A customer is for life, not just for Christmas

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By: Wise Marketer Staff |

Posted on November 30, 2010

A customer is for life, not just for Christmas

Retailers remain more focused on acquiring new customers than retaining loyal customers, despite acknowledging that the latter are more profitable in the long run, according to research from customer insight agency SMG.

The survey of 280 senior level decision makers from the UK's retail sector found that 42% find it more challenging to retain current customers than to acquire new ones. At the same time, respondents generally agreed that product, service and staff availability are the main factors driving customer retention and loyalty.

During the currently tough economic climate, and especially in the build-up to the Christmas shopping period (and the forthcoming change of the UK's VAT rate from 17.5% to 20%), now is clearly the time for retailers to identify the key drivers of loyalty and turn first time customers into profitable brand ambassadors.

Retailers' opinions varied on how to define "customer loyalty" and how to drive it and its value, in three main areas:

  1. How to spend the marketing budget;
  2. The role and value of 'refer a friend' incentives;
  3. Identifying the biggest impact on the customer experience.

Loyalty marketing budgets Considering the fragile state of consumer confidence following the announcement of the government's recent spending review, the rise in VAT in January 2011 and the expected Christmas rush, keeping customers satisfied has never been more important. Nevertheless, the research found that in 2011 more than half of retailers will be spending more of their marketing budget on acquiring new customers, increasing to 64% by 2015. This is perhaps surprising because 63% acknowledged that existing customers are more profitable.

Referring a friend At least 55% of retailers said they are prepared to spend more money on acquiring new customers, but that they are not committing enough resources to looking after current customers and increasing customer loyalty.

The best indicators of customer loyalty were cited as "increased number of visits" (37%) and "creating brand ambassadors from existing customers that recommend to friends, family and peers" (31%). However, in practice, only 23% said they understood the potential financial benefits of recommendations and were actively incentivising existing customers to refer friends to help acquire new customers.

Impacting the customer experience Despite anxiety over public spending, the survey also found that only 20% of retailers believe that cost has a negative impact on the customer experience.

Retailers are more concerned about delivering a high level of customer service, with 76% saying that product, service and staff availability, as well as check-out queuing times, are the biggest causes of customers walking away before completing an intended purchase.

Other highlights of the survey included:

  • Nearly half of retailers acknowledged that polite and helpful staff can turn a negative customer experience around.  
  • Two out of five (41%) felt that Level 3 ("generally satisfied") is the point at which a customer should be considered "loyal". Level 5 ("completely satisfied") is the point at which a customer will become a brand ambassador and is most likely to return and recommend.  
  • Senior management generally applies the most pressure to drive customer loyalty and acquire new customers.  
  • Two out of five retailers (42%) use mystery shoppers as their chosen method of monitoring customer feedback.

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