Creating loyal customers is one of the most important goals for retailers. It’s much easier to retain a customer than to acquire new ones. But what is customer loyalty and how do you achieve it?
There seem to be many misconceptions surrounding loyalty. Let’s explore the most important ones.
What is customer loyalty?
To begin with, it’s important to understand there are two types of loyalty: behavioral loyalty and perceptual loyalty. Marketers are often focused on increasing perceptual loyalty, meaning the extent to which people identify with the brand. At the same time, studies have shown that perceptual loyalty and behavioral loyalty, expressed in buying behavior, do not always go hand in hand.
Think for instance about luxury retail; shoppers might love the brand and share positive stories about it, yet they might not act and buy accordingly. This can have various reasons: the brand is too expensive for a fan to actually buy or the stores are not in a location near them.
Still, it is better to be in a position of high perceptual loyalty and low behavioral loyalty than the other way around. Why? In case of high behavioral loyalty and low perceptual loyalty a brand is very vulnerable.
Switching costs are high and it’s simply inconvenient to change brands. However, as soon as it becomes convenient you’re in danger. For example, when a competitor opens a store in the same street, the consumer easily switches, as he has no emotional connection to your brand.
How to achieve loyalty?
To become a loyalty leader, it’s essential to focus on driving both behavioral and perceptual loyalty. The key in achieving this is creating a store with high shopability. That means having excellent staff, store and assortment to provide a great customer experience.
How to achieve shopability?
To have a shopable store, the staff, store and assortment have to come together perfectly. But how do you know what your store needs to improve on? Here’s where new technologies and retail analytics can help you. By gaining a better understanding of how shoppers behave in your store, you’ll be able to point out exactly what to optimize.
To give an example, imagine you track behavior across your fleet with store analytics. You can track how many minutes shoppers spend in each store. When correlating that to the conversion of each store you’ll be able to pinpoint where there’s a misalignment: high dwell, but low conversion or low dwell, but high conversion.
What’s happening in these stores? If shoppers spend a lot of time in the store but the conversion is low, it probably has to do with the staff and the the staff in that store needs training. At the same time, the high dwell time is an indicator that the store itself is interesting and brings an experience to the shopper. By understanding behavior, you can optimize brick-and-mortar stores the same way as you’re used to online.
At the end of the day, brick-and-mortar retail is still the most important purchase channel. Consumers like to get good service, touch and feel products and experience the store. But in a competitive landscape, retailers need to realize that a shopability revolution needs to be unleashed to stay in the game.