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Is Customer Loyalty Decreasing?

A lot of industries are seeing a dramatic shift in customer behaviours and customer expectations. The result has caused businesses to struggle to keep customers in markets where, historically, customer retention wasn’t a problem.

Although some of these shifts caught many businesses off-guard, the reality is the COVID-19 pandemic accelerated a rising tide.

The upshot has been a rapid decline in customer loyalty across online marketplaces from traditional eCommerce to online gaming. An acceleration of a trend that was already gaining momentum.

This is in part because customers are expecting more. From an area of commerce that traditionally generated sales relatively easily, it’s been something of a system shock.

Businesses that are slow to respond to the demands of their customers will find themselves with no customers at all.

For the first time in a long time, customers are dictating the way the businesses they spend money with operate. If businesses get it wrong then they will quite simply go somewhere else.

The Impact of COVID-19

For many online businesses, the key traffic driver for their site was low prices, free shipping and aggressive introductory offers.

The pandemic created a perfect storm of specific circumstances that made online shopping significantly more competitive while driving prices up, rather than down.

Many businesses were forced to go online, despite traditionally being a brick-and-mortar offerings. Lots of people saw an opportunity prompting a huge surge in new online businesses.

However, it also sparked a supply chain crisis and a sharp increase in costs for both shipping and raw materials.

With many online businesses operating on tight margins to stay competitive, the costs were too much to absorb. The result has been rapid and sustained price increases across most online offerings.

For an industry that relies heavily on discounted goods, the result has been a dramatic shift in customer behaviour.

The overwhelming majority of customers will now shop around for the best price. A similarly high proportion also prioritises free shipping or a relatively low spend threshold to get free shipping.

The problem with this approach is that customers only perceive the value of shopping online as saving money. This presents a long-term problem for online businesses.

The Loyalty Vacuum

The problem with a business model that relies on discounts, promotional offers, free spins and 10% off when you sign up for a newsletter is that it’s not sustainable.

Amazon has been instrumental in creating this price lead environment and has been steadily extracting itself from it. Instead, their discounts aren’t as deep but deliver value by offering other services instead. Like Amazon Prime.

With businesses having relied so heavily on these tactics to lure new customers to their site, they now find themselves in a loyalty vacuum.

In truth, they were always in one, it’s just taken all these market conditions to realise that loyalty wasn’t decreasing; it didn’t exist.

The evidence was always there. The rising cost of customer acquisition was a clear indicator. Businesses are doing all they can to win new customers, but little to retain their existing ones.

We are in an ecosystem where customers are encouraged to only spend when there’s a discount, sale or promotion available. 

Customer Retention

Despite the fickle nature of most customers, the majority would much rather spend money with a few brands they like.

However, the faceless nature of online makes it much harder to build those relationships. Again, this is largely due to the highly transactional nature of using websites.

Users log in, buy a product, place a bet, play a game etc and then leave. The chances are they won’t have any communication at all from the business unless something goes wrong.

The result has been good service equates to low prices and fast delivery.

The post-pandemic world has made that much harder to achieve. Therefore, businesses need to invest heavily in customer retention, over customer acquisition.

Customer retention takes many forms but hinges around creating a customer experience users come back for.

All the research suggests that customers would rather pay slightly more if they receive better service. Similarly, they are more likely to shop with a business that has a compelling story or that they identify with.

While there are some wider marketing discussions around these points, let’s focus on what you can do to retain customers.

This goes beyond free shipping – although it helps.

Rather it’s about adding value in other ways. Tailored content, unique offers based on their purchase history and exclusive events are all powerful drivers.

While discounts are still a perfectly acceptable way to retain customers, make them more valuable.

Leverage purchase history to give your customers offers that are relevant to them. The same logic applies to your communications.

If your customers want great service, that extends to receiving emails too. Don’t lump your audience into a single mailing list and bombard them with generic offers.

It didn’t work well in the past. It’ll work even less now customers are expecting considerably more.

Building a Customer Retention Strategy

If you want to build (or rebuild) a loyal customer base, you need to implement customer retention strategies.

That means you need to take the time to understand who your customers are and what they want. Not just in terms of incentives but the kind of relationship they want from you.

Some businesses engage heavily with the customer base, building communities on forums or on social media.

This is a highly effective way of building loyalty. However, you need to have a solid core of happy customers first. Mainly because without one, there’s no one to engage with on Facebook.

The good news is that you have all the information you need to engage with your customers in a way that builds trust.

Consolidate your customer data, from across your entire estate, to create a Single Customer View. From here you can start to get a deeper insight into what your customers are interested in.

Everything from recently viewed products to purchase history is within your systems. This can form the foundation of highly personalised communications. 

You can use it to create tailored offers, time-limited discounts and product exclusives. All of which will keep your customers coming back for more.

Not least because the sense of exclusivity gives you customers both a sense of belonging and a feeling of being on the inside. Of having access to knowledge and products that no one else does.

This will help your customers to form a deeper, more meaningful bond.

Sustaining Loyalty

For your customer retention strategies to work long-term you need to be able to sustain them.

This means making sure that you have the data, the insight and the processes in place to ensure you can meet customer expectations.

Personalised communication is an excellent start but consolidating your data into a customer data platform is just the beginning.

You will be in a position to create unique customer experiences. Even to the point that the website one customer sees will be different to another. This ability to tailor the end-to-end customer experience is incredibly powerful. Not to mention a major differentiator between you and your competitors.

The more you invest in your repeat customers, to transition them to loyal customers, the more profitable you will become.

Purely by virtue of the fact that you won’t need to spend as much to get loyal customers to spend with you. Repeat customers also spend as much as 69% more than new customers.

Increasing retention by 5% can boost profits by a minimum of 25%. Considering they’re spending more money, to begin with, that’s something worth investing in.

Loyalty programmes are another robust approach to customer retention. There’s a programme to fit any type of business model. The only thing to consider is that the loyalty programme is actually worth your customer’s while.

If you make it too hard to accrue points or the rewards aren’t relevant to them and they will disengage. Loyal customers who fall out of love with your brand are almost impossible to win back. Psychologically they feel let down by you and it’s easier for them to just walk away.

Keep this in mind when tailoring your loyalty programme experience.

Customer Retention creates Loyalty

Leverage your customer data to create engaging and rewarding customer experiences. A unique and personalised customer experience increases customer retention and grows loyalty.

To learn how you can use a customer data platform to engage with your customers, get in touch today.

Click to download our guide to increasing eCommerce conversions and retention.

About Xtremepush

Xtremepush is the world’s leading customer data and engagement data platform. We work with various top brands within the eCommerce industry. Schedule a personalised demo of our platform to learn more about how we can help your brand drive repeat customers and increase revenue.

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