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Forrester analyst: Customer loyalty is dead but still vital for retailers

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June 11, 2015

Sephora is known for its substantial customer rewards program that drives sales and customer connection

Sephora is known for its substantial customer rewards program that drives sales and customer connection

NEW YORK – A Forrester Research analyst at the 2015 Integrated Marketing Week made a bold statement by claiming that customer loyalty is dead – in part because of mobile’s growth – which poses a significant problem for retailers because it is still crucial to brand success.

The channels in which retailers reach consumers have changed at a rapid pace and continus to do so, with all this upheaval landing the consumer in the driver seat of marketing and retail while causing the downfall of the loyalty program. Consumers have the ability to get what they want, when they want it and how they want it due to mobile, meaning retailers must work even harder to give shoppers an incentive to purchase with them.

“Loyalty is dead, I’m starting off this session on a little bit of a serious note but as we see it customers are not loyal any more,” said. “We do not really know how to make them loyal.

“Why is this, because customers are in control,” she said. “Customers have all the power, now it has shifted to them.

“They are the ones that are demanding to communicate with you how and when they want you to. They are getting tired of traditional marketing and advertising.”

The Integrated Marketing Week was organized by the Direct Marketing Association

Old news
The word marketing now has a bad connotation to it. Consumers can see through an inauthentic brand and advertising ploy.

Over time marketing has developed an in image that consumers are tired of and are looking for new and unique brand tactics, the traditional will no longer work. This is true in loyalty programs as well.

Currently, consumers are dissatisfied with loyalty programs but the need for them still exists. These programs can keep customers coming back to retailers, which is what every retailer needs.

With mobile and digital, consumers can now instantly and seamlessly search for deals. Even if a shopper is currently in a store, she can instantaneously search for that product at other retailers for a lower price, and will most likely find one.

Price checking is now seen in 23 percent of consumers, whether it is in store or at home. The competition is high and the ease of information is dangerous to retailers.

“Customers are always on,” Ms. said. “This always on mentality means that customers always have access to information.

“That information is right at their fingertips whenever they want they can look up anything,” she said. “According to our consumer data 41 percent of customers are actually looking at the internet on their mobile device several times a day and 23 percent of them are price checking on their phones.

“That means they have more choices. When it comes to making choices its so easy for them to research that 41 percent of them bought from a retailer other than the one they originally researched. Its so easy for them to switch and there’s really no consequence for to them switching.”

Customer obsession is essential to retailers and a good loyalty program can create that. To create an effective rewards program, retailers and brands must look at data related to demographics, individual customer history and preferences.

Personal loyalty
Creating individualized loyalty programs can be a beneficial tool. Sephora showcases this with a personalized VIP membership that examines past purchases and user information to create the most accurate advertising for that customer.

Through various channels Sephora advertises products that it feels the individual customer would be interested in based on recent purchase history. It also offers deals more attributed to this past user history, which creates more of a draw for customers to spend more.

The more incentive a retailer offers to a consumer to purchase with them, the more likely she is willing to do so, as well as becoming a loyal customer and brand advocate. Retailers should be looking at what can they do to make the customer experience easier and more advantageous.

“In the age of the customer, relationships determine success,” Ms. said. “Global connections, IT, mass manufacturing, these are no longer sources of dominance.

“What really matters is your customers, the loyalty you have with your customers and the loyalty they demonstrate to your company,” she said. “Customer obsession is the only thing that elevates you.”

Final take
Brielle Jaekel is editorial assistant at Mobile Commerce Daily

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Brielle Jaekel is staff writer on Mobile Commerce Daily and Mobile Marketer, New York. Reach her at brielle@mobilemarketer.com.

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One Response to “Forrester analyst: Customer loyalty is dead but still vital for retailers”

  1. Howard Zoss Says:

    Loyalty may be declining to some degree, but to say its dead is another example of the absurd statements writers make to get noticed on the Internet. Not dead by a long shot, consumers love to love great products with great service. Maybe, just possibly, the fact than so many products are at parity with very little differentiation is really driving this trend. With marketing getting the short end of budgets and innovation waning with the plethora of product extensions instead of true products breakthrough … consumers continue to search for differential in benefits that solve their needs. So, loyalty isn’t dead look at BMW, Apple, Amazon and many others who enjoy a high degree of repeat purchase and brand advocacy. Typical Forrester .. headlines over substance.

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