Articles

RSS

Retailers will need to strike a balance between offering loyalty programs and collecting customer information, according to the inaugural Retail Demand Insights 2006: What Drives Consumers?, a new annual NRF Foundation report, co-developed with Adjoined Consulting and sponsored by SAP, the world's leading provider of business software solutions. The study provides insights into what retailers can do to better meet untapped shopper desires and increase revenues and market shares.

Now more than ever, retailers are being challenged to create loyalty among their customers. According to the study, the number of shoppers stating that they were long-term loyal customers dropped in 2006 to only 77.2 percent compared to 83.8 percent in 2005.

While consumers do want to pledge their loyalty, retailers are going to have a tough time figuring out just how to build their allegiance. That's because consumers state they are only willing to share a small portion of the much needed personal information that retailers need to develop traditional loyalty programs. According to the study, the most acceptable information shoppers were willing to give retailers include their name (89.8%), e-mail address (78.1%), street address (60.7%), and past transactions (46.8%). Consumers were least likely to allow retailers to track weight (14.4%), income (12.5%), job title (12.1%), employer (10.9%) and net worth (8.2%).

"Retailers looking to create loyalty will need to walk a fine line between specializing their services to customers and invading their privacy," said Kathy Mance, NRF Foundation Vice President. "The more trust and goodwill a retailer builds, the more likely it is they will have a long-term loyal customer base."

When it comes to reaching new customers in 2006, television (31.7%) has replaced direct mail (21.0%) as the best way to influence their selection of a new retailer. Another underestimated, but influential media choice was word-of-mouth (17.7%).

While Internet advertising continues to grow exponentially, it still has little influence over consumers looking to choose a new retailer. Only 3.5 percent of consumers found Internet advertising effective. Other ineffective advertising choices included advertising before a movie (2.3%) product placement (1.8%) and radio ads (0.4%).

"While the fading of the 30-second spot is underway on Madison Avenue, retail consumers clearly still see TV as the most effective way to choose a NEW retailer," said Gary A. Williams, Managing Officer of Research for Adjoined Consulting. "Traditional advertising isn't going away anytime soon, but is more likely to morph into the integrated channel approach consumers already desire when making a purchase."

A key finding in the 2005 report was that consumers wanted to be able to shop and buy seamlessly across multiple channels such as the physical store, online and catalog. Today, consumers are rewarding retailers that employ a true integrated multi-channel approach to the shopping experience. The majority of consumers (70.2%) use a combination of all three shopping channels compared to stores only (17.5%) or online only (2.9%). Of those consumers that choose physical locations, indoor malls (36.0%) were the preferred option, followed by stand alone (28.4%) and strip malls (14.5%).

The NRF Foundation (NRFF) is the research and education arm of the National Retail Federation. A non-profit foundation created in 1981, the Foundation conducts industry research, develops education and workforce development programs, and promotes retailing as a career destination. The NRF Foundation benefits retailers, their associates and business partners and allies, and consumers in many ways. Research provides the basis for education about the industry and its importance to the economy, and provides industry and government leaders with an analysis of public policy decisions on consumers, retailers, and the economy. The Foundation's education and career development efforts, including NRF Universitywired, encourage professional development and excellence in performance of retailing for associates and executives at all levels.