3 ways technology is helping retailers boost loyalty

The retail industry was deep into an omnichannel revolution when COVID-19 entered the picture to drive 10 years of growth in six weeks.1 Customers quickly responded to the changing environment by changing shopping behaviors — leaving retailers to decode the new landscape of loyalty.

The biggest change so far? The dominant role technology plays in not just acquiring customers but also serving and retaining them.

“Loyalty in retail has always been a function of three things: price, product assortment and convenience,” said Chris Walton, founder and CEO of Third Haus, a retail consultancy. “That hasn’t changed. But what has changed is that technology is now an element across each of those dimensions, shifting how consumers think about their experience with a brand and the data retailers can access in order to optimize that experience.”

Few retailers see themselves as technology companies. And yet retailers must embrace many of the hallmarks of a technology company to deliver the kind of customer experience that will delight and retain long-term customers. Here’s a look at how new technology intersects with traditional dimensions of loyalty in the dynamic retail landscape:

Product pricing, promotions and pricing display have a powerful impact on loyalty because they set initial customer expectations. That’s also why so much thought and care should go into planning pricing — when you match those expectations, you build trust. And when you don’t, you weaken it. In fact, a Syracuse research study found that price displays on websites that include competitor pricing are more likely to drive purchases and loyalty.²

However, big box retailers have been more likely to embrace dynamic pricing — their prices change based on a store or a customer’s geographic location.³ It’s a risky move because we know consumers are comparing prices. In fact, nearly 70% of online shoppers compare prices on Amazon.com before making a purchase, according to a study by MarketingTrack. Add to that the increased use of third-party shopping apps like Shipt and Instacart, and these inconsistencies can damage customer perception of a retailer.

“Retailers that are consistent around pricing have a real-time understanding of all the options offered to their customers, both in the digital and physical world,” said Walton. “A successful omnichannel experience is one where customers see the same options — pricing, assortment, convenience — whether they’re buying in-store, online, or from a third-party provider.”

While consistent pricing is important to brand perception, competing on price alone can be tough, which is why so many retail experts are leaning into product exclusivity and personalized recommendations as a powerful lever for bringing in customers^.4

Exclusivity is a powerful tool in building customer loyalty. Exclusive timing promotes urgency, and exclusive merchandising and partnerships ensure customers choose your retail brand over another. For example, Target regularly partners with celebrities and design studios for unique product collections,⁵ and the popular e-commerce brand Universal Standard has collaborated with brands like Adidas⁶ and Erdem.⁷ Exclusivity can also drive conversions: 33% of the retailers surveyed by Digital Commerce 360’s 2021 Performance and Conversion report indicated that exclusive products were very important to optimizing their conversion.⁸

But while retailers might have previously relied on gut a bit more than analytics in merchandising, advancements in retail tech have shifted that balance, allowing retailers to make intuitive decisions supported by data. Retailers will be able to use this kind of intelligence to curate and segment merchandise selections for hyper localization and hyper personalization, as well as sense the needs of consumers and to respond in innovative and meaningful ways.⁹

We’re seeing this technology at play both in-store and online. In-store, retailers like Morrisons have been able to use a digital fulfillment platform like Blue Yonder to improve stock forecasting and replenishment in just under 500 store locations, delivering as much as a 30% reduction in in-store shelf gaps.¹⁰ Meanwhile, online, e-commerce stores like Skafos11 use artificial intelligence (AI) and machine learning (ML) to assess customer preferences and personalize the shopping experience based on intent. Retailers can use technology to accelerate product discovery and upsell and cross-sell complementary products.

In the past, convenience referred to the location of the physical store — was it easy to stop by on the way home? — or one-click shopping functions on an e-commerce site. But today, the concept of convenience has become much broader, taking into account several customer experience factors including:

Online shopping experiences offer a great opportunity for brands to grow and diversify their customer base and create cost savings and efficiencies in their delivery to customers, noted Sagar Rajgopal, chief operating officer at Ubiquity, a BPO that specializes in retail CX. However, the shift can also bring challenges, such as a higher volume of customer inquiries, longer hold times for customer service, and the need for more customer service agents to pick up the slack, he explained.

Recent consumer research from Kustomer revealed that 79% of consumers feel frustrated when they can’t contact customer service on their preferred platform, and 81% of consumers would abandon a purchase due to a poor service experience.¹² Offering empathetic and responsive service options across several channels are increasingly important convenience factors.

“If you want to drive loyalty, customers need to feel like you value their voice,” added Rajgopal. “Opening up communication channels like phone, chat, email, social media, and in-app, makes your customers feel empowered because they can communicate with you how and when they want to. If you make it hard for them to reach you, that might lower servicing costs, but it could cost you customers.”

“The number one question we get from e-commerce customers is: ‘Where’s my order?’ Agents and automated systems need to be able to provide answers, which can be difficult because of a lack of visibility into your third-party partners,” said Rajgopal. “The more visibility your customers and agents have into the delivery journey, the better. And that typically requires integrated technology tools.”

At first, the complexity of having technology integrated into every layer of the retail customer lifecycle might seem overwhelming. But as retailers see the potential cost savings and conversion opportunities that come from investments in customer experience technology and support, the best path forward becomes obvious: pricing, selection, and convenience will remain mainstays of customer loyalty in retail. Retailers that use technology to optimize those three things will be the most successful.

Design and deliver customer experiences that drive loyalty. Discover how in our eBook.

This article originally appeared in Retail Dive.

1. McKinsey & Company. (n.d.). The quickening. McKinsey Quarterly. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/five-fifty-the-quickening
2. Jones, G. (2020, August 25). How does pricing affect customer loyalty? Intuit MintLife. https://mint.intuit.com/blog/updates/how-does-pricing-affect-customer-loyalty/
3. “Dynamic Product Pricing and Cost Based on Location via Zip-code or IP Recognition,” Optimum7, https://www.optimum7.com/blog/programming-2/location-based-pricing.html
4. Amaro, S. (2021, April 13). Retailers look to innovate and tempt customers back to physical stores. CNBC.
5. “Target’s Latest Designer Collaboration Spotlights The Future of Fashion,” Vogue Magazine, https://www.vogue.com/slideshow/target-designer-dress-collaboration-christopher-john-rogers-rixo-alexis
6. “Together We’re Your Perfect Fit,” Adidas, https://www.adidas.com/us/universalstandard
7. “Erdem and Universal Standard Join Forces for a Game-Changing Denim Collaboration,” Vogue Magazine, https://www.vogue.com/slideshow/erdem-universal-standard-collaboration-launch
8. “The Shopper Speaks: Getting customers to convert: 10 hidden findings that deserve attention,” Digital Commerce 360, https://www.digitalcommerce360.com/2021/03/09/the-shopper-speaks-getting-customers-to-convert-10-hidden-findings-that-deserve-attention/
9. “Merchandising of the Future,” Accenture, https://www.accenture.com/_acnmedia/PDF-73/Accenture-Merchandising-of-the-Future.pdf
10. “Artificial Intelligence for Retail in 2021: 12 Real-World Use Cases,” SPD Group, https://spd.group/artificial-intelligence/ai-for-retail/
11. “Guide shoppers to quickly discover the products they want,” Skafos.ai, https://www.skafos.ai
12. “Consumers Love Live Chat, but Businesses Aren’t Adopting It. Here’s Why,” Kustomer, https://www.kustomer.com/blog/live-chat-for-business/