Elusive Loyalty: How Retailers Keep ’Em Coming Back for More

Faced with intense competition and shocking levels of store closings, retailers are scrambling to get up-to-date with what customers expect, embrace new models of smart store technology, and encourage customer loyalty. The speed at which retailers are falling has made this imperative all the more pressing.

The desire and need to have loyal customers is nothing new, but older tactics are no longer working, and trying to create loyalty by price competition and traditional loyalty tactics are quickly being replaced by more advanced analytics, multichannel options where each sales channel is equal, and combining those traditional tactics that still work with newer digital strategies that take into account demands of millennial shoppers and utilize advanced technology.

Embracing Digital

A multichannel, digital approach may well be the key to falling victim to intense competition and the changing economics of retail. A common response to the current retail crisis is to blame Amazon.com and other online retailers, but that's a short-sighted approach. Consumers have adapted too, and demanded digital shopping options faster than retailers have embraced the need to include an online channel as anything other than an “add-on.”

“Part of the status quo is the weight of historical precedent and practices in the brick-and-mortar environment,” said Ric Noreen, managing partner of Waypoint Strategic Solutions, noting the generational nature of much of retail. “For most traditional retailers, management has come up through the stores, has had operational roles, has been in procurement, supply chain, and dabbled in merchandising and marketing, but their comfort zone is in what they know. It’s what they’ve been good at, but not necessarily what they’ll need to be good at going forward.”

The Perfect Balance of Old and New

While traditional retailers may lack the understanding needed to implement a truly digital solution, upper management may resort to bringing in new people from outside the company when they build an e-commerce group, and then they face the same problem in reverse. “The new people don’t necessarily understand the ins and outs of retailing; they’re just looking to apply a specific set of tools,” says Noreen. “They’re not fully appreciating the bricks-and-mortar context that senior management was brought up in, and senior management doesn’t have the skills, vision, creativity or innovation that the typical e-commerce group can bring when they come in from the outside. So you have this uneasy alliance between old and new, and each party only knows half of what they need to know to be successful.”

“Retailers need to move aggressively towards today’s digital realities, but must do so with caution to avoid leaving behind those traditional marketing tactics that still work,” said Mark Fick, president of commercial signage company Allstate Sign. “Part of the customer loyalty equation begins with the simplest things that create recognition. A trusted logo, prominent signage and, of course, attention to creating a positive customer experience.”

Creating that positive experience combines those traditional means with things like predictive analytics which help retailers understand the emotional connection they have with shoppers — the elusive qualities that, when a customer sees that sign with the familiar logo, elicits a deep, emotional response that transcends the simple need to procure goods.

Understanding the Emotions of Retail

The desire of retailers to forge an emotional connection with shoppers is as old as retail itself, but it has been only recently that they have had the technical wherewithal to do so with any level of accuracy. “Emotional connection is an evolved approach to customer strategy,” Scott Magids, CEO of predictive analytics firm Motista, notes. “It’s the path to maximize the value of customer relationships that lead to organic growth.”

According to Magids, it’s in understanding that emotional connection that retailers can create an extreme level of loyalty. Price and availability of desirable products only work until a competitor inevitably matches that offering. However, it’s a lot more difficult for a retailer to capture emotionally connected customers. Magids talks about the traditional “not satisfied” to “very satisfied” continuum of measurement, which addresses only functional benefits a brand may be offering.

“When we talk about satisfaction, we’re talking about customers that provide high scores to measures of quality of service, price and value," says Magids. "When we talk about emotional connection, we’re talking about how the brand transcends those functional benefits to actually connect with the deepest and most important intrinsic motivations of a customer.” This may include helping a customer feel better about their family, helping them stand out socially, or have confidence in the future.

The formula for customer loyalty has gotten more complex. The realities of e-commerce, changing demands of younger shoppers, and a lack of understanding between a retailer’s older management and newer e-commerce group all hinder this development far more than any “retail apocalypse” or competition from big internet retailers. Understanding the balance will be key for retailers looking to survive the ongoing retail shakeout.

Dan Blacharski is a thought leader and PR counsel to several internet startups. He's author of the book, "Born in the Cloud Marketing: Transformative Strategies for the Next Generation of Cloud-Based Businesses."