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Is Customer Loyalty the same in retail today as it was yesterday ?
For as long as I have been in the retail industry , ( in excess of 40 years ), I have been told the customer is the lifeblood of success in retail and all of my mentors have repeatedly chanted the mantra “ the customer is always right ”. It is , or at least was , assumed if the customer is treated as always being right then customer loyalty will be achieved and that will result in the customer returning over and over again to the retailer thus creating the valued customer loyalty loop .
In determining how to drive customer loyalty in retail today the first challenge for the retailer is to determine whether the approach of “ the customer is always right ” is in itself realistic and indeed necessary to achieve customer loyalty .
Here is one “ real life ” experience where indeed the retailer took the approach that “ the customer is not always right ”. I visited a Bon Chon restaurant recently and tried to order 2pcs fried chicken with fries whilst the standard menu item is served with rice . I was politely informed with a smile that my request was not possible as the 2pc set is with rice and not with fries . I did not want rice and given there was no flexibility I departed the store without making a purchase . Lost sales for the retailer ! Was this a right or a wrong decision by this food outlet ? Well when I passed the same restaurant a few days later I observed every seat in the restaurant was again fully occupied so clearly the lunchtime business is booming . Is it possible that by focusing on the needs of the core customer and NOT trying to please every person who makes a menu change demand , they will actually serve the target customer better , achieve the highest levels of operational efficiency and therefore deliver the maximum bottom line profit ?
Many of today ’ s successful retailers will clarify the “ customer is always right ” phrase only refers to the identified “ target customer ” and not every shopper who enters the store . The primary aim then for these retailers is to service their target customer better than all of their direct competitors . So if it is agreed that by stating they are only referring to their identified target customer the next question is what do they have to consider if they are to provide a retail environment that meets the wants and needs of that specific customer . In today ’ s retail environment where choice of retail locations , expanded retail formats and shopping channels , level of service from self-serve to full service , media exposure and the impact of the “ social media ” that pops up in our hand held devices as fast as the send button is pressed , changing lifestyle and the ever increasing value of time in our lives , then it is easy to see creating customer loyalty is more complex today than ever before .
The Good Old Days in Retail .
As a starting point it is interesting to look back , ( at times when retail was a simpler industry ), before looking forward . What was it that constituted great customer service in the past , and indeed were the retail characteristics that led to customer loyalty .
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The above model was possible for the following reasons : 1 . There were less stores and many of these were local stores in smaller towns with no or limited competitor alternatives , ( less retail choices for the customer ) 2 . Smaller towns with fewer people allowed for increased personal interaction , ( shoppers were friends of the shopkeeper / owner / manager ) 3 . Local store shopping was as much a social experience as it was a shopping transaction , ( time was generous when visiting the store as this was one of the only means for gaining knowledge on what was happening in the neighborhood or town ) 4 . There were 2 basic formats and they were : a . The general store such as the newsagent which also sold everyday commodities b . The specialist store such as the butcher or the barber shop 5 . Stores carried less items ( SKU ’ s ) and store managers had an intimate knowledge on all items , ( supported trusted product knowledge and information to the customer ) 6 . The Store Manager owned the business and ran it as a hands on operation supported usually by the family , ( this allowed immediate decisions when dealing face to face with the customer ) 7 . Transport and parking were less congested , ( facilitated easy effort to visit the store ) The Age of Diminishing Loyalty and the role of CRCM So now if you consider the enormous changes and developments that have occurred and will continue to occur in retail today , it is blatantly clear that driving customer loyalty can no longer be driven as it was done in the past .
The following diagrams the impact that the significant changes in retail complexity over time have had on a retailer ’ s ability to create and maintain customer loyalty .
A sure sign of how much more difficult it has become for
a retailer to maintain customer loyalty is evidenced by retailers having teams of people who are solely dedicated to the challenge of delivering the retail environment that is conducive to creating and maintaining customer loyalty . These teams operate as the retail function of CRM : Customer Relationship Management .
The following is one definition of CRM taken at random by searching on-line :
“ Customer relationship management ( CRM ) is a term that refers to practices , strategies and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle , with the goal of improving business relationships with customers , assisting in customer retention and driving sales growth . CRM systems are designed to compile information on customers across different channels -- or points of contact between the customer and the company -- which could include the company ’ s website , telephone , live chat , direct mail , marketing materials and social media . CRM systems can also give customer-facing staff detailed information on customers ’ personal information , purchase history , buying preferences and concerns ”
Even the definition of the role of Customer Relationship Management is a complicated statement !
Is it possible that today many of the simple retail drivers get lost as they are tangled up in the complexity of modern day retail ?
So it would appear the question is answered ! Managing within today ’ s retail environment is without doubt different to what was required for success in the past in earning customer loyalty . As retail organizations and markets have grow in complexity there is a need for the retailer to upgrade how they think and indeed how they manage this critical component of retail success .
WARNING : Do not let retail complexity get in the way of a simplex understanding of CRM . Attract and engage your target customer , be in a position to service their complete needs and give them a shopping experience that is memorable and you will have loyal customer .
Customers can and will be Fickle In the world of retail today there are more reasons than ever before to tempt your customers to shop elsewhere . They can move without your knowledge or understanding to your competitor or simply change the retail channel they use to purchase e . g . they move from you store format to buy on the internet .
It is harder today than ever before to hold on to your valued loyal customer . Customers are more knowledgeable , more demanding and have more retail choices than ever before . The predominant reasons for customers to change their shopping location and / or retail channel include :
• Cannot find the product they are looking for – out of stocks will kill customer loyalty
• Cannot get the product knowledge they require to make the purchase decision
• Non existing or unsatisfactory customer service – creates customer frustration
• Impatient with POS inefficiency – queue disenchantment creates “ drop and go ” syndrome
• Do not like the shopping environment – this includes many factors such as cleanliness , noise , airspace pollution , lighting , air conditioning , ease of access , parking and transportation ,
• Believe they can buy elsewhere at a lower price – minor price variances can be acceptable
• Believe particularly in “ pleasure shopping ” that the retailer has become boring
• Believe “ chore shopping ” lacks in convenience when shopping time is a prime consideration Attracting new customers is both difficult and expensive .
There is no doubt maintaining an existing customer is a critical challenge in retail today . Given research shows it is generally 7 times more expensive to attract a new customer than to hold on to an existing customer the retailer MUST prioritize the objective to successfully manage and keep their loyal customers . Failure to do so could result in failure to survive .