Magazine Article | February 1, 2005

Does Technology Drive Customer Loyalty?

Source: Innovative Retail Technologies

Consumers are more loyal to well-stocked shelves and good service than price.

Integrated Solutions For Retailers, February 2005
Matt Pillar

Specialty and small retailers take heart - the screaming deals offered by big-box discount retailers will only score the big boys so many points in the competition for customer loyalty. There's fresh evidence that, while discounts drive traffic, customer loyalty is tied more directly to technology-aided issues like good in-stock positioning, smart store layouts, and positive customer experiences. In other words, the onus is on retail technologists to work in concert with merchandisers to drive store traffic and build loyal customers in unison.

Store performance management solution provider StorePerform recently commissioned Harris Interactive to poll 1,026 consumers on their loyalty to retailers. The survey findings support the idea that customer loyalty is an important by-product of merchandising and supply chain technology initiatives. In fact, 86% of consumers consider a well-stocked store a very important or important factor influencing their decision to return. In contrast, only 61% of those surveyed counted discounts or promotions as very important or important factors influencing their loyalty to a particular retailer or store. I had a chance to speak with Andrea Morgan-Vandome, VP of strategy at StorePerform, and Nikki M. Baird, director of marketing there, about their survey findings.

A consistent shopping experience (83%), an easy-to-navigate store layout (73%), and assistance from salespeople on the floor (69%) round out the most important indicators of customer loyalty. You might not be able to match your competition on price, but wouldn't a CRM (customer relationship management) solution help you out-service them and expose their second-rate customer service associates? Wouldn't a BI (business intelligence)-enabled planogram execution tool ensure an easily traversed layout from one store to the next? Wouldn't both help ensure a consistent shopping experience?

Discounts Create Traffic, Retail Technology Creates Loyalty
Surveyed consumers were asked how many times they visited a store to take advantage of advertised promotional campaigns or sales. Only 32% of them said they made that special trip one to five times. A measly 4% were motivated enough by advertised sales and promotions to visit a store more than 20 times. Slashing prices in an effort to build loyalty is clearly a low-percentage strategy.

The key to getting customers back in your stores repeatedly is meeting their expectations when they get there with a well-organized, well-stocked, and well-staffed store. Morgan-Vandome points out that the StorePerform survey results will be prepared and published in a report that will soon be made available to retailers. In the meantime, you can read about midsized grocer Hannaford's use of CAO (computer-assisted ordering) to improve its in-stock position - and subsequently the loyalty of its customers - in this month's feature story.