Loyalty cards give retailers a better guide to customer preferences than complaints or product returns, study finds

New YorkGaining deeper customer insight is the key to gaining a competitive edge in the retail industry, according to Understanding the customer, the first of three parts of a new Economist Intelligence Unit report entitled Intelligent Merchandising: Creating a Unique Shopping Experience. The report is based on a worldwide online survey of 180 senior retail executives conducted by the Economist Intelligence Unit for SAP. The executives were also interviewed for more in-depth responses and analyses.

To identify and understand their best customers, companies most frequently track purchasing records through loyalty cards (41%). Other popular methods are surveys (26%) and incentive contests (15%). Only 9% of respondents examine complaints and returns as a way to improve their performance.

“Customer loyalty is based on the extent to which merchants connect with customers’ interests, values and needs,” said Nigel Holloway, research director in the Americas for the Economist Intelligence Unit. “So the onus is on retailers to use every means available to communicate with the customer in new and invigorating ways.”

Other key findings of the report include the following:

  • Retailers opt mostly for traditional methods to keep customers loyal. Over half of the executives use new products (63%), local store activities (56%) and discounts for special customers (52%) to enhance customer loyalty.
  • Customer satisfaction and retention are key measures of the success of promotional efforts. The success of promotions is tracked through customer satisfaction (55%), customer retention (52%) and sales per square meter of retail space per week (40%).
  • Executives rely heavily on sales staff to monitor the “customer experience.” The lowest-paid member in the retail industry is considered the most reliable observer of customer behaviour. In-store traffic (31%) and customer opinions (31%) are seen as important indicators of customer satisfaction.

“It is extremely important to understand what customers want and to provide it to the them at the right time for the right price in the right channel,” said David Thomas, SVP, SAP Retail. “This study shows that retailers have a long way to go to get that end goal. There is growing recognition amongst retailers that they need something more than the current manual systems to be able to truly understand their customers.”