Has there ever been a better time to build or kill customer loyalty?

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Aug 07, 2020
George Anderson

The novel coronavirus pandemic has been a time of testing for all retail businesses. It has also been a period of great opportunity for retailers to show long-standing and new consumers that they are there for them at a time of need.

In an interview on CNBC, Etsy CEO Josh Silverman said, “This is a moment when we have a chance to win the loyalty of millions of people and we’re working so hard to do that.”

The online platform for independent sellers of handmade goods and crafts has seen its active customers jump to more than 60 million, a 41 percent increase, as sales of face masks on the site took off along with the rise in COVID-19 cases across the U.S.

A new study by the Wharton School’s Baker Retailing Center and WisePlum found consumers questioning their loyalty to retailers following disappointing omnichannel interactions in recent months.

Thomas Robertson, a professor of marketing at the Wharton School, told RetailWire that 66 percent of consumers experienced at least one issue on their last online shopping trip in the second quarter, up by 10 percent from the first three months of the year.

The most frequently cited problems were related to product availability. Consumers listed among their complaints being able to only purchase the item they wanted online instead of in a store. Others included finding a product they purchased not available for pickup or, if available, at a distant store.

While product availability has been an issue, Prof. Robertson said, “The most damaging problems were related to the returns process and website and mobile app navigation.”

Chief among these complaints were purchasing an item online and having to pay for shipping to return it, difficulty navigating websites and apps and not being able to return items without the original receipt.

Prof. Robertson issued a caution to retailers regarding customers who participate in loyalty programs.

“Members of loyalty programs tend to have higher expectations and therefore experience more problems than that of non-members,” he said. “We believe that this is because members typically are more engaged and have higher customer lifetime value than non-loyalty members. Losing loyalty program members may lead to long-term degradation to the brand and may have significant financial impact to the retailer.”

DISCUSSION QUESTIONS: Do you think retailers have risen to the occasion in recent months in the eyes of consumers or have they largely fallen short? What do you see as the best ways for retailers to “win the loyalty” of consumers at this point in time?

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"In the end, the retailers that foster loyalty will be the ones who offer better personalization, transparent communication, and a digital experience that goes above and beyond"

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24 Comments on "Has there ever been a better time to build or kill customer loyalty?"

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Mark Ryski

The massive disruption and shift in consumer behavior has caused challenges from end to end, from the supply chain to the end customer. While the disruption and impact on customer experience would make it seem as though retailers have fallen short, in the current context of a pandemic and despite the challenges, some retailers have most certainly stepped-up – deepening loyalty with existing customers and winning over new customers. Now more than ever retailers need to focus on basic execution — honing BOPIS/curbside services, maintaining inventory and offering practical solutions for returns.

Neil Saunders

Having things go wrong does not destroy loyalty per se. Not addressing, fixing, and apologizing for those things is what causes resentment. Amazon recently messed up one of my deliveries by sending it to the wrong house. A simple web chat that lasted three minutes resolved the issue and new products were sent out (a full refund was also offered). I was impressed with the service and it made me more loyal to Amazon – and more likely to renew our Prime membership – because I know Amazon will correct any mistakes that are made. And mistakes do happen, no matter how good the retailer.

Baker Retail
1 month 11 days ago

Thank you for this comment. In fact, the study shows that if a problem is resolved quickly (after the first call), then customer loyalty is restored. Unfortunately, we also found that most consumers do not take action when problems occur, so this loyalty saving/problem resolution process often does not take place at all.

David Naumann

Some retailers have risen to the occasion during the pandemic and pivoted their operations to adapt to changing rules and restrictions. Keeping customers informed of product availability and honoring promises are key to exceeding expectations and maintaining loyal customers. Target, Walmart, Costco and several regional grocery chains have prospered with enhanced customer loyalty and winning new customers. Others haven’t been as proactive. Personally, I had some bad experiences where retailers disappointed me with BOPIS. For example, I ordered a screen door at a home improvement store and when I went to pick it up the next day, the store associate said that it wouldn’t be picked from the shelf for 36-72 hours. I know everyone is busy, but that was unacceptable. I cancelled my order, went to the shelf and picked the product myself. This tarnished my opinion of this brand.

Ken Morris

It has been a mixed bag with some retailers rising as other have fallen. Inventory issues have many causes from supply chain interruptions to antiquated legacy systems. Perpetual inventory in real-time has not permeated retail yet. Synchronicity from stores to the web to wholesale are required to compete against Amazon, that is their secret sauce but technology investments by brick-and-mortar retailers to achieve that end have not been made. Reserving inventory, returns management and frictionless service are the way to win and keep your customers.

Bob Amster

Most retailers have definitely risen to the occasion. If a retailer was able to fill a need (not a desire) during the pandemic, they have gained the loyalty of that customer. The impact of doing something special or quickly in times of anxiety, shortages, and restrictions goes much further towards gaining the loyalty of consumers.

Gene Detroyer

I have heard complaint after complaint from people about their shopping experiences. Everything from stores being closed to having to follow rules to lack of stock and on and on.

Knowing a little about retail and understanding the magnitude of this disruption and how far reaching the disruption has been, I believe retail has done an outstanding job.

Kathleen Fischer

Unfortunately, most retailers struggled in recent months as they had to shift to BOPIS or ship from store to meet consumer needs. The key to keeping loyal customers returning is to work to meet and exceed customer expectations but when things go wrong (as they often do), be quick to react and try to fix the problem.

Zel Bianco

There will always be issues related to availability, promised delivery dates, etc. The solution needs to be better navigation on websites and apps and better chat. So many times the chat gets you only so far, and talking to someone in customer service is sometimes impossible. Retailers who want loyalty should reward their customers with better help line service to act as a control tower across their omnichannel landscape.

Rodger Buyvoets

It’s probably a combination of both. Many issues the research brings up fall outside of a retailer’s scope of control (e.g., product availability). I think retailers have done what they can to meet many of these challenges in a very short time. The real test is to be seen: How will retailers follow up to transition to a digital-first approach? To win the loyalty of their consumers means optimizing the basics – free-returns, priority pick-ups, seamless customer experiences, etc. In the end, the retailers that foster loyalty will be the ones who offer better personalization, transparent communication, and a digital experience that goes above and beyond.

Rich Kizer

I think most retailers did a wonderful job switching to unique ways to get product to consumers that they had never experimented with before. Ordering on the net, product waiting at the curb, deliveries — and the list goes on.

Some retailers made mistakes by not showing constant change in selections and presentations. It’s important to show different products, etc., on a weekly basis. We preached that the customer does not want to see the same store they had pre-virus. Yet some retailers now want to minimize new inventories for stores. I understand the cash flow issues, but a restaurant must offer new menu items every so often, and a retailer must excite me on at least a quarterly basis. It’s easy to kill customer loyalty — too easy. We must totally focus on a Disney type of climate in-store that takes the customer on a trip. The winners have always done it this way.

Brian Numainville

It’s a mixed bag. With the rush to online fulfilment in the supermarket sector, coupled with supply chain issues, some retailers did better than others with both the practical and tactical, while others seemed flatfooted and struggled to even communicate well. Many people tried online shopping but more than 60 percent used more than one online grocery shopping service, indicating that they were cycling through multiple providers trying to find one that worked best for them. It will be interesting to see how many people stick with online grocery shopping versus heading back to the store when they feel it is safe. It will also be interesting to see if that store is a past favorite or a new choice, based on their experience during the pandemic.

Brett Busconi

I agree that this is the best time in years for retailers to win/grow the loyalty of consumers. While I do believe that it is a mixed bag, I think most retailers have fallen short in their efforts to “rise to the occasion” in recent months. People are working at 100 miles-per-hour to get where they want and need to be but too many retailers were not putting technology into practice so that things which are must haves today (BOPIS, BORIS, delivery, in-app purchases, etc.) are still being developed/deployed.

The best way, right now, for retailers to win the loyalty of consumers is to focus on getting the must haves in place and communicating about them.

Many consumers have high expectations — in many cases they are unrealistic given the pandemic and various associated supply chain impacts — but retailers absolutely destroy any loyalty when they fail to communicate, to understand, and to correct as quickly as possible.

Perry Kramer

In the majority of cases retailers have risen to the occasion in the view of the consumer. The average consumer recognizes we are all working through unprecedented times. The best way to win and retain the “loyalty” of consumers is to set expectations early and consistently. If the product they are searching for is not in stock or available at a store near them, let them know on the first page of their search results — or, better yet, give them the option to include that in the search criteria. The second key is to have real time visibility to inventory and safety stock so that a retailer meets its commitments. Thirdly offer your “loyalty’ consumer some differentiation — I agree they are already expecting it.

Shep Hyken

Some retailers are better than others at connecting with customers. The emotional connection that drives not just repeat business, but loyal repeat business, is more important than ever. Customers need convenience in their lives. Friction in the ordering or delivery process will cause a customer to jump to a competitor. Friction with returns will potentially cause a customer to never come back. The formula is simple, but not necessarily easy. It’s a combination of the retailer having what the customer wants, delivering it with good customer service, and creating a convenient experience. Throw in some empathy and you may win the loyalty of your customers.

Brett Busconi

Always Be Amazing — you already laid the groundwork here!

Jeff Sward

These are emotional times. The highs are higher and the lows are lower. And there are a lot more lows than highs. Frustrations and disappointments are magnified. I think most customers are prepared to offer a little slack in minor misses. And feel relief if not gratitude when the brand/retailer delivers. But big misses will infuriate and will not be easily forgiven. There’s an expression about all politics being local. I think that goes for brand loyalty also. It’s built and lost one transaction at a time.

David Slavick
There are two considerations here. One, are loyalty programs or recognition and reward programs of greater interest now than they were pre-COVID-19? The answer is a resounding YES. I have seen the data. Participation rates up. Digital engagement up. Sales from members, especially new online behavior up. Because of the pandemic shoppers who happen to be members are not going to as many places to fill out their list and satisfy needs. Do you do things differently than before? YES. Simply saying do personalization better or improve the online shopping experience is not nearly enough. In regards to the second point I agree, need to do better. But let’s be reasonable here and put ourselves in the shoes of business operators in this crazy world we are experiencing. Out-of-stocks have existed for decades. Issues with returns have as well. Customer complaints are rising, and it’s no surprise they are frustrated at so many more things in their daily lives than ever before. Call center volume has skyrocketed. Managing customer or member expectations is key. Always… Read more »
Phil Rubin
1 month 11 days ago
How and which retailers have responded to “the occasion” is a function of leadership and prioritization of the customer relative to the business strategy and this didn’t start or stop with the pandemic. The retailers that had already prioritized the customer and the customer experience are doing exceptionally well. The pandemic accelerated what was already on the road maps for companies (e.g., WMT moving to contactless payment immediately after lockdown) and those that were not customer centric (beyond empty CEO talk) are typically the ones falling short (JCP, Neiman Marcus, Macy’s, J. Crew, Stage Stores, Ascena … it’s a long list). Loyalty programs aren’t what win customers. If anything, the general dissatisfaction with loyalty programs is another example of acceleration: pre-COVID, only 44% of loyalty program members were very or extremely satisfied with loyalty programs. This declined by 50% during the pandemic, and this was a low number to start with when you consider that loyalty programs are supposed to result in the best customer experience a brand can deliver. Retailers will win loyalty by… Read more »
Chuck Ehredt
The question in the title of this article is far more important than those posed for discussion. All three require the panelist to share their personal opinions, but asking whether there has ever been a better time to build customer loyalty is a question that should be answered in the same way month after month — forever. Does any manager at any level in any company believe they can survive without loyal customers? The answer to this question changed profoundly in the 1980s. Prior to that, demand for goods and services largely exceeded supply, so a brand could survive even with poor products or services because demand kept growing and there were always enough new customers to meet revenue targets. During the 1980s, this changed (dramatically) and for 3+ decades we have lived in a world where there is so much supply of nearly everything, a wide variety of substitutes, and fierce competition that if brands don’t build a fairly high degree of loyalty with at least 25% of their customers, they just can’t survive.… Read more »
Ralph Jacobson

Brand loyalty, whether for a retailer or CPG brand, is emotional. And these are definitely emotional times, indeed. You can capture lasting loyalty via genuine, responsive action to solve immediate and real challenges faced by consumers with promotions that may cause short-term business pain, but long-term customer lifetime value. Or you could take the path of too many brands and simply blast out shallow, pandering messaging that will only perpetuate the pain for all.

Doug Garnett

Retailers should keep their heads down and focus on delivering what customers need in the ways they need it. How well have they done on this? Not so well. I keep noting that my experience with curbside pickup is that it’s being used as a marketing gimmick and executed generally quite poorly at the store.

In part, we need to avoid exaggerating how much “loyalty” is possible. Retailers do far better to build behavioral habits based on their delivering what customers need than to believe that it’s loyalty that drives retail sales.

Closeness. Product availability. Shopping experience. Fairness in pricing. Customer service. These are the things that bring people back to stores or online retailers. And, I suppose they could be called foundations of loyalty — but we give the word “loyalty” far more emotional content than these things. It’s not the emotions — it’s the reliability of the experience – which matters.

Craig Sundstrom

My own impressions match the poll results: people are understanding and for favored retailers, they are likely not just sympathetic but also empathetic, but as this ordeal drags on and on … and on … frustration is beginning to replace all other emotions.

And of course, for retailers who haven’t been able to resume any kind of operations at all — bars, theaters, clubs — the “point of no return” for retaining customers or even staying in business is fast approaching.

Carol Leaman
1 month 6 days ago

It’s been a mixed bag in my experience the last few months; I’ve had delightful, above and beyond experiences that have won my loyalty forever (yeah, that’s you Simon’s in Montreal) and I’ve had some pretty big disappointments too. But one thing is certain — I’m cutting some slack to the retail associates who are on the other end of this, doing the best they can with the hand they’ve been dealt. In the poor experiences I’ve had, my brand loyalty hasn’t been tarnished where the associate is clearly apologetic, trying hard to rectify the problem and has been appropriately trained to deal with it. It’s been harder to let go of the small number who clearly just don’t care. But as I said, I’ve been giving them the benefit of the doubt. That’s quickly coming to an end though. My loyalty is based on the overall experience, not just the product. If you have the right associates who do the right things consistently, you’ve won me over.

"In the end, the retailers that foster loyalty will be the ones who offer better personalization, transparent communication, and a digital experience that goes above and beyond"

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