Marketing
Loyalty success metrics to start the year on
Christine Sullivan, director, product development for SessionM, a Mastercard company, explains why brands need to determine the best ways to understand and evaluate loyalty efforts to achieve success in the near term and assess readiness for 2021.
January 1, 2021 by Christine Sullivan
As we near the end of a tumultuous 2020, many retailers are struggling to measure success of their loyalty programs with their usual metrics. The retail landscape has changed entirely. Consumers are shopping for varied reasons, in different ways, and more consciously than ever before. As such, brands need to determine the best ways to understand and evaluate their loyalty efforts to achieve success in the near term and assess readiness for 2021.
Although shopping habits have changed in 2020, that does not mean that consumers have stopped buying altogether. Despite declines in in-person traffic, recent data from the Department of Commerce shows consumers spent $347.26 billion online with U.S. retailers in the first six months of 2020. That's up 30.1% from $266.84 billion for the same period in 2019. While precautions around the pandemic continue to be a critical factor in purchasing and shopping behaviors, there is no doubt that consumers are relying more heavily on the ability to carry out shopping needs online.
Basket size does matter
Shoppers today are savvier than ever before. Due to COVID-19, consumers are more cautious about the amount they spend, as well as how they are spending. For example, a survey by Acosta found the recession is adding stress for many shoppers, with 37% worse off financially than they were pre-pandemic — including 9% who are much worse off. With limited resources, consumers are seeking out the best deals from a variety of retailers to ensure they are getting the best deals across the board. In fact, 45% of shoppers claimed that low prices were a key factor in choosing where they would conduct their spending now and post-pandemic.
Consumers are far more likely to carry out the bulk of their spending at an individual retailer if they can get better deals on a majority of products. So, how can retailers ensure customers are choosing their online shopping experience over others? By focusing on basket size.
According to a report by digital marketing specialist Catalina grocery shoppers' trips per month decreased by nearly 11% in August. However, basket size has swelled 19% in the same period. The rate at which consumers are making purchases has resulted in the perfect storm for retailers. With in-person shopping down and larger online purchases up, maximizing basket size is critical.
Trends in basket size can also explain how shoppers are behaving in today's environment. Monitoring these changes, as well as other customer data, is crucial to adapting to the new retail climate.
Retention and churn
Understandably, many will be tightening belts this holiday season. Loyal customers make up the foundation of a strong business, so understanding retention and churn can reveal quite a bit about the health and future of the company.
Churn ultimately describes how close or far buyers deviate from their traditional purchasing patterns. By tracking these patterns, retailers can identify how their most loyal consumers are shopping today and predict when they are beginning to return to normal. Understanding the scale of churn and the type of customers with the highest churn rates gives some hint as to how consumers are responding to the uncertainty we're experiencing.
Since retention efforts typically have a much greater return than new acquisition spend, there is value in understanding when and whether customers are likely to stop purchasing. With that, retailers can determine how best to incentivize customers to stay engaged.
Data that's actionable
Today, customer data is arguably more important and telling than ever. Forrester reports that 74% of firms say they want to be "data-driven," but only 29% say they are good at connecting analytics to action.
Through analytics, retailers can understand customers' new purchasing behaviors, allowing them to identify the factors that are most important to shoppers in the COVID-era and deliver action at the moment of greatest impact — when the customer engages with the brand.
For example, retailers must process transactional data across touchpoints to provide relevant offers and understand how to incentivize checkout. When retailers recognize a customer at checkout, they must have the ability to return eligible offers directly to the point-of-sale. Retailers can then direct targeted or earned discounts to customers that they may not have been aware of or forgot to use. This creates a tangible sense of value for the consumer whether or not they are a member of a loyalty program. Providing real-time experiences and offerings promote larger purchases, more frequent transactions, and greater advocacy.
Benchmarking loyalty
While the COVID-19 pandemic has created uncertainty across all industries, it is clear that retailers and consumers alike are able to adjust to meet these unprecedented circumstances. Our wants and needs have changed as we've learned to streamline our purchasing efforts.
Identifying trends in basket size and churn and retention, as well as connecting analytics to action, enables retailers to better understand how their most loyal customers are adapting to the change. With that, retailers can ensure they are continuing to find ways to lean into online engagement, think long-term, and show commitment to consumers and the community — ultimately bolstering customer loyalty and demonstrating readiness for success on the road ahead.
Christine Sullivan is director, product development for SessionM, a Mastercard company
About Christine Sullivan
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