2020 is set to be a big year for retail. With the future of the high street and consumer habits continuously changing, as well as the debate on business rates ongoing, retailers are quickly executing their best tactics and strategies in order to survive.
In an ever-increasing competitive market, retailers are working hard to retain their existing customers; especially when acquiring new customers is five times more expensive than retaining loyal ones. The challenge these retailers face is exactly how this can be achieved especially when research shows that only one-third of UK customers are satisfied with retailer loyalty schemes whilst existing customers spend on average 67% more than new customers. Every indication shows something clearly needs to change in this space.
Increasing the average customer spend is extremely important in the retail industry. Retailers are keen to drive customers to spend more and increase their margins as a result, all the while knowing the total checkout value was higher than if the customer wasn’t part of the loyalty scheme.
However, a simple loyalty scheme with a physical card that was issued many years ago won’t make the cut anymore. Consumers have shifted towards a channel-less shopping experience, so loyalty schemes must mirror this change in order to stay current and above all, to ensure the loyalty scheme remains usable. Getting this right is critical to the retailer’s success, given that 49% of consumers spend more once they have joined a loyalty scheme. Retailers must make the move from physical card to digital card; enabling the customer to download the app quickly to their phone, or integrating it with a larger loyalty app that enables the customer to have multiple digital cards in a single location. Technology has facilitated this change; now loyalty schemes no longer operate independently, but we increasingly see schemes such as Nectar encourage collaboration between businesses to achieve a common goal – in this case Sainsbury’s, eBay and Esso. With 61% of retailers citing customer retention as their biggest obstacle and 83% of customers confirming an effective loyalty scheme makes them more likely to do repeat business, it has never been a better time to take advantage of digital loyalty platforms.
Competing on more than price
Furthermore, loyalty is increasingly important in the retail sector as consumers and retailers split their focus on price. On the one hand, discount-heavy retailers such as Primark, Aldi and Lidl are enticing customers with the promise of a good deal, but on the other hand, 52% of millennials admitted they feel it’s important that their values align with the brands they like so the experience offered by the retailer and their promises concerning environmental and sustainability policies are now garnering far more interest. Retail is becoming about more than just price, and this is where loyalty has an increasing part to play. A loyalty scheme must incentivise a customer to come back, but loyalty cannot replace a good brand, only supplement it. The balance must be right between giving the customer a reason to support the brand, but also to return to the store or online and most importantly, spend more. This doesn’t always have to be points; retailers should increasingly explore other options, as 67% of consumers said surprise gifts were important to them. If one thing is clear as we embark through 2020, it is that the retailers with the strongest loyalty schemes will be streaks ahead in the retail race.
Credit: Declan Hannon, Strategic Partnerships & AppStore Product Owner, Epos Now.