Dunnhumby Ireland: Loyalty to the customer
Staying relevant to customers is one of the biggest challenges companies have today. The definition of customer loyalty needs to be radically re-thought, writes Etain Seymour.
One constant in the retail sector is that customers' wants, needs and behaviours change over time. In fact, over the past year to 18 months, we have probably experienced the fastest change in customer behaviour ever recorded. That is true not only in Ireland, but globally, and is particularly evident in the grocery retail sector, where a more fickle customer has emerged.
Therefore one of the biggest challenges
facing companies is how to stay relevant to today's customers.
Understanding your customers through insight
Understanding what your customers want and how they have changed is critical. You need to start with the data from sources such as customer loyalty programmes, Points of Sale, and traditional market research. A combination of this type of data means you can understand not just what customers say, but what they actually do.
Once companies understand what, how and why customers buy, they can put the customer at the heart of their business decisions. That means making decisions that are relevant and targeted to customers: people want what they want, so the best way to make sure they buy your product is to give it to those that want it. dunnhumby recently carried out a piece of analysis for a leading grocery manufacturer in which we identified new customers to a brand and analysed their purchasing behaviour. The manufacturer was then able to communicate relevantly with these customers, ultimately leading them up the ‘loyalty ladder'. We know that small group of customers represent the majority of sales volume. Companies need to know and treat their regular customers better than anyone else.
It is particularly important to understand the overall shift in customer trends over time. The trend of "shopping around" last year has created a more promiscuous customer in the grocery retail sector - more volume now goes through on deal. We are now starting to experience early signals of customers actually buying a little more. However, this time the change is slow as customers remain consciously cautious. So understanding customer behaviour is both the biggest challenge and the biggest opportunity as companies plan their next steps.
This is true for both strengthening ties with existing customers and acquiring new customers. Often companies saturate the market with marketing activity without getting to know their customers first, which leads to ineffective marketing. Companies need to focus on attracting customers that are more likely to become loyal over time. If you can crack the code of who these are through insight and apply the right and relevant marketing activity, the payback of drawing these valuable customers into your business can be very rewarding.
The importance of understanding changes in customer behaviour extend to every part of the retail experience, including the way in which we communicate with customers. The digital revolution has radically multiplied the number of ways in which we can speak to clients, throwing Irish companies into a global communication space. Companies must pay attention to these trends; understand them, respond, and be more relevant than ever before.
Customers must be at the heart of decisions in every part of a business's operations so that the company delivers the right product at the right price, marketed through the right channel of communication for its customers.
Responsive and relevant
Businesses that have been the most responsive to change and have remained relevant have been the most successful at retaining customers. Developing customer understanding is only the first step; turning this knowledge into action and being relevant (by basing your marketing activity on purchase behaviours over time) delivers success.
At dunnhumby, we believe that by achieving greater relevance, you become more attractive, enabling you to draw customers towards you and away from your competitors. For example, over the last 12 months, customers have become less brand-loyal; shifting their behaviour from branded goods to private label. Yet the companies that responded quickly with smarter pricing and more effective promotions in order to reinforce their value proposition managed not only to retain their customers, but are now seeing some positive signs of growth.
Re-defining loyalty
Traditionally, customer loyalty refers to the loyalty of a customer to a brand. Yet this definition needs to be radically re-thought. Putting the customer at the forefront of your business is fundamental to operating successfully in this changing environment.
Every area of your organisation must be focused on the customer all of the time. Embedding a long-term, customer-centric strategy within your company means that you will be able to spot shifts in customer trends and respond quickly; in some cases it's the fundamental difference between surviving in the long term and going out of business.
If companies start to put their customers first in all their business decisions, they will become their customers' first choice. That means customers will buy one more product, one more time - improving the business performance of those companies. It's a simple sequence, but an effective one and it all begins with loyalty: the loyalty of the company to the customer and, consequently, vice versa.
Etain Seymour is commercial director of dunnhumby Ireland
