With the abundance of choice that today’s consumers have, particularly online, we’ve seen loyalty to retailers and brands decrease. If a retailer can’t meet the immediate and increasingly stringent needs of a consumer, be it price, product quality, service, delivery time, etc., they simply move on to a competitor. And those shifts are occurring across all channels and at all points in the purchase journey. Consumers have come to expect that the retailers they do business with know them, and thus provide them with custom experiences, including offers.
The transient nature of today's consumers is important for a couple of different reasons: one, the cost to acquire new customers continues to rise. In fact, it can cost up to five times more to acquire a new customer than to retain an existing one. Therefore, retaining existing customers becomes even more critical for retailers as they look to profitably grow their businesses.
And two, following up on that last point, increasing customer retention rates yields gains to the bottom line. According to the Gartner Group, 80 percent of your future profits will come from just 20 percent of your existing customers. Furthermore, boosting retention rates by just 5 percent can actually raise profits by 25 percent to 95 percent, according to a Bain & Company report.
Considering the challenge retailers are facing in retaining customers and building long-term relationships with them, and the financial benefit of doing so, Total Retail wanted to help. Therefore, we recently produced the report, Customer Loyalty in a Fragmented Retail Market: How retailers can leverage data to create long-term relationships with their customers. The report is sponsored by Fidel, a fintech startup that offers an API to let developers build functionality, such as rewards programs, on top of the major credit card payment networks.
The comprehensive report offers insights into the customer retention challenge that retailers are facing; how customer data can help address that challenge, particularly data which is obtained in a loyalty program; examples of leading retail loyalty programs, as well as analysis of why they're best in class; the role card-linking technology can play in creating loyal customers through the collection of valuable transactional data; and best practices for earning customer loyalty.
To help address the retention challenge, retailers are looking to technology solutions that can help them leverage their most critical asset — data, and more specifically, customer data. Data on where, when and how much customers spend provides retailers with the information they need to craft relevant messaging and offers. With that, they can increase customer engagement and build long-term, loyal relationships. Tools that enable frictionless data capture across shopping channels are therefore at the top of many retailers’ wish lists as they look for ways to improve and customize the customer experience. And prioritizing customer experience is proven to pay off.
To stay ahead of shifting consumer behaviors and a hypercompetitive retail environment, particularly during the COVID-19 pandemic, a large number of retailers are looking to loyalty programs as a means to capture more customer data.
The value of an effective loyalty program doesn’t lie solely in the repeat transactions that it generates. In addition to increased sales, there’s the data that consumers explicitly share with retailers to join programs, as well as the implicit behavioral and transactional data that retailers collect from loyalty program members. Every time a customer clicks an affiliate link, scans a coupon code, etc., they share a variety of implicit and explicit data. That data can be monetized if leveraged properly.
For more on this topic, and to download Total Retail's latest research report, Customer Loyalty in a Fragmented Retail Market, click here.
Related story: Customer Loyalty in a Fragmented Retail Market