The Loyalty Shift

When asked for the factors that most influence their loyalty to a retailer, consumers revealed a major shift in their views since 2008. The importance of customer service dropped 18 per cent among the general population, falling to second place behind competitive price. By contrast, in 2008, virtually all demographic groups ranked customer service the most important factor in gaining and keeping their loyalty, with competitive price finishing a distant second.

Even among most demographic groups that still rank customer service as the top driver in shopper loyalty, its lead is narrowing. In Quebec, its importance plunged by 25 per cent in 2010. Similarly, for both seniors and women it dropped by 20 per cent in importance. The only exception is young adults, whose views of customer service as the top factor in loyalty are virtually unchanged since 2008.

Despite the large drop in the importance customer service plays as a loyalty driver in Canada, the Canadian experience pales in complexion to the US, where a similar study by COLLOQUY reveals that low prices have become even further entrenched since 2008, leaving little room for retailers to win on anything but price.

"While the recession played a major role in driving consumers to low-price stores, even as the economy recovers the need to deliver a good customer experience and value is the new normal for all retailers," said Kelly Hlavinka, author of COLLOQUY Canadian Retail Loyalty Index and COLLOQUY Partner. "But value doesn't just mean low prices. Stores that can identify the shoppers that contribute most to their bottom line, and how to satisfy them, stand the best chance of survival and success," she added.

Winning strategies for the new retail normal

Since there can only be one low-price "leader" and given the risks to retailers associated with continuous price cuts, the COLLOQUY Canadian Retail Loyalty Index suggests the following strategies for retailers:

- Be wise about where you can win. While retailers may not be able to
beat Walmart on price, there are other places to win, from selection
to in-store service. Better yet, retailers can win by knowing and
understanding their most profitable customers and what they want.

- Deliver more value. While the recession hangs on, promotions aimed at
a retailer's best customers and partnerships can augment the value
customers receive in return for their loyalty.

- Collect the customer data you need to succeed. By casting the net wide
and collecting customer data, retailers can ensure their
communications, pricing and product selection hit the bullseye with
their most profitable customers.

- Look local. Examine additional marketing opportunities within a
tighter range of store locations to court nearby customers, and to
attract new and previously infrequent shoppers.

To read the full COLLOQUY Canadian Retail Loyalty Index visit: http://www.colloquy.com/files/2010-COLLOQUY-RetailTalk-Canada.pdf