Best-In-Class Retailers Resort To Customer Loyalty Programs For Surviving Downturn

Aberdeen Group, a Harte-Hanks Company, surveyed 165 retail enterprises between February 2008 and March 2009, which shows that customer loyalty programs and similar relationship marketing initiatives are some of the most critical factors that are impacting the retailer's sales and customer retention performance in current difficult market conditions. Ninety percent (90%) of the Best-in-Class indicate at least "some level of success to very successful results" from their programs, compared to on average of less than a third of Average and Laggard retailers. "However, significant loyalty-related improvements are required in retail as almost half (47%) of Laggard retailers and more than a third (35%) of Industry Average retailers indicate "no change in performance" from their loyalty program. This indicates a null return on investment on customer loyalty program dollars spent towards loyalty process, technology management, and professional services," says Sahir Anand, research director - retail, and co-author of the customer loyalty report. The primary reasons for the lack of success of Industry Average and Laggard companies, and the success of Best-in-Class is due to the following factors:

• CRM data capture. Currently, 70% of Best-in-Class retailers capture the required CRM data at the point-of-service or the point-of-sale register, which is 1.5 times more likely than all others. The required CRM data fields enables companies to map transaction data with customer demographic attributes so that loyalty offers can be designed and developed in an effective manner.
• Customer analytics-based offers. On average, about a third of Industry Average and Laggard retailers can develop personalized product or service loyalty offers based on customer purchase analytics for their specific customer groups, compared to 52% of Best-in-Class retailers. Therefore, loyalty offers and programs are more precisely configured in the case of Best-in-Class companies leading to targeted offers that elicit better customer response or loyalty offer usage rates.
• Loyalty process execution. Less than half of Industry Average (40%) and less than a quarter of Laggard retailers (24%) possess effective automated loyalty process execution (customer sign-up, customer information look-up, and reward redemption) at POS. This leads to a high level of missed sales and customer engagement opportunity as retailers are unable to implement loyalty program activation and redemption goals.

Furthermore, according to Aberdeen data, even though 53% of retailers surveyed indicate that customers can join their loyalty program on the retail website, the same is not true at the store POS. Despite the growth in online retail sales, store sales account for bulk of retail revenue and customer traffic. A mere 37% of all retail respondents reported that customers can join their loyalty program via the POS system in stores. "This gap between the POS capabilities the retailers possess and POS processes that enable loyalty program implementation show that retailers are not taking advantage of the technology afforded to them," states Anand.

"Retailers need to raise the bar when it comes to customer loyalty technology applications. They have the tools but they do not know how to properly use them. Until retailers become more proactive, they will not see the return that is possible from their customer loyalty programs," says Chris Cunnane, Research Associate-Retail, and co-author of the customer loyalty report.

For more information, visit: http://www.aberdeen.com/summary/report/benchmark/5803-RA-customer-loyalty-retention.asp.

For additional access to complimentary Retail Research, please visit http://research.aberdeen.com/index.php/-retail.

About Aberdeen Group, A Harte-Hanks Company
Aberdeen is a leading provider of fact-based research and market intelligence that delivers demonstrable results. Having benchmarked more than 30,000 companies in the past two years, Aberdeen is uniquely positioned to educate users to action: driving market awareness, creating demand, enabling sales, and delivering meaningful return-on-investment analysis. As the trusted advisor to the global technology markets, corporations turn to Aberdeen for insights that drive decisions.

As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte-Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For more information about Aberdeen, visit: http://www.aberdeen.com. For more information about Harte-Hanks, visit: http://www.harte-hanks.com.

SOURCE: Aberdeen Group