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Comment: Customer behaviour vital to loyalty intentions

With retail sales falling by nearly 2% in March, the worst decline in 16 years, Customer Loyalty is obviously under considerable pressure as shoppers increasingly seek out the best bargains. By Ray Higgs

GENERAL MERCHANDISE

Comment: Customer behaviour vital to loyalty intentions

With retail sales falling by nearly 2% in March, the worst decline in 16 years, Customer Loyalty is obviously under considerable pressure as shoppers increasingly seek out the best bargains. By Ray Higgs

This is hardly surprising as incomes are not keeping pace with inflation.  Even worse, there are components of the household budget which take priority and are facing the worst of the price surges: petrol, utilities and eventually mortgage repayments when interest rates rise once more.  This makes the squeeze on real disposable incomes even more severe.  The economy may well be technically out of recession and into recovery this year, but not many customers will feel richer, confident or happier.

When the household budget has to cope with inflationary price increases it cannot avoid then it has to find ways of reducing the most discretionary part of their spending to compensate – and it is retailers who are going to bear the brunt of this reduction.

This is why austerity is and will continue to drive changes in customer behaviour.  There is switching from premium brands to secondary brands; from brands to private label; from the brand I always buy to whichever is on the best price deal; a switch to ‘necessity’ rather than ‘nice to have’; and ultimately a switching of loyalty from one retailer to another.

The key to understanding and retaining Customer Loyalty is a market research programme that tracks changes in loyalty and therefore enables the business to adjust the tactics of their loyalty programmes – to correct any weaknesses and build on unforeseen opportunities.  Traditional ways of doing this kind of research can be expensive and takes time, and with customer sentiment changing so rapidly that by the time you get the results then it might be too late to act. But using either e-mail or web based processes that are both fast and inexpensive, makes the information that they obtain both timely and valuable.

RedRoute has been one of the pioneers of using iPad or Android tablet devices to do this.  These are used to survey customers on site during their shopping trips.  It’s a very cost effective way of doing this – there’s no need for any dedicated research interviewers and the wireless connectivity of these devices means that data collection is automated and almost instantaneous.  This delivers very timely and low cost evaluations of customer behaviour, attitudes and future loyalty intentions.  This gives fast feedback on customer loyalty and enables you to refine and improve the effectiveness of the overall customer loyalty programme as it proceeds.  For example, one can quickly test and compare the effectiveness of different loyalty tactics to see which one performs best.  Delegates to the Customer Loyalty Conference will be able to see how this works on the RedRoute iPads.

The decisions that businesses have to take over this period of austerity will determine how well they will survive and how strong they will be at the end of the journey towards the return of prosperity.  The companies that will successfully make this journey will be the ones who have the tools to understand the consequences of the decisions that they take.  They are the ones that will make the right decisions.

Red Route will be participating in the Retail Bulletin’s Customer Loyalty Conference, June 15th 2011 as a Networking Partner.

Ray Higgs is a Director of Red Route International.

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