Customer Loyalty in the Time of Covid
Small brick and mortar retailers depend on customer loyalty. Foot traffic from local customers who purchase everything from specialty items to necessities is the lifeblood of local retail. And there are over 130,000 small retailers nationwide! Small retail not only makes up a significant portion of the US economy (worth $34 billion annually), they drive innovation.
To these businesses, customer loyalty is everything. Yet acquiring new customers is expensive, costing businesses anywhere from 5 to 25 times more than retaining an existing customer and building on that loyalty. There is a clear correlation between brand loyalty, customer retention, and increased profits. The Loyalty Report gathered feedback from 22,000 Americans reporting on over 200 different loyalty programs. 79% of the consumers surveyed reported that loyalty programs made them more likely to continue doing business with a brand.
Highly-engaged customers buy 90% more often and spend 60% more per transaction (Rosetta Consulting). This higher frequency of larger purchases can lead to a big increase in profits — a 5% uptick in customer loyalty can boost profits as much as 95% (Bain & Company).
Investing Wisely in Customer Loyalty
Loyalty programs are an important investment, but they have to be the right kind of programs, designed to respond to consumer expectations and preferences. After all, 54% of loyalty memberships are inactive and 28% of consumers abandon loyalty programs without redeeming any points (Colloquy Customer).
A familiar example of an outdated program is the paper stamp card, formerly used by many retailers across industries. These cards have a low barrier to entry for business owners, and customers are familiar with how it works. But anyone who has ever discarded a stack of unused stamp cards they collected in their wallet understands that they’re not as effective as they could be. In fact, 79% of consumers are more likely to join a rewards program that doesn’t require them to carry a physical card.
From mask requirements to store capacity limitations, the pandemic has changed the way businesses can engage with customers. Today, many consumers hold out a loyalty stamp card for their favorite retailer only to be told, “Sorry; we’re not using cards right now because of Covid.”
Customer Loyalty Research
Given this challenging environment, our research team looked for a test bed to understand loyalty programs after the devastation of the pandemic. To start our inquiry, we reached out to small retailers in a select market to learn more about the role that loyalty plays in their businesses. The case study market needed to be a classic “closed ecosystem” of small retailers without competition from big box stores nearby.
Ground Zero: Olympia Washington
We selected a downtown retail district in Olympia, WA, a small and vibrant state capitol city with a population of 50,836. The median income in the area is high enough to support a vibrant local merchant scene ($58,606), and a successful “buy local” movement has persisted for more than a decade. The Olympia Downtown Alliance and the Sustainable South Sound’s Buy Local Program are both local organizations that actively encourage residents to shop at local businesses.
In Olympia, we spoke with a variety of retailers, including Janis Dean, founder and owner of The Popinjay. The boutique women’s clothing store and gift shop has been open for more than forty years. The store’s merchandise ranges from specialty greetings cards ($2-$5) to leather handbags and designer clothing ($300+). The expansive inventory brings in a mix of customers from young parents with babies in arms, to mid-career women, to shoppers who are “mature in age and young in outlook.” Dean credits a good amount of her success to long-lasting relationships with her loyal customers.
“I have a lot of people who have spent so much money with me over the years and basically supported the business in so many ways,” says Dean. “A lot of my shoppers are long-time customers or children of long-time customers. I think at least 50% are pretty much regular customers.”
Customer Loyalty on the Local Level
To keep these loyal customers engaged, Dean regularly sends out coupons to the store’s email list. She sees a large amount of coupons redeemed, which is great for sales, but Dean says a primary reason she sends out coupons is to say “thank you.” Loyal customers have kept The Popinjay in business for decades, and Dean wants her customers to know that their business is appreciated.
“People tell me on a very regular basis, ‘I’ve shopped here since the 80s or the 90s.’ They are very proud about that. We always like to acknowledge these people and say thank you. I think it’s really important to acknowledge and appreciate that people have choices, and we’re fortunate to have them choose us.”
Our conversations with these small retailers were enlightening, and they acted as further proof points not only of the importance of customer retention, but of the creativity and resiliency of small business owners. Highlights from our research can be heard on a recent episode of the Spark Plug podcast, featuring retail researcher Karen Jensen.
Drivers for Growth During Covid
Over the past year, SnowShoe heard first-hand how the lockdown impacted the ways that businesses could interact with their customers. The limitations around physical contact and in-person shopping made it much more difficult to continue the customer engagement tactics that lead to loyalty.
The growing expectations for quick, easy, and digital transactions has been one of the main drivers in the development of new solutions at SnowShoe. These expectations, paired with the limitations around physical contact presented by Covid, led to the development of the Spark Tap™, a hands-free check-in device that can accelerate loyalty and spending at small local retailers.
This unique fixed-point solution requires no human contact; rather it comes into contact only with each customer’s mobile screen and can be easily sprayed off with alcohol in between uses. The check-in device recognizes a proprietary pattern that is unique to a specific location, thus validating physical presence without requiring physical contact.
Retailers are able to continue rewarding customers who come into the store and make purchases without putting sales people and shoppers at risk. The device does not require batteries or electricity, and it is impossible to break, making it an easy and safe solution for retail staff.
Getting Started with SnowShoe
Small retail cannot afford to lose loyal customers, nor can it risk the safety of both staff and shoppers. SnowShoe is here to fill the loyalty gap and make the transition to safe check-ins possible. Find out more about SnowShoe’s Spark solutions — get started with customer loyalty today.
All images courtesy of the Washington Post article Things to do in Olympia.