyalty, offering multiple financing/credit options (36 percent), having a high rate of credit approvals (35 percent), and shortening the checkout experience (36 percent) are also viewed as influential in building customer loyalty.
Unfortunately, traditional approaches to retail credit often limit the number of customers who qualify for a credit option, negatively impacting loyalty. Six in 10 (63 percent) retailers surveyed believe that financing declines at checkout have a negative impact on customer loyalty. In the past, retailers have typically worked with a single lender to implement a store card program, limiting the options available to shoppers. However, innovators like Build.com (Private-Label Credit Program Builds Customer Base for Build.com) are now connecting shoppers with multiple lenders at checkout in order to provide more consumers with more store credit. This approach has proven to more effectively engage different consumer segments (e.g., one group may respond better to 0 percent financing over 24 months, while another segment prefers 5 percent cash back).
Retailers that widen access to store credit can win more loyal customers, but the right approach to retail financing requires rethinking store credit around customers’ needs and goals (vs. your own processes, technology and bottom line).
Build Loyalty From the First Purchase Onward
When asked what factors increase the likelihood of return purchases, 83 percent of shoppers told Forrester that a positive prior purchase experience was crucial. Because first impressions are so important, an initial denial of store credit can wither a budding brand relationship. Offering an easy, streamlined credit application as an integrated checkout step online or in-store can boost favorable impressions, leading customers to re-engage with the brand in the future. For example, by broadening its array of lenders while streamlining the credit application process, retailer BrandsMart is now able to offer 90 percent of its shoppers financing, boosting customer satisfaction. Repeat business has increased 73 percent as a result.
Connect Customers With Integrated Loyalty Programs
Store credit cards often confer immediate benefits, from 0 percent financing to instant cash back on the initial purchase. However, savvy retailers also integrate loyalty incentives, enabling store cardholders to access ongoing perks such as double points on purchases, exclusive member events and free home delivery. Such all-in-one programs are increasingly popular in the era of e-commerce and mobile purchasing. Forrester found loyalty points and rewards is the top feature consumers seek when contemplating adoption of mobile payments. Leading innovator Starbucks sees nearly 30 percent of sales transacted via its mobile app, which combines loyalty perks and stored payment information..
Cement Bonds With Millennial and Gen Z Buyers
Retail credit cards are a particularly effective loyalty driver with millennial and Generation Z customers, 91 percent of whom come back to shop again and again. Furthermore, expanded access to store credit can also help retail brands compete for younger consumers who consider Amazon their go-to shopping resource. Fully 48 percent of millennials own a credit card from Amazon, and they ranked Amazon second only to banks as a trusted card issuer. By contrast, younger shoppers — who have yet to establish credit histories — are disproportionately declined for credit with other retailers. In fact, some 66 percent of millennials have received a decline in the past year, according to ID Analytics. Retailers that reverse this trend have a better chance of not only winning sales, but remaining top-of-mind for future purchases.
Winning customer loyalty in the era of mass-merchant dominance is a steep challenge. However, by expanding the availability of store credit across customer touchpoints, retailers can establish a solid foundation for building customer relationships that last.
Doug Filak is the chief marketing officer of Vyze, a provider of consumer financing solutions for businesses.