Without a doubt, 2023 will represent great challenges for the retail industry. The closing of 2022 and the projections of what this year will be like will maximize the ability of retailers to retain their best customers and gain participation over their competitors. Inflationary trends in most of the world and more cautious consumer behavior on the part of people will be something we will see in 2023. One of the most important and fundamental focuses for the strategy in this industry will be to increase the customer lifetime value. (CLV) of its clients. CLV measures the net worth of a customer throughout their relationship with a company.
According to a study conducted by Bain & Co, the value of loyalty in retailers is very lucrative. Customers spend an average of $132 a month with retailers that have earned their loyalty, compared to $71 for those without. Likewise, Bain & Co points out that happy customers mean higher spending. Promoters spend more and are more loyal than other buyers (Happier Shoppers, Higher Spending: The Value of Loyalty in Grocery). The consumer trends that exist today such as fast delivery, proximity and greater purchase options, put maximum pressure on retailers to retain their loyal customers. The execution of the following best practices are a prevailing throughout this year.
1. The execution of the digital in the physical – “Phygital”
It is no longer a “nice to have”, it is an obligation. The coexistence of digitization in physical spaces to improve the experience of “phygital” customers in stores will be increasingly necessary. OXXO has just announced its most recent opening of the “Grab & Go” format, which has a fully digital system that allows customers to buy any product in the store, without having to queue and paying through an app, thanks to the installation of cameras and the use of artificial intelligence.
2. Service and personalized attention
The digitization trend does not reduce or eliminate the need for personal service in retail. This can make the difference to gain or increase loyalty in 2023. The human factor is still present, from excellent service at checkouts to avoid long lines to personal assistance in case a customer requires it, as well as keeping stores clean and ordered. Not for nothing, the customer service offered by Nordstrom’s stores is still legendary and is a guarantee of creating and keeping loyal customers.
3. Rewards and loyalty programs
Loyalty programs have been constantly evolving. Stamp cards have left their place for discount models, subscriptions, memberships and point programs. The foregoing must be based on the generation of value and better experience. Fake discount schemes no longer work. The customer recognizes when a brand gives them real benefits and a better experience that simplifies the moment of purchase. The Starbucks app is an excellent example that combines the shopping experience with the granting of benefits to users.
4. CX: customer experience
Throughout the purchase funnel there will be pleasant moments and also moments that stress the model. Retailers that do not understand this and are not prepared to face these situations may lose their best customers and gain a bad reputation. Return policies are a clear example of the above. There are brands that have understood the value of having clear and simple customer-focused return processes. Zappos, Amazon, Staples, and Nordstrom’s are a few brands that accept returns without friction or question. The foregoing might seem counter-intuitive for the business, but it is not if the effect it has on the CLV increase is studied.
5. Inclusion is a “must”
The younger generations are the ones who value it and create the greatest attachment to brands that take inclusion seriously. Race, ethnicity, age, LGBTQ community and other criteria must be taken into account to establish a true and genuine interest in these groups. According to a 2021 study conducted by Deloitte and published in part by The Wise Marketer, it establishes that 57% of consumers are more loyal to brands that are committed to working to reduce social inequities.
Understanding how customers buy and their level of engagement with retail is crucial. According to a report by Econsultancy, 76% of retailers say they prioritize loyalty issues for their customers, but only a third use CLV as a metric. Another factor to take into account is that loyalty investments have no return in the short term. Its effect is more of a medium to long term, so it requires patience, consistency and discipline to maintain a competitive, updated and customer-oriented value proposition. In the end, the retailer that complies with these principles and practices will obtain the positive effects over time.