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Bad customer experiences risk huge retail losses

The March 2015 survey shows that approximately half of 2,500 US consumers polled reported experiencing a problem on their last shopping trip. Of those customers, 81% decided not to contact the retailer about the issue. Among these silent shoppers, 32% said they were unlikely to recommend the retailer to friends and family, putting these shoppers at-risk of decreasing their spend with the retailer.

By comparison, the study shows that shoppers who did notify retailers of their poor experience and had their problem completely resolved were 84% less likely than silent shoppers to be at risk of decreasing their spend.

"The results are a resounding confirmation that poor customer experiences have a considerable negative impact on shopper spend and attrition which can run into the billions," says Dennis Armbruster, LoyaltyOne Consulting Vice President and Managing Partner. "We're ushering in a new era of customer experience measurement vital to retailers looking to make even more informed decisions."

Building on its leading behavioural analytics solution, LoyaltyOne Consulting has partnered with The Verde Group, a leading customer experience research consultancy. Verde's proprietary Revenue@Risk analysis will use experience impact modelling to identify the specific customer experiences most damaging to customer loyalty behaviours and prioritize them according to impact on revenue and market share.

Retailers should take note of the importance in identifying specific customer experiences most damaging to customer loyalty as billions of dollars are at risk. Below is the ranking per category:

• Mass merchandisers are putting 25% of potential revenue at risk;
• Apparel retailers are putting 16% of potential revenue at risk;
• Department stores are putting 15% of potential revenue at risk;
• Drugstores are putting 12% of potential revenue at risk;
• Grocers are putting 11% of potential revenue at risk.

"Our methodology precisely measures the impact of ineffective customer touch points. Insight around the effects of poor customer touch points can help retailers reduce the risk of negative customer experiences, while also enabling them to proactively design experiences that positively influence spend, visit frequency and basket size," says Paula Courtney, President of Verde Group.

The survey also revealed that big spenders within a category disproportionately experience certain problems:

• Mass Retail "Check Out" Risk: Shoppers frustrated by check out wait times reported spending 23% more than the average mass retail customer (US$545 vs. US$446 a quarter).
• Department Stores "Not-My-Department" Staff Attitude: Shoppers troubled by an associate's not-my-department attitude reported spending twice as much as the average department store customer (US$543 vs. US$261 a quarter).
• Apparel Retailers "Ship Date": Particularly in their online channel, customers who cited their inability to obtain a specific date or time to receive an online order reported spending 66% more in the category (US$416 vs. US$250 a quarter).

"In a very robust platform, these partners have taken the psychology of shopping and married it with the economics of shopping. Insights around the impact of the silent customer could prove to be valuable tools for retailers looking to minimize the risk of attrition created from weak customer experiences," says Dr. Deborah Small, from The Wharton School of the University of Pennsylvania.

Have you seen The Marketing Factbook?

The Marketing Factbook will help you up your marketing game, walking you through the techniques, metrics, reporting, analysis, marketing models, technologies, tools and innovations you need for a hgih-profit, high-rentention marketing strategy.

This comprehensive marketing guide has 400+ packed pages of marketing strategy, trends, best practices, do's and don'ts, practical know-how, facts and figures, and tons of ideas to boost sales revenue, market share, ROI, and profits. It's the report no marketer can afford to be without.

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