Customer Retention and Loyalty Seen a Big Battle for Retailers

Slightly more than half of retailer respondents to an RSR Research survey [download page] released in September 2012 say that customer retention has become more difficult and building customer loyalty is challenging. This was the most frequently-cited top-3 marketing business challenge among respondents, ahead of marketing budget constraints owing to an uncertain economy (47%), and fragmentation of customer segments that make it harder to reach customers (41%).

Interestingly, despite indications that consumers are cautious about sharing their information online with retailers, just 13% of respondents to the RSR survey said that customer pushback against the amount of information they collect about them was a top-3 marketing business challenge.

Retailers Struggle to Identify Best Customers

Data from RSR’s “Marketing in Retail: Making the Case for the CMO” indicates that only 56% of respondents believe their company knows who their best shoppers are – and this is down significantly from 73% last year. Presumably, this contributes to the challenges faced by retailers in building customer retention and loyalty.

Still, a healthy 56% of respondents say that their customer loyalty program is a foundational element of their marketing strategy, and that is a marked increase from 39% last year. Where respondents appear to trip up is in targeted marketing across channels: just 43% say they are proficient at this, although that figure is up from 35% last year. RSR concludes that as marketers focus more on these areas, they are discovering how little they know about their customers.

Of course, retailers aren’t the only ones having difficulty identifying and engaging customers. Survey results released in March 2012 by Acxiom and Loyalty360 found just 49% of company executives surveyed from a range of industries agreeing that they know who their most loyal customers are, and the best way to reach out to them and get them to engage with their brand. Only 1 in 10 strongly agreed with that statement.

Top Performers See Greater Opportunity for Customer Engagement

Further details from the RSR report suggest that retailers with comparable store/channel sales growth of over 5% (“winners”) are far more likely than their under-performing counterparts (“laggards” – with comparable growth of less than 5%) to understand the opportunities presented by a more customer-centric approach. About two-thirds of winners say that more effective targeting – by capturing more detailed customer preferences – can contribute to their company’s success, while only 44% of laggards recognize this opportunity. Similarly, winners are more likely to see other factors contributing to their company’s success, such as developing better products and services through more direct customer input (62% vs. 32%) and putting a greater focus on customer experience, less on product (55% vs. 43%).

About the Data: The RSR Research survey was conducted online from June to September 2012 and received answers from 131 qualified retail respondents. 28% came from companies with more than $5 billion in revenue in 2011, while 46% had less than $1 billion. Respondents sell a variety of products, and 80% have either their headquarters or a retail presence in the US.