Building Customer Trust
In the New Economy
By Lynne Cooke
More customers, anxious about the downward economy, are remaining loyal to the stores where they currently shop rather than switching retailers. These “advocates” of existing stores differ from “shifters” who seek new retail relationships.
Those are the keys results of a survey of 30,000 U.S. consumers, including 9,700 in grocery, to understand the factors driving shopping behavior and spending. The study was conducted by the IBM Institute for Business Value.
“Advocates – that is, shoppers loyal to their primary retailer – have radically increased as consumers are relying more and more on retailers they trust,” Craig Stevenson, Global Portfolio Leader for IBM, said in a presentation recently in Las Vegas at the CPG and Retail Summit hosted by Information Resources, Inc. (IRI).
Most analysts believe that such shopper insights serve to encourage retailers and their collaborative trading partners to focus on loyalty marketing programs to maintain the
shopper base.
Retailers that deploy the right strategies to attract and retain these loyal shoppers will be positioned to emerge as winners, according to Stevenson.
The IBM Institute for Business Values was interested in learning how shoppers are spending their dollars across several business segments, and wanted to identify the key attributes which will help retailers attract and/or retain shoppers.
According to Stevenson, the study revealed that “the new economy has forced consumers to fundamentally change shopping behavior as less discretionary budgets have led them to sacrifice in some spending areas.”
People are less willing to experience the unknown during tough economic times, he said; as a result, “advocacy” is increasing. In fact, from 2007 to 2008, the amount of advocates in grocery increased by 48%. One of three grocery advocates has increased spending with their primary retailer over the past two years, which is 10% more than non-advocates.
The IBM study found that while shoppers’ discretionary spend has decreased, the grocery channel has been affected less than others. In fact, research revealed that while 28% of shoppers said they will be spending less on groceries, 22% predicted that they will be spending more.
“Consumers are dealing with budget shifts by buying fewer items, using coupons, waiting for sales, or buying lower-priced items [such as private label],” said Stevenson.
He said the following basic shopper advocacy behaviors increased dramatically from 2007
to 2008:
- Willingness to recommend one’s primary retailer to friends and family (increased from 39% in 2007 to 50% in 2008)
- Willingness to increase purchases if the retailer expands its assortment to products currently only found at other retailers (rose from 33% in 2007 to 43% in 2008)
- Willingness to stay with their current retailer even if competitors start offering the same products and services (went from 21% in 2007 to 38% in 2008).
The store attributes most important to advocates were: quality, store experience, convenience, product availability, and assortment. Conversely, “shifters” value the following top five attributes when making an advocacy shift decision: price/promotion, convenience, product availability, assortment and quality.
The retailers with the highest number of self-professed advocates were:
The also study found that eight of ten of customers will commit to a deeper product or service relationship with a brand or retailer after a satisfying experience. Also, one of three relies on recommendations from friends and family before making a purchase.
IBM helps retailers formulate, implement and operationalize programs to respond to changing customer buying behaviors, align organizational structure and metrics, and transform customer-centric processes.
MARCH 2009
Members of Loyalty Programs
Are Best Brand Champions
By Lynne Cooke
New Word-of-Mouth (WOM) research shows that reward programs are the best source marketers have for finding consumers who will recommend their brands, according to consumer researcher Colloquy.
Data drawn from the researcher’s recent study, “The New Champion Customers: Measuring Word-of-Mouth Activity Among Reward Program Members,” shows that 68% of WOM champions in reward programs will recommend a program sponsor’s brand within one year.
Consumers who are loyalty reward program members are far more likely to be WOM champions for their favorite brands than non-members. The more active their program participation, the more likely they are to exhibit WOM behavior.
Here are some of the key findings:
- Reward program members are 70% more likely to be WOM champions (defined as customers who are “actively recommending” a product, service or brand) than the general population
- Fifty-five percent of reward program members are self-described WOM champions
- Only 32% of non-reward program members are self-described WOM champions
- Sixty-eight percent of WOM champions in reward programs will recommend a program sponsor’s brand within a year
- Actively participating reward program members are over three times more likely to be WOM champions
- Reward program members who have redeemed for experiential rewards are 30% more likely to be WOM champions than those who have redeemed for discounts.
Colloquy maintains that a company’s loyalty marketing database is an under-utilized
social network that marketers would do well to exploit in the pursuit of positive, profitable
WOM activity.
“If your goal is to cultivate and encourage ongoing, profitable customer WOM activity, all
of the tools exist within the loyalty marketing database,” said Colloquy Editorial Director
Rick Ferguson, who co-authored the study with company partner Kelly Hlavinka. “Loyalty marketers should find the champions buried within their program memberships, and build relationships that reward them for positive WOM activity,”
In October 2008, Colloquy conducted a consumer research survey designed to explore the intersection of consumers who participate in reward programs and their WOM activity regarding brands, reward programs and specific product categories. This survey of 3,610 U.S. and 3,583 Canadian consumers was subdivided into specific demographic segments and by specific WOM behaviors.
The research also examined the motivations of WOM champions and uncovered why they engaged in WOM activity regarding their favorite products and brands and what categories of offers and information they were most likely to pass along to others within their networks.
The top five motivations of WOM champions were:
- To tell manufacturers what I think (73%)
- To get smart about products/services (68%)
- To be the first to discover new items (68%)
- To get free product samples (63%)
- To share my opinion with others (61%)
“WOM champions crave a deeper relationship with their favorite brands and are searching for ways to provide feedback,” said Hlavinka. “Four of these top five responses also reflect the importance of confirming self-worth, and, of course, 63% of champions admit that they engage in WOM activities to earn free stuff.”
The study is available as a free download at www.colloquy.com/whitepaper.
New Research Tool Determines
Brand Loyalty of Consumers
By John Karolefski
A proprietary research technique that identifies actual purchasers of a particular brand based on the actual amount that they spend has been developed by Partners In Loyalty Marketing (PILM).
The Top Shopper Dialog (TSD), which tells manufacturers the “why” behind consumer behavior, is now available after successful performance with select CPG companies over the past year.
“This new approach avoids one participant commandeering the session or driving responses by others as often happens in focus groups. It also avoids the ‘yes-no-yes-no’ cadence that sometimes marks telephone quantitative research,” said Michael Schiff, managing partner of PILM. The Chicago-based strategic consulting and research firm helps retailers and manufacturers grow same-store sales and consumer loyalty.
Consumers are selected to participate in a TSD based on shopper loyalty card data from cooperating retailers. The interviews themselves are telephone one-on-ones in which a PILM staff member directly engages participants in a natural, free-flowing conversation.
“Since we know interviewees are purchased confirmed, we can start the conversation at a different point than one might with other research methodologies,” said Schiff.
A recent TSD was successfully performed with a large beverage manufacturer at two retail chains. Concerned over a slumping economy, this manufacturer was developing a loyalty program and wanted to know how to differ messaging between key demographic targets. The brand learned that it was less about which demographic bucket they were in, and more about how frequently they purchased.
“They thought they had a uniform group of Heavy Buyers, which they had a lock on,” said Schiff. “The truth was that they actually had three groups of Heavy Buyers with varying degrees of loyalty and rationale for how often they interacted with the brand.”
The TSD was originally designed as Heavy Buyer research to help manufacturers transform their base message into something that this small, but extremely important, group of buyers could respond to.
“Most Heavy Buyer communication is simply brands’ existing creative, just repurposed,” said Schiff. “Heavy Buyers have already bought into that message. The key is to build upon that, find that next level of communication that increases loyalty, build a relationship to the brand, and create advocates.”
The TSD has also targeted Lighter Buyers to see what may propel them to “heavier” status. Most recent requests, however, have been in determining the driving forces behind why some loyalty consumers are leaving the brand.
“In today’s declining market, it is no surprise that manufacturers are more worried about attrition than before,” said Schiff. “What may be surprising is that, while it does play a factor, price is not the only reason consumers leave a brand. It may not even be the first one they mention when you speak with them. In fact, more often than not, the reasons why somebody stays and others leave are closely linked. This is good news for any manufacturer looking to increase their overall retention rate.”
More information: Michael Schiff at 312-932-0285, Michaels@PartnersILM.com, or visit www.PartnersILM.com.
