Online Retailers Move Past Discounts to Earn Deeper Customer Loyalty

Source: eMarketer, MAR 11, 2013

Retailers use technology to identify what would make consumers become repeat buyers

Online retailers disproportionately invest marketing dollars in acquiring new business at the expense of strategies designed to retain existing customers, according to a new eMarketer report, “Customer Loyalty: Emotional Bonds Trump Monetary-Based Loyalty Programs.” At a time when 70% of internet users are already buying online and smartphone owners comparison shop across sites at will, earning customer loyalty has become a critical success factor for web retailers.

Retailers pay a steep price by not focusing on loyalty. Even though return purchasers (i.e., those who have made one previous purchase) and repeat purchasers (makers of multiple previous purchases) accounted for only 8% of site visitors, they generated a disproportionately high 41% of site sales, according to the Q2 2012 Adobe analysis. What’s more, return and repeat purchasers had higher average order values and conversion rates than shoppers with no previous purchase history.

Retailers often equate a retention strategy with a loyalty program based on points, discounts and other monetary rewards, said Dennis Armbruster, vice president at loyalty marketing and management firm LoyaltyOne Consulting.

The problem is that giving rewards and pricing discounts is tantamount to purchasing loyalty. And customers continue purchasing only as long as they perceive a financial incentive. But a different, deeper level of loyalty can create a lasting relationship with a retailer or brand.

Authentic customer loyalty starts with a retailer understanding what really matters to its customers during the research, transactional and after-sales phases of the customer lifecycle.

The upside of emotional loyalty is it insulates retailers from competitive practices like aggressive discounting and price matching that depress profit margins. Loyal customers tell other people about their positive experiences. They also buy more and overlook competing products and companies, according to a 2012 ClickFox survey.

Multichannel and web-only retailers can earn customer loyalty by mitigating the pain points consumers encounter while shopping online. Focusing on improving shipping and delivery time, implementing a liberal return policy and addressing trust and security concerns are some important ways retailers can win over repeat customers who believe in the brand.

The effort to build and maintain a personal relationship with a customer depends heavily on technology.

Big Data, social media and mobile are at the core of the strategies that retailers said would improve the effectiveness of their loyalty programs, according to the 2012 Edgell Knowledge Network survey.

Working with these new and emerging technology platforms can be complicated, costly and difficult. But marketers who are slow to incorporate them into their businesses are at risk of losing ground quickly.


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