6 of the Best Ways to Retain Customers in Retail
Chasing new clients may feel more exciting than retaining customers. But it costs more to acquire a new customer than retain one you already have. Think about all of the effort you put into acquiring your current customer base. All of the social media posts, emails, late nights and dollars spent. That translates into revenue and something very important, trust. Consumers buy things from people and retailers they trust. That’s why you still shop at the mom and pop grocer across the street from your home. While that store has higher prices than Walmart’s you like the fact that owner knows your name and always asks you about your kids.
If you are always chasing the next thing without a lot of success why not try a different approach and focus on what’s right in front of you. It’s not that new customers aren’t important but if you have a high churn rate it’s going to eat into your profits. If you look at companies like Apple and Amazon they do a really good job of increasing sales from their existing customer base. Are you leaving money on the table that could come from customers you already have? If you are here are six tips you should consider to increase your customer retention rate.
1. Sell great products. Think about your favourite retailer. Why do you choose to shop there year after year? I bet they have great products. Apple is the largest company in the world with a market capitalization of over a trillion dollars. Apple did not get there by accident it has great products. Those products keep customers coming back to Apple year after year because Apple has a brand consumers trust. Apple also seemingly pays attention to every single product detail, striving for perfection every time. Apple does this not only with its products but with its packaging. There are billions of views on YouTube dedicated just to people opening up their purchases from Apple and marvelling at the packaging. Do your customers marvel at your product?
If you are working hard on retaining your customers but your churn keeps increasing have you had an honest conversation about the quality of your products? Are they good enough? lululemon has an innovation lab and one of the innovative products that has come out of the lab is lululemon’s Like Nothing bra. lululemon discovered that women were looking for a bra that felt as if it was barely even there. Then lululemon dedicated four years to developing a bra that meets that need. It also took four years for Chick-fil A to create its best-selling original chicken sandwich. Quality takes time, no business is truly an overnight success. The better your product is the easier it is to retain your customers.
2. Execute consistently. While focusing on your customer retention efforts think about consistency. Being consistent matters. One retailer that is very consistent is Amazon. That is not something that always comes to mind when you think about Amazon but it is one of Amazon’s keys to success. Every single time you make an order on Amazon, Amazon tells you when the order will be delivered and it arrives at that time or early. If there is going to be a delay you are informed of it immediately. If you return an item before you even have think about it you receive an email saying your refund has been processed. Amazon has an exceptional level of consistency.
What does it mean to be consistent? Consistency means you do what you say you are going to do. It’s what builds trust. A few days ago I had to buy a birthday gift and due to a change in plans I only had a few days to do so. I placed an order on Amazon two days before I needed the gift. I was nervous at first. I thought what if the order does not arrive the next day as Amazon said it would? But then I thought to myself, as a Prime member, my order always arrives when it is supposed to so I decided to relax. And of course it arrived right on time. Amazon’s success is fuelled by its ability to meet its promises.
During the time I waited for my package to arrive I experienced an internet outage from my home internet service provider. I was surprised that my internet service provider never called or texted to tell me about the problem. The outage also lasted longer than my provider told me it would after I called to inquire about it. For the first time after using this service provider for many years I considered cancelling my service. Internet access is an essential service. The provider should be the one proactively communicating with customers. There was also no apology for the service disruption.
Success is often found in the details. If you promise your customers they will receive their order in five days then make sure it arrives in that timeline. If you can’t commit to five days then tell your customers it will take seven. And always follow up if you do not meet a previously communicated expectation. It’s like a friend. How do you view the friend that always shows up late? Or the one that says they will help you with a project you are working on but when the time comes they are not available. Doing what you say you are going to do goes along way with your customers.
3. Understand your customers better than anyone else. Do you really understand your customers? Understanding what people want and need can be very difficult. People will say they want something but will spend their money in ways that contradict with what they say. Let’s take the sustainability movement. Many consumers say they want to buy sustainably sourced clothing but fast fashion retailers like Zara and H&M are among the largest clothing retailers in the world.
Asking consumers about what they like works a lot better for products they have tried before but not for ones they haven’t. Steve Jobs famously once said “it's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them.” Speaking about Amazon’s Echo devices, Jeff Bezos said: “no customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said ‘would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?’ I guarantee you they’d have looked at you strangely and said ‘No, thank you.’”
Needless to say if you want to retain your customers you have to find products and services that will keep them engaged. Success requires trial and error since no one has a crystal ball. A big part of Amazon’s success is its culture of experimentation. “If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table,” says Bezos.
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4. Keep them interested. Humans crave novelty. We are hardwired to be interested in new things. Why do you think the words “breaking news” are used so frequently on social media? It’s to grab your attention and tap into your fear of missing out. Apple is not a one trick pony. Its sky-high valuation is the result of a constant stream of new products.
If you look back at Apple’s history for a few decades Apple was really about the desktop computer. But in the early 2000s that started to change with the launch of the iPod in 2001. If you already had a Mac then of course you wanted a compatible music player so you could listen to your music on the go. Even if you didn’t own a Mac you still wanted an iPod. That was the beginning of Apple hooking customers into multiple products.
Then towards the end of the decade in 2007 Apple launched the iPhone, then the iPad in 2010. Both of these products were and still are hits with consumers. “I’m from the halo generation, where my first iPod caused me to buy my first MacBook, which led to an iPhone and then an iMac and then more iPhones, iPads, and finally, an Apple TV. And all this Apple hardware begat dozens of compatible accessories including speaker docks, cradles, cables, and Kickstarter doodads, not to mention hundreds of apps and other content purchased in Apple’s stores,” said Thomas Ricker Deputy Editor at The Verge. “So maybe what I’m describing is akin to Stockholm syndrome. But I don’t think so, not yet, anyway. Nevertheless, I’m at the point where I judge the best device to be the device that works best in the ecosystem where I live.”
You may not be able to do what Apple has done but what can you do to keep your customers interested? One retail strategy that is effective is releasing products in limited quantities. When Kanye West launched the Yeezy Boost 350 sneaker with Adidas he did so with a limited release drop. It is estimated that for many of West’s limited release drops only tens of thousands of shoes were available for sale which then sold out almost immediately. Even former Adidas CEO Kasper Rørsted confirmed what the brand’s secret sauce was when he said: “as we’re moving new Yeezy products into the market, we will do what we’ve done also in the past: create scarcity around the new products we are launching, make sure we have the hype, and, over a given period of time of course, drive volume into that market.”
5. Develop a meaningful and differentiated loyalty program. The world is littered with loyalty programs making any single one hard to standout. It is possible to have a loyal customer base without a formal program. But if you are interested in launching one Sephora has an excellent loyalty program you can take cues from. Sephora’s Beauty Insider loyalty program has over 25 million members for a reason. It is not your boring old program with only a few benefits. Some of these benefits include receiving samples from top brands, free standard shipping and a birthday gift.
In 2019 a Sephora Beauty Insider sweepstakes winner won $1 million. Now that doesn’t sound like your average frequent flyer program. "We also know rewards that provide greater emotional and memorable experiences are the most meaningful for our clients, and we want to continue to deliver personalized experiences where our clients can choose what works best for their needs. The emotional component of loyalty is a vital driver of our loyalty program and what really matters most to our clients," said Allegra Krishnan, former vice president/general manager, loyalty, credit card & consumer insights at Sephora.
A loyalty program like Sephora’s or Amazon Prime doesn’t have millions of members because of the structure of the program. It has members because of the success of the underlying retail business and the loyalty program only serves as a way to give back to the best customers who then in turn reward the retailer for doing so. Over 200 million people wouldn’t have signed up for Amazon Prime if Amazon wasn’t already executing at the highest level.
6. Provide a level of service that stands out. If you are confident you have a great product but are struggling to get customers to make repeat purchases have you taken a look at your service? Poor customer service is often a silent killer. After interacting with a sales associate who is unkind or indifferent customers often decide it’s not worth it to return. They don’t fill out a survey or tell management they just take their dollars elsewhere.
Many retailers that are succeeding do so in part by excelling at customer service. Take Chick-fil-A. Chick-fil-A generated $18.8 billion in sales last year. Its customer service is so good it landed at the top spot on the American Customer Satisfaction Index for fast food restaurants in 2023 for the ninth year in the row.
So what is Chick-fil-A doing that others are not? For one it empowers its employees to go above and beyond to serve their customers. Take this example. In 2019 a 96 year old WWII veteran entered a Chick-fil-A store in Maryland. The long-time customer was visibly shaken because he was driving to the restaurant and barely made it there because one of his tires was flat. After telling Chick-fil-A employees what happened Daryl Howard, a Manager, quickly sprang into action and began working on the veteran’s car. 15 minutes later the tire was changed, the customer was relieved and Chick-fil-A had yet another example of why its service is legendary.
A key differentiator between Nordstrom and other retailers is its customer service. Nordstrom focuses on having employees use their best judgement in all situations. Employees are also given the flexibility to determine how best to solve a customer's problem. In a classic story of great customer service, a Nordstrom employee noticed that a customer left their luggage and flight itinerary in the parking lot of the store. The employee jumped into their car and drove the customer’s luggage to the airport and found her before her flight took off. Without an engaged employee base or empowerment most employees would be unlikely to go the distance to surprise and delight a customer.
In an interview Hubert Joly, former CEO of Best Buy, was asked if he ever goes to Best Buy stores incognito. He said that as soon as he steps into a store he is recognized in a nano second. But he said this about experiencing Best Buy’s service from home: “on a Saturday, about five years ago, I had a networking issue at home. It was intermittent failures, as is often the case with networking issues. So I called 1-800-geeksquad, and that was very early on in my tenure, and the fact that — instead of recognizing me not as the CEO of the company, but as a customer — based on some number, like my phone number, or my account number, they had to ask for my information. Then after taking all of my information, including my credit card, they said, "Somebody will call you back." I said, "Really? What are you talking about?" “They didn't have the tool to know how long the wait time was to get a specialist for my issue. These were well-intentioned people, but we ended up giving them the tool. So a lot of what we've had to do is give people the tool. It's what Churchill wrote to Roosevelt in 1941. "Give us the tools, and we will finish the job."
A lot of retailers think they have great service. But how many times in a week do you receive service that is exceptional? It happens less than you think. Try conducting an independent customer service audit to see if your sales associates are providing the level of service that is going to make a difference in the mind’s of your customers.