Features, Next Generation

Millennials and Loyalty

Ever since Salesforce.com CEO Marc Benioff declared that “Loyalty is dead,” in a November 2017 interview with Mad Money’s Jim Cramer, business leaders have been wringing their hands.  But listen beyond the attention-getting soundbite, and you will learn that what Benioff is talking about is the way businesses define customer loyalty, i.e. as a program. That is not how customers look at it. Benioff rightly says that loyalty is shifting from points accrued and spending rewarded to a how customers view their whole engagement with the brand, their journey, their experience and in many ways, how they are made to feel part of a community with the brand.

That is perhaps the key takeaway from a recent study completed by InMoment with over 1,300 retail customers. Its goal was to understand what it takes for retailers to cultivate a loyal and engaged customer base with a special emphasis on the millennial generation. What InMoment found is that retailers and their customers are talking two different languages when it comes to loyalty. “There is a gap in what retail brands think defines trust and loyalty versus what customers are seeing loyalty as,” says Andrew Park, InMoment’s vice president of customer experience strategy. “Retailers want to quantify it by looking at average amount per transaction or repeat purchases. When customers talk about trust and loyalty, it is about their relationship with the brand and the value they get out of that relationship beyond transactions. For them it is a combination of head and heart, intellect and emotion.”

To bridge the loyalty gap, Park says, retail brands need to adapt strategies from the consumers’ view. “When it comes to understanding loyalty, the brands that do it really well are those brands open to creating ongoing discussions with their customer base and find unique ways to connect with their customers to co-create their experiences. Building trust and loyalty is about more than just a satisfied customer. It is about consistently delivering good experiences and delivering on the promises you make,” Park continues.

Here are three themes that emerged from the study, along with ways that retailers can create a more loyal, engaged customer base.

#1 – Trust and Mistrust Are Earned

For millennials, Trust – with a capital “T” – is key to their shopping choices. In the shadow of Facebook’s Cambridge Analytical scandal and recent data security breaches, retailers might incorrectly assume that trust has to do with data security. But the survey found customer trust goes far beyond that. When consumers were asked about what retailers can do to build trust, the majority (55 percent) said “deliver what is promised” as the most important step they can take, rather than “keeping data safe” which only 13 percent saw as a concern. On the other hand, the biggest deal breaker when it comes to trust is the failure to live up to a brand’s promise, identified by 67 percent as the chief reason they lose faith with a brand they previously loved.

Those brand promises can be explicit or implicit. For example, L.L. Bean recently changed its life-long 100% satisfaction guarantee to a 365-day return policy. That broken promise caused the company to take a nose-dive in 2018 in its brand reputation as measured by Reputation Institute’s U.S. RepTak 100 study. In 2017 L.L. Bean was ranked number 16 overall as a company to do business with, to work for, that created trustworthy high-quality goods and services and that could be counted on to do the right thing. This year it dropped completely off the Top 100 list. “Recently implemented business strategies have had a broad negative impact on L.L. Bean’s reputation – i.e. the emotional connection that the general informed public has towards the company,” said Sven Klingemann, RI’s global research manager. “We have also seen L.L. Bean’s performance rated more negatively – not only in product and customer service performance but across all key operations of the business.”

On the other hand, Foot Locker is rated number four on Forbes’ 50 most engaged customer list and with good reason. “Foot Locker is a brand that has a relentless focus on the customer experience. But it understands that is more than just operationally driving a consistent experience every time you shop there. Foot Locker is in the engagement and experience business,” InMoment’s Park shares. For Foot Locker customers, that experience goes beyond athletic performance on the court or playing field. The sneakers and athleticwear they choose is a lifestyle choice and a means for personal expression. So, it plays to that value.

For what Park calls “sneakerheads,” who crave the latest releases as a status symbol, Foot Locker identified a prime friction point in their relationship with the brand: getting access to the latest new product releases. In response, the company created a mobile app that took the friction out of that process that allows customers to sync their personal calendars with new releases, sign up to get in a virtual line for what’s coming up and get exclusive offers. “The mobile app is more than a way to shop, though you can purchase digitally and look up stores,” Park explains. “But it does more by finding ways to add unique value to the relationship, not just sell more stuff.”

And through this app, Foot Locker can also learn more about its customers, what they want and what they are interested in. Thus, Foot Locker gets better customer data that they share willingly because it enhances their overall relationship with the brand. “People want most than just ads or promotions in a loyalty app. They aren’t willing to give up personal information just to get that,” Park says.

#2 – Loyalty Is Alive and Well, but Complicated

Good news in the InMoment study is that 30 percent of millennials consider themselves more loyal to retail brands than their parents. This was the highest percentage reported across all demographic age groups. When asked what made them more loyal, they reported it was because they do more research, have more first-experiences and have a wider range of choices of places to shop, brands to buy. That research and personal experience produces loyalty, but their wider range of choices makes them vulnerable for brands that fail to deliver.

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The lesson for retailers here is two-fold:

  • They must engage in the pre-purchase, discovery journey with their target customers to entice them and pull them in with engaging stories about what their brand means to them, as well as what the customers mean to the brand.
  • They must be diligent not to break promises made that build loyalty for the next time they are in the market.

Nike has nailed both for its younger target customer. Nike, the “Just Do It” brand, is one that keeps doing it for their customers by continuously working to forge deeper connections with its customers. Like Foot Locker’s app that helps customize the customer experience, Nike’s loyalty app is more than just a point system to get rewards for transactions. “You go into the Nike app and define what you are interested in, what products and what sports and it then customizes the information it feeds back to you,” InMoment’s Park explains. “The app is driven by the need to create a relationship with the Nike customers that will educate them and give more information that they desire. Nike is the expert around athleticwear and sports. That is the unique value that the brand can give.”

Park also calls out Nike for advocating causes that pull at the heartstrings of its most loyal customers, like its recent Kaepernick ad and product line. Noting that in the InMoment survey, younger customers in particular view trust more about emotion than intellect, the brand delivers on both measures.

“The Kaepernick ad was an extension of the brand’s on-going advocacy for social justice, but at the same time, Nike also understands it must be experts at quality products,” Park says. “Playing to the head and the heart with good products and helping customers be the athletes they want to be is a complex promise. Nike must understand the aspirations of its customers, plus the functional product side. Building relationships must be based on more than just the product itself,” Park continues.

#3 – Customers Want Experiences, Not Just Products

For millennials the place where customer loyalty is built most often happens in the store. More than half of the consumers InMoment surveyed (53 percent) said their most recent enjoyable shopping experience occurred in the physical store. This is the place where retailers can most effectively deepen their relationship with customers, one-on-one, hand-to-hand, person-to-person.

But for millennials, they are more likely to be looking for a hybrid experience that gives them support throughout the buying journey, before, during and after the sale. This is where retailers can maximize engagement, by both offering in-store access to products that may not be available in that store but the store across town or in another city and BOPIS (buy-online-pick-up-in-store). Walmart has done a great job in that realm and Foot Locker has created an on-brand BOPIS service as well. In some locations, it has customer lockers they can use to pick up orders placed online.

Another retailer that understands the 360° hybrid wraparound customer experience is The North Face. “The North Face has built a loyal following on trust,” InMoment’s Park maintains. “Customers trust the company to produce high-quality products that are environmentally and socially conscious that they can also trust to perform in any outdoor situation.” The company works to deliver a consistently excellent in-store and online shopping experience, but once the customer buys the product, The North Face understands that how they use the product afterwards is also part of the overall trust and loyalty experience. For retailers, the relationship of trust is built by “finding unique ways to add value into how customers use and enjoy the products, not just in the interaction with the people that represent the brand,” Park stresses.

Creating a Culture of Customer Loyalty

In conclusion, Foot Locker, Nike and The North Face are examples of retail brands that have cultivated a culture within their ranks – from the corner office to the shop floor through to the warehouse — that puts the customer at the center of everything they do. Decisions related to what products to make, the design of the stores, website and apps, operations and staff training, and causes to support are all made through that lens.

From this consumer-centric foundation the brand’s dedication and devotion to its customers flow out with the result that consumer loyalty and trust flow back in return. While it doesn’t happen overnight, the InMoment study reveals that consumer, even younger ones, are ready to love a retail brand that loves them back.

The key, according to Park, is to “add enough value to every customer interaction not just in the transaction, but over the lifespan. The need is to make that corporate culture something that consumers want to be part of and participate in.”

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