The #1 Reason Why Your Customers Really Defect
(And a simple strategy to decrease defections.)
 According to many estimates, retailers are burdened with customer defections of 30% to 50% per year. This translates into a full customer base turnover about once every three years. To survive this lack of consumer loyalty, retailers are relying on frequent sales, heavy discounts, and frequent promotions. But instead of creating loyalty, these strategies have created a different result: price sensitive customers without a brand relationship, quickly hopping among competitors without warning.
Addicted to Discounts
The standard 10% off discount is no longer getting the response it once did, and retailers have found themselves addicted to heavier discounts: “20% off a single item,” “buy one get one free,” and “30% to 50% clearance weekend,” are direct mail and ROP’s leading headlines.
The Truth About Defections
How did retail end up in this predicament in the first place? It’s common to point a finger at Wal-Mart and other mass discount chains. However, research from Purdue University indicates the reasons for customer defection are simple (see chart). Unfortunately, “Poor Service Experience,” is the leader, with customers giving reasons, like: rude employee, unaccommodating, slow to respond, and unable to find the right person for help.
Controlling the Store Experience is the Key
The corporate marketer’s dilemma is the inability to control the customer experience inside the store. It’s the marketer’s responsibility to drive store traffic and to build a brand in the marketplace. Often, marketers take great pride in their ability to build a brand perception. But, once the customer drives to the store, that perception is often shattered by the reality. If the store was good before the experience, can it also be good after the experience?
The Opportunity: Combating Customer Defections
In some cases, the customer shopping experience is so polarized from the brand perception that the customer is essentially unbranded, and they’re likely to defect. So the marketer’s problem is simple: to lower the customer defection rate, marketers need to build and then rebuild the brand after the customer shopping experience. Most marketers already have the initial branding exercise down, but rarely do marketers invest in the follow-up to close the gap and pick up the pieces after the customer has had a shopping experience.
Recommendation: Thank You-Branding Campaign to Reinforce the Brand
after the Experience
If you were running a small retail store, you would create a positive post-purchase experience for your customers by talking to them about the values behind your brand, expressing your appreciation, making sure that they knew how to find help, and giving them a powerful reason to visit your store again, soon. However, it’s not reasonable or economical to expect store staff to call and thank each customer after each visit.
We have seen a number of clients execute these campaigns with impressive results – measured both in immediate repurchase rates and in lifetime value. We recommend crafting a personal message: to thank your customers, to reinforce the original brand notion that drove them to the store, and to invite them back again – with or without an offer. The message should be delivered on a weekly or monthly basis to customers that recently purchased from the store (or online). Based on results measured with other clients, it is further recommended to segment and test higher-than-average customer cells, as well as first time customer cells.
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| “We target the
messages to fit the customer’s transaction
history. We’ve had tremendous success with
our calling campaigns.” |
— Dianne
Binford, SR.
Director of Consumer-based Marketing
at
Jones Apparel |
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