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Welcome to Loyalty MagazineLoyalty Magazine reports on customer retention,loyalty schemes, rewards, affinity, CRM, call centre issues, direct and viral marketing, mobile and internet channels for both B2B and B2C enterprises. It covers all global markets and business sectors, including retail, financial services, travel and hotels, telecoms and electronic commerce. |
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Monday, 29 November 2010 12:26 |
 Can loyalty prolong the e-retail phenomenon?
E-commerce will continue to grow, but at a considerably lower rate than in previous years. Retailers will have to work harder on their online strategies, and driving loyalty and spend per head across all age groups will become key. Article by Jeff Dakin of payments and loyalty solutions provider Htec.
Verdict Research, the independent retail analyst recently revealed that although online expenditure will increase by more than 56% to £35 billion by 2014, and continue to outperform total retail expenditure, it is expected to slow considerably from previous years. Verdict forecasts average annual online growth between 2009 and 2014 will be 12% compared with an average of 35% per annum over the previous decade.
The warning is clear: following a decade of rapid growth, online shopping is set to slow down significantly as the channel matures and competition increases. The number of online shoppers is reaching saturation – Verdict predicts numbers will rise to 32.5 million in 2014, only another four million shoppers, and their spend will be spread over far more websites as the number of retailers online continues to increase rapidly. Retailers will need to work much harder to win and keep online customers.
Malcolm Pinkerton, senior retail analyst said: “With the number of people shopping online set to peak, retailers will have to change and evolve their online strategies. Driving loyalty and increasing spend per head across all age groups will become vital factors to ensure growth.”
At the time my views were that with the outlook looking more downcast the ingenuity of UK retailers was really going to be tested over the coming years. Retaining any kind of market share through economically difficult times is going to make customer experience and satisfaction and loyalty key battlegrounds for online growth.
Technology has its part to play and is already advancing and improving experiences like mobile shopping while multichannel strategies, driven by the technology, are creating seamless shopping experiences across online, mobile and physical stores with fulfilment services such as click & collect or reserve and collect merging the shopping experience across real and digital worlds. However, does loyalty have the same potential and could it be used to prolong the e-Retail phenomenon like it once revitalised the physical retail world? My feeling is that it can if retailers find the right balance of strategies to not only win customers but keep them coming back for more. Tesco's ClubCard is the example supporters refer to - arguably one of the biggest and best-run loyalty programmes in the world today – it made money from day one and continues to do so.
The theory of customer loyalty is simple: a business that retains its customers for longer usually makes more money from them at lower cost than one that is constantly paying to acquire new customers. The basic principles are simple, too: know your customers, and only reward them for behaving in the way that you want.
What can we expect retailers to do with loyalty?
Learn from the data and personalise the online shopping experience. The acquisition of data is the bedrock of all loyalty programmes; garnering information from customers to learn more about them: who are the most or least profitable, what they wanted, and what changes or offerings would be most likely to make them truly loyal.
New technology is already being introduced to meet customer demands. Interactive features such as catwalks, 360° views of products and interactive changing rooms are finding their way onto some of the UK’s most well known online clothing & footwear stores. And it’s these personalised versions of a website that will improve customer loyalty. Product and channel preferences can be deduced from customer order history and online retailers are in the position to suggest products customers might be interested in which they may not have been aware of before – all in an instant. This type of personalisation is going to achieve greater cut through and see retailers reap the rewards of increased customer loyalty. Tailoring a website to individuals will mean conversion rates and the potential to up-sell are likely to be higher.
With growth in the online shopping population set to slow, expenditure growth will be increasingly driven by the ability of retailers to persuade existing shoppers to spend more. Traditionally in a loyalty sense that meant moving customers up the spend bands through the grading of rewards i.e. offering extra points for exceeding a specified spend threshold in a time period.
I have already spoken about improving the whole multichannel experience and retailers needing to become more adept at using technology to deploy innovation across multi-channels. By this I mean the seamless merging of customer environments i.e. if a customer decided to purchase a product online then he/she should have the option to return a product via a store or if a purchase was made over a mobile then that purchase should be available at a store for pick-up if the customer so wished. Making the customer experience convenient, enjoyable, even exceptional fosters customer retention and loyalty. The successful retailers will be the ones that can create that seamless shopping experience across bricks & mortar, online and mobile. If you happen to be just an e-retailer then it’s going to be about getting online and mobile offerings perfectly integrated and raising online service levels to what customers expect from in.
Online retailers will also be leveraging heavily on data to help claw back profitable customers that have defected. It’s commonly said that the success rate in approaching 'lost' customers can be three to four times as high as it is when prospecting for new customers. The rate for converting prospects might typically be 5%, while that for reactivating inactive customers might be as high as 10%-25%. The reasons why getting a customer back are far easier than finding new ones are that you already have data on those customers that left; including: information about their past purchase history; where and how to reach them; and their preferred communication channels.
To ensure the success of a loyalty programme it’s important to remember it takes time to build loyalty, even online because loyalty is based on trust- and relevance-based relationships with best customers. Success will be based upon gaining consumer buy-in, knowing your customers, rewarding only the right behaviour, rewarding and recognising customers in the right circumstances, spotting defection patterns, insights into customer lifecycles and making sure rewards are attainable. Loyalty has all the ingredients to extend the e-retail growth phenomenon. |
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