As consumers become more sensitive about their personal information, retailers must find a balance between offering loyalty programmes and collecting customer data, according to a survey report from the NRF Foundation, co-developed with Adjoined Consulting and sponsored by SAP.
The Retail Demand Insights 2006: What Drives Consumers? study was fielded to provide insight into what retailers can do to better meet untapped shopper desires and increase revenues and market shares. According to the report, now more than ever, retailers are being challenged to create loyalty among their customers. But the number of shoppers saying that they were long-term loyal customers dropped in 2006 to only 77.2% compared to 83.8% in 2005.
Will share, won't share
While consumers agreed that they do want to pledge their loyalty, retailers must find the best ways to build that allegiance. Consumers said that they are only willing to share a small portion of the personal information that retailers use to develop traditional loyalty programmes. According to the study, the most acceptable information shoppers are willing to give retailers include:
- Name (89.8%);
- E-mail address (78.1%);
- Street address (60.7%);
- Past transactions (46.8%).
At the opposite end of the data collection spectrum, consumers are least likely to allow retailers to track:
- Net worth (8.2%);
- Employer (10.9%);
- Job title (12.1%);
- Income (12.5%);
- Weight (14.4%).
According to Kathy Mance, NRF Foundation's vice president, "Retailers looking to create loyalty will need to walk a fine line between specialising their services to customers and invading their privacy. The more trust and goodwill a retailer builds, the more likely it is they will have a long-term loyal customer base."
When it comes to reaching and acquiring new customers, television (31.7%) has replaced direct mail (21.0%) as the best way to influence consumers' selection of a new retailer. Another underestimated - but still influential - media choice was word-of-mouth (17.7%).
While internet advertising continues to grow exponentially, it still has little influence over consumers in choosing a new retailer to deal with. Only 3.5% of consumers said that internet advertising was effective. Other ineffective advertising choices included advertising before a movie (2.3%) product placement (1.8%) and radio advertising (0.4%).
According to Gary A. Williams, managing officer of research for Adjoined Consulting, "While the fading of the 30-second spot is underway on Madison Avenue, retail consumers clearly still see TV as the most effective way to choose a new retailer. Traditional advertising isn't going away anytime soon, but is more likely to morph into the integrated channel approach consumers already look for when making a purchase."
Another key finding in the 2005 report was that consumers wanted to be able to shop and buy seamlessly across multiple channels such as the physical store, web site, and catalogue. In 2006, consumers are still rewarding retailers that employ a truly integrated multi-channel approach to the shopping experience. The majority of consumers (70.2%) use a combination of all three shopping channels compared to stores only (17.5%) or online only (2.9%). Of those consumers that choose physical locations, indoor malls (36.0%) were the preferred option, followed by stand alone (28.4%) and strip malls (14.5%).