How Retailers Can Increase Customer Loyalty with Contextual Interactions

customer loyalty

The retail industry has experienced a seismic shift in the past two decades. Where brick-and-mortar stores were once the only location to buy what customers needed, consumers now have dozens of physical and digital options to buy everything from furniture to diapers. Online-only stores like Amazon, Wayfair, and others have hollowed out old-guard retailers like Macy’s and Sears, resulting in traditional stores losing millions of dollars of marketshare over the years and causing store closings.

The situation doesn’t look to be getting better. Data from RetailNext shows an average decline of 8.4 percent in retail sales between February 2016 and February 2017, and an average in-store traffic decline of nine percent over the same period. Consistent poor showings for traditional retailers has intensified competition for share of wallet, with many brick-and-mortar brands adding e-commerce capabilities to increase their reach. The emphasis on share of wallet has also resulted in most traditional retailers creating customer loyalty programs and using number of members as a key performance indicator.

This makes sense. Loyal customers are generally more engaged, and tend to spend more money than one-off purchasers. Bain & Company recently found that a five percent increase in customer retention (which means the brand has more loyal customers) can lead to more than a 25 percent increase in revenue. The benefit of increased customer loyalty is not in doubt, but many programs are little better than lists of customers who receive occasional sale offers and coupons when the retailer wants to push a particular item.

There is a better way to increase the number of loyal customers, and that is through providing contextually relevant interactions based on customer behavior and history with the brand. Emphasizing relevance over traditional broad-based approaches will lead to more loyal customers, higher share of wallet, and more efficient marketing in the long run.

Contextually Relevant Interactions and Customer Loyalty

A “contextually relevant interaction” is a message or offer that is informed by the customer’s behaviors, preferences, or previous history with the company. The interaction between brand and customer is provided within the moment of need, either in real-time or at least within the same session. Think of an in-store beacon that sends out a product or service offer via a mobile app when a customer breaks a geofence. Consider how this could be made more powerful when the offer comes within the context of knowing the customer’s recent shopping history.

Contextual interactions can enhance a retailer’s loyalty program by ensuring brands treat repeat customers appropriately, which a recent CMO Council report found was the top frustration for a third of consumers.  Broad-based marketing campaigns that aren’t informed by a customer’s history often lead to customer attrition. Customers tend to be most susceptible in their moment of need, and if retailers can capitalize on that moment, they are more likely to gain a repeat customer.

The Paradox of the Brick-and-Mortar Store

There is no telling when or through what channels the customer will interact, so retailers must adopt an omnichannel approach to customer engagement – especially if they have a significant brick-and-mortar footprint. An omnichannel approach that blends digital and in-store engagements can outpace growth in either arena alone. Paradoxically, the same physical footprint imperiling traditional retailers today can also be their savior if leveraged as part of an integrated customer engagement strategy.

Providing contextual interactions while customers are in-store, whether through beacons, geofencing, or accessing POS data in real or near-real time, can result in increased sales through serving up the next best offer at the moment when the consumer is most likely to act on it. This blend between the digital and the physical can, and does, make a significant difference in customer retention and overall loyalty to the brand, if done effectively. Such is the power of effectively leveraging context to provide the right kind of engagement at the right time to the right customer.

Today’s retail industry is competing harder than ever for share of wallet. The retailers who succeed must heavily leverage customer data to provide contextually relevant interactions in the moment of need to increase engagement, improve loyalty and retention, and grow revenue per customer.

 

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Carol Wolicki

Carol Wolicki

Carol Wolicki brings more than 20 years of technology marketing experience to RedPoint Global. As Vice President of Marketing, Carol is responsible for the overall direction of the company’s marketing initiatives.

Previously the Vice President Marketing for WebbMason, a marketing services & software solutions provider, Carol also held senior marketing management positions at Unica (now IBM’s EMM solution), integrated marketing agency Kelley Habib John and marketing software vendor Ennect, a division of Elliance. She has extensive experience in international marketing and customer event management.

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