SMG UK roundtable: Is brand loyalty in decline?

The UK’s high street retailers are spending an increasingly large proportion of time, money and effort on acquiring new customers, but where is the focus on customer retention and is brand loyalty in decline?

Retail experts including Dave Poole, retail operations manager, Pets at Home joined to discuss the findings from a report to be launched this week from SMG UK, leading customer insight agency, that examined the viewpoint of 280 senior level decision makers and C-level management throughout the retail sector on these issues.
Attendees at the roundtable included:
• Dave Poole, retail operations manager, Pets at Home
• Clive Nicolaou, managing director, Plumsource, and Caffé Nero customer service consultant
• Nan Russell, vice president, SMG
• Jeremy Michael, managing director, SMG UK
The following areas and points were debated during the roundtable discussion held on Thursday 18th November 2010:
• Statistics from the report show that retailers recognise that loyal customers are more profitable (63%), but why are retailers (64%) planning to keep increasing spend by 2015 on acquiring new customers? Why do 42% of retailers find it harder to retain customers then to acquire new ones?
Dave Poole: “For many retailers, the focus on customer acquisition versus retention depends on where your business is in its evolution. We are growing and opening new stores so encouraging new customers, whilst continuing to build brand loyalty is important to us.”
Jeremy Michael: “In some examples that we see, UK retailers are still completing the picture for understanding everything about their customer base and what makes them return and spend more.”
Clive Nicolaou: “Shoppers are savvier and they have set the expectation bar higher, which means it’s harder for retailers to gain a complete understanding of their customer base and develop emotional brand loyalty. In addition, with the discount economy, retailers have to work even harder to increase basket revenue and therefore need to get more people through the door.”
Is brand loyalty in decline? Are price comparison sites destroying brand loyalty?
David Pool: “As a retailer there is a desire to have both the best price and the best in-store experience. Attracting new customers in new locations is vital but with both new and existing customers what remains important throughout is the in store experience – it is this that will create and improve customer loyalty. To drive brand loyalty you need to have an engaged and passionate workforce. In our stores product knowledge is a major focus as our customers expect to be able to come in to talk about their dog, for example, with someone that actually has a dog or knows a lot about them. 98% of our colleagues across the organisation have pets so are able to relate to our customer base.”
Clive Nicolaou: “The in-store environment still plays a strong role in influencing brand loyalty. In the coffee shop scenario loyalty is determined by availability of product, the speed of service, consistency and product quality. What also differentiates you from the competitors is how the staff treat you, for which there is around a 60 second window for impressions to be made.”
Jeremy Michael: “Brand loyalty isn’t dying. What is concerning though is that retailers still don’t fully understand the costumer experience. The majority of respondents (41%) identified ‘generally satisfied’ customers as ones that would be classed as loyal, but SMG research* identifies that it is only when a customer scores 5/5 for a retailer that a customer becomes a brand ambassador and will return and recommend.”
How do you measure the customer experience and brand loyalty?
Jeremy Michael: “Loyalty cards are an interesting part of this debate and are increasingly used by retailers. They can tell you the buying habits of your customers, but they fail to tell you where else they are shopping, or why they may have left the store before purchasing a certain item. Another factor to consider is social media and the power of instant feedback as this is changing the traditional methods of measuring the customer experience. Capturing the customer experience through fact-based information that directly links to financial performance turns a ‘nice to have’ customer insight research into something meaningful/tangible for retailers.”
Can customer insight data be misconstrued?
Nan Russell: “When completing a customer insight programme it’s about understanding the front-line experience and matching it to the board room – there needs to be a direct link between the two to ensure management understands the real needs of the customer. We spend a lot of time developing an approach that will capture the experience across the board to gain credible information from a variety of sources.”
Dave Poole: “For customer insight to be successful, it’s the buy-in from the people within the organisation which makes the difference. There is a danger that information can be diluted by the time it gets to management. The approach needs to be positioned to colleagues as a method to give them a strong voice for change.”
Does mystery shopping capture the entire customer experience?
Jeremy Michael: “Traditionally retailers have used mystery shop programmes to gain customer insight. What SMG offers is an evolution of mystery shop to provide more than just a snapshot.”
What needs to change in the retail sector in the next three years?
Jeremy Michael: “Like we have seen in America, there needs to be more of a focus in the UK on the customer base and finding out what’s important to them before retailers invest in advertising and marketing campaigns. More than ever the customer has a voice across multiple platforms and retailers need to listen.”
Dave Poole: “Since I started in retail the customer experience has moved massively. Online is a huge beast and a number of businesses are frightened of it, but they shouldn’t be afraid. Online will never replace the in-store experience, you just have to make sure it matches the knowledge and interaction you get in-store.”
What could UK retailing do better?
Jeremy Michael: “There should be more long term consideration of the customer. For example, in the furniture sector, a customer won’t typically enter the store and spend £5k in their first visit. The retailer needs to understand that they may want to return with family to get their view, confirm measurements in the home etc and it’s important for the staff to understand this.”
*From SMG’s database of 100 million shoppers. The research identified that customers who score 3 out of 5 are not actually loyal and even those that score 4 (satisfied) are very open to competitors. It highlights that retailers need to aim for scoring 5 out of 5 to ensure customer loyalty.
Source: http://www.smg.com/uk