Topic(s): Customer Centricity Customer Engagement

Loyalty Is Dead, Long Live Goodwill

[LONGREAD] It’s no secret that across the globe a massive shake up is happening with retail loyalty programmes. An average household is a member of 29 different loyalty schemes, that’s 29 potential cards. As I look at my desk I have 5 different coffee cards, some of them the same, why? Because every time I go out for a coffee I forget them/can’t be bothered. I mean, come on guys, do you really think a free coffee is going to make me come into your shop over the 20 or so I have within walking distance? [LONGREAD]

 

So why is it that the high street persists in offering me the same vanilla experience every time I walk into a shop?

As any loyalty marketer knows, most people on your loyalty scheme will provide scarce incremental revenue. In fact, one major retailer (sorry, no spoilers) only got reasonable incremental revenue from less than 5% from the 2mio on their scheme. That’s a staggering 1.9mio that didn’t get it. This is just one example from many, but it does show one thing, loyalty as we know it is dead.

Customer Experience - the next battleground

Debenhams announced to a big fanfare “we are redesigning the store experience.” Their CEO Sergio Bucher said some of their stores were tired, unprofitable and customers had to “go on a treasure hunt” to find what they need. Something must change. He has a passion for improving customer experiences, as such the stores will be transformed into areas where you can get pampered, have your nails done and more. This is no vanity project for him, it is vital to the long term commercial success of the organisation. And more importantly this will help to build goodwill amongst a beleaguered customer base.

It’s easy to see why he wants to re-design the experience, people’s high street shopping habits are changing.

“If we look on a global basis, in the west we have probably hit peak stuff. We talk about peak oil. I’d say we’ve hit peak red meat, peak sugar, peak stuff … peak home furnishings,”

Steve Howard – head of sustainability Ikea

Customers no longer go to the high street for pure consumerism, they want an experience. Our wardrobes are full of 10% of the things we need, 90% of the things we want. If Steve Howard is right, and I think he is, retailers need to work more in this area if they are to survive and thrive.

How can retailers win in the experience economy?

Retailers are doing it already, Urban Outfitters bought upscale Philadelphia pizza shop Pizzeria Vetri. The Body Shop® opened a new flagship store in Leeds with a complete range of extra pamper services. We can predict this is the way the market is heading, consumers want an experience beyond the norm. But you must build the right experiences for the customer, otherwise the damage you could do to your brand would be catastrophic. As many as 30% of consumers that have a terrible experience will drop your brand. Bottom line – get it right and shutter poorly performing programmes quickly.

Start with a pilot

Don’t jump straight in and put an upmarket pizzeria into your stores, think about what your customers really want. If you want to build great in-store experiences you need bold ideas. As this is the new battle ground in Retail as time goes on competition is going to get fierce.
As I was researching this article, many, many people suggested building a data first strategy. Look at your data, see what your customers are doing and build your experience around that. I have a couple of problems with this:

  • Firstly, by just looking at the data you miss out on those truly revolutionary ideas that totally change a business for the better. 
  • Secondly, I’ve worked with a few large retailers, understanding their data has always been a major issue.
  • Thirdly you will get bogged down with numbers, your project might stall because people will focus too much on the figures, and not enough on the vision.

If you want to build a real vision of what the retail experience is you must start with the blue sky (you have no idea how much I hate this term – but here it works). Get a small initial team together, I can’t stress the word SMALL here enough. Too many and again, you will run the risk of getting stuck. These people must be visionaries, I’m not talking about Steve Jobs (although if you have a Steve Jobs type, use him/her), but the people within your organisation who can really think outside the box. 

Burberry are a prime example of using tech to deliver great experiences via the use of smart mirrors. Customers will be able to see themselves in the mirror wearing the new clothes without having to go through the changing room process (http://memorymirror.com/). What this means for customers, well you can try on many more things before you choose the ones you want. For the millennial generation, it hits a certain time pressurised sweet spot.

Develop your pilots with care, the key principle is that each version should have a positive impact on the customer experience. Whether it’s an in-store workshop, VIP event, free pizza, high tech mirror etc. The aim is to get more people into the store and increase overall lifetime value of the client.

Choose your pilot stores with care

This is where you start bringing data into the equation. If you are large enough to be able to run several pilots you need to choose where you put them. If you only try them in your flagship stores, or with your most loyal customers you will only ever see one side of the story. 

You must pick a mix of stores if possible, from poorly performing up. Same goes for any customers you want to invite onto the pilots as well. Each cohort should represent a different customer segment. Seeing the impact that experience development has on poorly performing stores is as important as the well performing ones.
Monitor the experience impact across each cohort

This is where data is your friend. You must monitor the impact that each pilot has on the following key measures:

  • Net Promotor Score™ (NPS™) - which pilots increase the likelihood to recommend
  • Customer Satisfaction (CSAT) – which pilots improve overall customer satisfaction
  • Lifetime Value (LTV) – how do the pilots effect the lifetime value of the customer

One of our major Benelux clients did exactly this, they were noticing that their scores were going down, and people were coming into their stores less. Something had to change so they developed a fresh look pilot stores. One of the most fascinating things to come out of the pilot was that customers were talking more about how great their staff were. In the control stores they were mainly talking about their products. The bottom line, if you want to provide a memorable experience it will be people led, not product or trend or gimmick.

Numbers are great, but have you ever wondered why?

Our client was measuring more than just the number, they were considering the why as well. By understanding why people gave a good or bad score they could make the right business decision. The impact on their bottom line has seen a 4% growth. Yes, they got it right, but more importantly they tested and iterated based on the feedback they got from customers.

Your people will make the magic happen

Jeez, that’s a cheesy sentence, but never has it rang truer. If you are going to inherently improve experience it will be people led. Operationally that can be difficult, your running say, 5 pilot stores, each with a different pilot. Depending on the size of store, that could be as many as 100 people that all need to pull in different directions. Staff are confused about what they need to do, staff satisfaction plummets and your pilots fail. This is, I’m sad to say something that happens all too often and one of the reasons true customer centricity ends up being consigned to the cutting room floor. 

The only way to make it happen right is to get your all your staff behind the project. There are several ways in which you can do this;

  • Include some frontline staff from each pilot store in the team developing the pilots. This will not only give you valuable insight into what’s happening on the frontline, but also make them ambassadors for your project with their colleagues.
  • Work closely with your training department to build a bullet proof training and communication plan. People like to know what’s going on, they don’t like to be surprised. Communicate with them effectively and at the right times then they will be more likely to support you.
  • Feedback regularly, tell your staff what’s going on. This is especially effective when you can send them real customer quotes of how well they are doing. Everyone likes a pat on the back every now and then to let them know what an excellent job they are doing.

If you want to avoid failure you must bring people on the journey with you. Find new and interesting ways to inspire them through providing them with regular customer feedback.

How does this all link to goodwill?

Firstly, read this article by Rik Vera. Goodwill is what happens when you consistently provide customers with great experiences. Customers who have high levels of good will are more likely to forgive you when things do go wrong. With the age of the internet we sometimes lose sight of how to build a customer centric culture. By providing customers with great experiences we naturally build goodwill. Customer experience is a way to measure goodwill, and by the measurement of it we can plan on how to improve it. Don’t lose sight of the human-to-human relationship, it’s key to success in today’s ever competitive market.

Summing up

If you want to improve customer loyalty and build goodwill you must build an experience that matters. People remember experiences more than they do earning another 50 points. When you have the right experiential programmes in place you will improve the lifetime value of the customer.

Don’t get me wrong, it will not be easy to find a winner. It’s likely you will have to continue innovating in this space if you are to build long term value for your business. Make sure you pilot, monitor, iterate and scale correctly, get it wrong and you could end up damaging your brand.

At the end of the day it’s your people that make it happen, and your people that build goodwill with your customers. That 1-1 personal connection is something no amount of money or tech can buy. But it is something that tech can monitor.