Is It The Carrot Or The Stick For Customer Retention?

By Will Roche, via the RocheonRetail Blog

I love to hate airlines. I feel like an indentured servant always working off my rewards and benefits. All airlines are all the same to me and I have clawed my way to gold or platinum on every one of the major airlines over the last twenty five years. I know people that rather than taking a direct flight with a non-affiliated airline for one hour, will take four hours with a connection just to get the points from “their” airline. I believe airlines tend to stay away from the word loyalty and use ambiguous names like Medallion or Advantage. I don’t feel like I am being rewarded because I flew with their airline. I feel like I had to pay penance to get the service everyone should get, or should they? I guess everyone cannot get on the plane at the same time?

Retailers generally do not have the luxury of treating their customers badly and then making them earn the right for good service by the spending of more money. Do you think they would if they could? Fortunately retailers must earn your retention by doing the many things that make you feel special and have you believe you got a deal? Retailers pretty much have to use the carrot and not the stick as in the case of the airlines to grow their business. Even though Amazon or Wal-Mart are huge,they know they can be displaced tomorrow by some new comer or competitor. This is healthy and important. No matter how much we believe a retailer has a hold on us, there are always multiple choices. In the case of airlines you do not have that many choices and those choices are getting less. Think about the upcoming United and US Airways merger? Will that make services better and prices go down?  Because of this carrot or stick approach which is created by the economic theory of scarcity, we can look forward to a future of ever increasing better experiences in our daily shopping.

There is a clear financial motivation for a retailer to provide you with great service! The great services come in many flavors and are the primary differentiators of their business. This is why the omni-channel, mobile, customer-centric initiatives are so critical to a retailers future. Besides having highly trained and passionate employees (all employees not just sales associates) technology can also be used to remove much of the friction in the sales process. Why is it important that I can find a product on your website and find out if my local store has it in stock? Because if you don’t your competitor will! There are numerous examples like this that a few years ago were rare, but now are expected. These new expectations will continue to grow and it will be great for the consumer.

Now comes the hard part. As a retailer how do you do all of this exciting stuff and still make a profit? No simple answer here and the answer is some retailers will fail. This is the cycle! As a retailer you must go back to your core and first make sure you have a solid foundation with your leadership, vision and culture along with your products and services. This is a continual re-examination which requires commitment. The foundational part of your retail business which is dependent on the carrot and not the stick is what you build all of this technological innovation on not the technology itself.

Lastly seek outside help with technology. You are not in the business of creating technology solutions and if you are you should look hard as to why.   Amazon and Wal-Mart might be able to pull it off, but certainly not a mid-market retailer. Your leadership team must have an objective perspective and proven advice when considering the purchase of technology to advance your retail business. You cannot do it alone!