From Inflation to Recession: Why Customer Loyalty Matters More Than Ever in Retail
High inflation rates can make it hard for retail brands to survive, but increasing customer loyalty can help. Learn how to prioritize customer experience, enhance communication channels, and act on customer feedback to expand loyalty and weather the storm.
The (not?) coming recession is the worst will-they-won’t-they in recent memory. Every day, the experts seem to flip flop on whether the retail industry will feel the brunt of consumers curbing their spend, or not. While consumer spending is still up year-over-year, the growth seems to be slowing and may stall out depending on whether the Fed decides to raise interest rates again.
One thing is for sure though: while a recession may or may not arrive, what has already arrived is high inflation. The inflation rate in the US is still around 6%, which is five times what it was ten years ago. This has been the key factor leading to many consumers keeping their wallets closed and waiting for a drop in prices.
Continued high inflation doesn’t bode well for shopping in general, but your retail brand doesn’t have to be a victim of reduced consumer spending if you have the right strategy in place. And that strategy can be boiled down to just two words: increasing loyalty.
Focusing on Loyalty Helps Weather the Storm
According to Hubspot, loyal customers are 50% more likely to try new products and will spend 31% over brand new customers. So while other brands may be hustling to acquire new customers who are willing to spend, it is almost always a more effective use of your marketing dollars to focus on expanding your base of loyal customers.
During times of high inflation rates, everything is more expensive, which is a double whammy for you and your consumers. Not only does the average shopper have less to spend outside of the essentials, but most retailers will be forced to raise prices on their products to compensate for the increasing overhead costs.
Recent price increases in retail are the main reason customers are switching brands as much as they are at the moment. In fact, more US consumers have reported that they switched retail brands in the past few months than any time since the pandemic started.
In light of unavoidable price increases, your retail brand’s best move to combat this is to focus on loyalty above all else. After all, it’s much harder for a shopper to switch away when they’re in love with your brand!
So what can your retail brand do to increase and expand loyalty among your current audience?
Prioritize the Customer Experience
If your prices must increase, then it’s up to your team to provide an elevated customer experience that can make up for that extra spend. Exceptional customer experience (we call it clienteling) is the cornerstone of customer loyalty.
We recently wrote about elevating the in-store experience that can go a long way to boost customer happiness and thereby loyalty. One additional factor to consider is the return and exchange experience. During economic downturns, even your most loyal customers can get picky about what they eventually decided to keep. A friendly and easy returns policy puts their minds at ease when shopping with your brand.
But aren’t easier returns expensive for each store? Perhaps, but the increase in sales from your happy and loyal customers will more than make up that cost. Accenture (via RetailDive) found that “a well-managed return experience can drive a 2246% increase in profit per customer on average over six months, and a 29% increase over a three-year span.”
Other ways to prioritize the customer experience include a user-friendly online shopping platform, retraining your staff to provide that clienteling service in-store and online, and personalized product recommendations and offers.
Approach marketing from a whole new direction.
Reach customers on a local level and increase your sales an average of 27%.
Enhance Communication Channels
Like all good relationships, it all depends on good communication. Today, that means retail brands need to communicate with three things in mind: when, how, why.
When refers to when your customers want communication. More and more, that means instant communication whenever they feel like it. Due to the omnichannel nature of modern retail, your audience (especially Millennials and Gen Z) are more comfortable using SMS and chatbots (e.g. Intercom) to communicate with customer service reps in real time. The more you can be available to chat when they want, the more that trust and relationship will grow.
This is why retail brands have seen such success leveraging SMS-based campaigns. Apparel brand Morley leaned hard into SMS communications to relay information on new products and to answer questions quickly, leading to a 20% increase in revenue.
How refers to the method of communication. Email, SMS, and chatbots are all amazing ways to hold 2-way conversations with your customers, but don’t forget that modern shoppers are very comfortable with visual content as well. Social media has conditioned all of us to communicate not just with images, but video as well.
Shoppable Stories are Endear’s solution to visual communication, allowing brands to send visual lookbooks to their customers. They can showcase curated items, styling tips, and even be used to answer product questions. Interacting in this way can provide a virtual clienteling experience.
Want to know how much more your brand could be making?
Modern clienteling gives your retail teams the ability to reach customers like never before.
Solicit and Act on Customer Feedback
Actively seeking customer feedback not only shows that you value their opinions but also provides valuable insights into areas where your brand can improve. When customers “feel heard,” it increases their attachment to a business. For example, a study showed that when a customer receives a response from a tweet, they are willing to spend 3-20% more on an item from that business.
Isn’t that incredible? They felt heard, felt good about that communication, and then became more willing to spend with the brand.
This is why it’s so important for your brand to solicit feedback and act on it. Be it through email surveys, follow up texts after a purchase, or polls on social media; make known that your brand is approachable and open to change according to what your loyal customers are saying.
Written byRobert Woo, Writer @ Endear
Edited byDanielle Bissonnette, Content Marketing Manager @ Endear
Learn from the best - subscribe to our clienteling newsletter now.
Latest posts in Best Practices
- 4 ways that contemporary retail brands can turn customer conversations into strong marketing strategies
- Elevating the IRL Shopping Experience: Tips for Apparel Brands
- The Secret to Win at Skincare & Wellness Marketing: Go Niche
- Is Your Retail Brand Relying Too Much on Social Media?
- SMS Best Practices for Engaging Your Retail Customers