If retailers think customers engagement was easier back in 1992, it’s because they didn’t know what they didn’t know.
Back then, Amazon was just a sparkle in Jeff Bezos’ eye. People happily crowded indoor shopping malls. No one owned a smart phone. And most retailers had to guess what their customers did outside of their stores.
Then came data technology. Over 30 years, online and “mail-order” retail advanced to $870 billion from $35 billion. Mobile purchases are predicted to control nearly 43% of all ecommerce by 2024. And the retail industry has blossomed – tripling to nearly $6 trillion from $2 trillion.
Of course, the consumer population has blossomed, as well, along with the many places they shop.
Technology Has Changed The Shopper, But Only To A Point
Yet the fundamentals that shape consumer behavior today are not too different than they were decades ago; technology has just altered how people realize the fundamentals. These seven behavioral lessons, as true today as decades ago, bear me out. Here’s what history has shown us.
- Consumers often break rational molds. Shopper purchases often are unpredictable, regardless of how sophisticated a retailer’s artificial intelligence (AI) model may be. Good example: Years ago, my associates and I learned that grocery shoppers who bought coconuts also tended to buy prepaid calling cards. Why? Because many of these shoppers migrated from tropical places, and the coconuts made them homesick. The lesson: Creativity and insight are needed not just to observe customer activity, but (more importantly) to understand why that behavior occurs – why calling cards? Consumer data is highly informative and highly predictive of future behavior, but understanding what motivate the behavior – the why behind the actions – can demand grade-A consumer sleuthing.
- Consumer definition of relevance is fluid. What makes a brand or organization important to a customer today could dissolve in an instant if that person moves, changes jobs or welcomes a baby into the household. Then there are external conditions – recessions, the pandemic and now record inflation. Altered spending behaviors can serve as predictors of change in terms of what a consumer will find practically relevant, but retailers also should ferret out what shoppers find emotionally relevant, as well – especially in challenging times. Certain experiential indulgences, such as a weekend getaway, may take on more relevance in the face of change.
- Shoppers will give top dollar to a good experience. That good time doesn’t have to be glitzy, although often it is. Take DSW’s Las Vegas store, which in 2018 featured a vending-machine-like delivery system called the “shoevator.” This level of pizzazz is tailor-made for a market submerged in excess, underscoring the secret to a good shopper experience: Know the audience. There’s nothing glitzy about Costco’s free samples or methodical store layouts, but both contribute to why the average fee-paying Costco member visits its giant warehouses every two weeks.
- If the relationship isn’t invested in being dynamic, it will die. Sustained customer engagement requires ongoing retailer investments in technologies, staff and other resources. The more advanced a retailer’s reach and personalization, the more refined customer expectations become, making the next financial outlay to support a more enjoyable and rewarding customer journey more crucial. As retailers advance their abilities to understand and then target individual consumers via greater relevance, they must ensure their communication channels speak with one “voice” and adjust to continuously meet the needs of those customers. The best retailers are constantly evolving and investing in experiences that fulfill their brand promise and stay ahead of competitors. ln 2017, Macy’s, Staples and others invested in IBM’s supercomputer Watson to better predict customer preferences. By 2021, it was clear the computer was not up to the task. Still, other forms of AI are fine-tuning customer relations, profitably. AI likely informed merchants on how to reopen physical locations after the Covid-19 lockdown was lifted, for example, a crucially sensitive period for reviving in-store customer engagement.
- Consumer demand for privacy shouldn’t be underestimated. Consumers know when the information they share is being misused due to poor personalization efforts. Only 47% feel they have control of their data, and only 5% rank retailers among their top-three most trusted industries, according to research by Deloitte. These sentiments are reinforcing regulatory efforts, such as the California Consumer Privacy Act, to give people more control of their information. Some merchants are formalizing consumer privacy practices, but they are in the minority: just 22% of retailers have integrated their data privacy plans into their corporate strategic planning, Deloitte reports. That figure should be higher.
- Every generation is the “it” generation. In 2010, retailers were advised to throw their resources into capturing the 80-million millennial market. In 2018, it was Gen Z, the first digital natives. And in 2022, it’s Gen Alpha, who are maturing alongside advancing technologies. You get the picture. Each generation has defining characteristics that distinguish it from the others, but they are all consumers, regardless of age. In 2022, we’re seeing the rise of mature consumer influencers – 50 and older – proving that traditional market guidelines rooted in demographic constructs are no longer reliable. Consumers should be understood by their actions, not their ages, because 70-years-olds can behave like 35-year-olds, and vice versa.
- They always bounce back. In challenging times, consumers prove their resilience by reorienting spending, but not always in expected ways. Take Home Depot’s 12-foot, $299 decorative Halloween skeleton. Introduced in 2020, the monstrous lawn ornament sold out, contributing to Home Depot’s most successful Halloween on record. (It sold out again in 2021.) “Skelly’s” success was the product of resilience. Introduced during the pandemic-enforced lockdown, it enabled many emotionally exhausted people to convey their control over the situation. It revealed that consumers will fight unpredictability with the unpredictable – a factor worth folding into retail predictive models.
Consumers Don’t Always Know What They Want
It’s true; retailers may lead the way for consumers occasionally, but their customers are right frequently enough to require that companies follow them always, and closely. Retailers and marketers know a lot more than they did in 1992, and the good ones continue to build off those historic lessons. However, I’d wager there is still a lot they don’t know, and won’t know, until their customers show the way.
Bryan Pearson is a Featured Contributor to The Wise Marketer and currently serves as a director and strategic advisor to a number of loyalty-related organizations. He is the former CEO of LoyaltyOne.
This article originally appeared in Forbes. Be sure to follow Bryan on Twitter for more on retail, loyalty, and the customer experience.