I break with thee, I break with thee, I break with thee …challenges in the land of loyalty

“Oh, I’m sorry, that starts tomorrow,” said the teenaged clerk behind the checkout counter at Ulta.  It’s Saturday.  It was a $3.50 coupon that she passed back to me.  I received it because I am a member of their loyalty program.  What I had handed her was not a magazine coupon, or a random distributed circular.  It was something addressed directly to me.   It was an enticement to spend, which is exactly what I was trying to do.  On Saturday, because I was busy Sunday.

However, that was, unfortunately, irrelevant.  She was just a clerk who scanned, bagged, swiped, and repeated endless times in a shift.

• She has no incentive to deliver good service to any customer, let alone one who spends a fair amount of money in their store.
• She had no way of knowing what I spend on beauty stuffs
• She did not know that little one little action, in the land of multiple choice and unequal effects would cause me to decide to break with them.

For good.

It is also highly likely that she did not care.  What’s one customer in a sea of thousands, nay millions of potential ones? I, in turn, handed her my basket of items and walked out.  I didn’t bother to explain myself, but then, no one asked.  In the end, her unwillingness to apply a $3.50 coupon to my order of $75 was the last straw.

Now, I admit it.  It wasn’t an exclusive thing I had with Ulta.  However they had at least 50% of my spending. And based on my early read of my own economic situation, they were likely to receive more of my spending as it shifted from more expensive outlets like high end retailer Barney’s New York.

• Barneys – $386, Beauty Habit – $286, Sephora – $94, Ulta – $761

And it pained me a little to decrease my BNY relationship.  I love my Barney’s personal sales associate (please note: I did not use the word *clerk.*)   However, I was willing to do that because when money is tight, you make seemingly logical shifts.  BNY was the high end choice, and hence, likely to be the first to go. I am not in love with Sephora despite their brand depth.  Their small samples sparingly meted out don’t meet my needs.  It’s also the store: a little like beauty counter meets Studio 54 – were I around to understand Studio 54.   And you can only occasionally get competent help. So, service does trump price for me, I guess.   By choosing a retailer before a product, I decrease my group of choices, but not so significantly that I can’t find a workable option among my consideration set.  (Brand loyalty, ahh another diminishing quantity in my economically constrained world.)

I don’t think I am uncommon.  As a matter of fact, the IBV’s recent retail research of 30,000 consumers conducted in September and November 2008 confirms that:

• 54% of people are switching retailers, or shifting spending, across all income levels.
  
• 74% are sacrificing spending somewhat or significantly overall.
  
• There’s a slight drop in the number of shopping trips
• 89% of the population is spending equal or less in Health and Beauty as a category on each trip.
• 68% of the survey respondents (n=28811)  - who are buying fewer items or are purchasing less.
  
• 63%  are using coupons or buying on sale more often.
  
• 41% traded down brands at the same retailer in some items.

Yup, I am doing all or most of those things.  So what’s a retailer to do?  Certainly not upset people who are category aficionados who are willing to spend with them and who communicate and influence others.  Simply put, consumers have options in the land of unequal effects.  The land where the inability to use a $3.50 coupon can cause someone to move nearly $800 in spending somewhere else – with another $800 or so they were already missing but could have had.

The land of unequal effects is a place where small positive or negative actions can have consequences that do not follow the bell curve.  It is a place of microscopic actions that have macro effects when taken in total.  It is the land of multiple small failures that lead to bad consequences.  That being said, it is also the place where small systemic wins can add up to big gains.  It is the realm where empathy, customer understanding and execution intersect.  To me, it is magic place.  It is the place where Apple, Nike, Progressive Insurance, Trader Joe’s, Real Simple magazine, and even Wal-Mart these days succeed and others fail.

These folks understand the additive quality of developing and delivering customer experiences across their myriad dimensions and can develop engagement.  I would also like to point out, interestingly enough, that no one I mentioned above tries to get me to spend more through a frequency-based program labeled loyalty.  Because frequency is not loyalty.  Net promoter scores are not loyalty.  Loyalty is around the next dollar – not the one that last left my wallet.  The land of unequal effects is the land of multiple choices in which I choose a provider not just because of one thing, because the sum of things they do adds up to something relevant to me.  That sum is customer experience – and it’s not one number, but many additive effects.  One number cannot even begin to reflect the complexities of the relationship without oversimplifying it beyond recognition.  One number is like asking for a magic bullet.  One number smooths out the details that make the experience good or bad, acceptable or marginal.  It lacks dimension by continually reducing the facts to meaningless entities.  Even the IBV’s own advocacy score is the sum of three separate pieces – willingness to recommend, willingness to complete the next purchase through the same provider and willingness to stay with that provider in the face of multiple choice.  And we admit, it does not take one question, experience or factoid to find.  It’s work.

Given the current economic situation for retailers focing on frequency is a necessary thing.  It is however not the only thing.   That is just the ticket to entry, folks.  I know you know this.  You know that design – whether merchandising in a physical location or on the Internet is critical.  So does price/value perception where Wal-mart continues to deliver better prices on areas that drive you to visit and buy more while you’re there.  So does good competent help, such as Trader Joe’s (TJs – I love you and your quirky goodness).  So does seamless channel and experience continuity, as is Apple’s strength.  And last, but not least, the way you use and view the product post purchase, where Nike continually teaches us great lessons.

And what happens to retailers who are only satisfying the basics?  Many are likely to continue.  However can you afford not to look at customer experience as a differentiator and way to win customers?  Can you afford not to take even small actions that can increase loyalty – or even frequency – right now?

No.

So look across your operations and figure out where those holes might be.  Ulta has a heads up.  They may be doing a lot of the right things, but small changes could retain valuable customers.  How about your own operations?  Are there holes that could cause customers to leave, perhaps a few at a time, that can add up to a bigger dent over the period of economic upheaval?  This does not imply you can ignore the big things that are likely to take longer to fix, but can you create a list of 10 small leaks in your customer experience pipeline that allow you to have more dollars and loyal customers delivered to you at the end?

Use the social media of your choice.  Engage people across your organization.  Engage your customers.  Ask them for feedback – NOW.  Don’t worry about sophistication – worry about the data you get back.  Focus on asking questions where you have concerns or an inkling that something might be happening you don’t know about.  You can do this via a survey, or you can do this a question at a time.  Start taking that data and doing small tests in your business to implement those ideas.

Because you have a limited set of chances.   According to our research, 3 strikes and you’re out.  Basically, as a retailer, you screw up three times and you lose the business.  I actually think that’s overstated.  I know there are retailers that I have cut off after 1 visit.  I think that three visits is actually the loyalty high mark.  If a customer has a good history with a retailer, then he might give them the full three chances.  If that consumer is already shopping in the virtual land of unequal effects – the Internet – the retailer might never even get that.

The next day, I ordered from Sephora.  They basically doubled their business in one order.   I’ll probably keep pursuing my options, but I know Ulta is not one of them.  Maybe they’ll understand when the one number they know from me is zero dollars spent.

-c-

Cristene Gonzalez-Wertz

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Tags: Barneys, BNY, customer_experience, CX, IBV, retail, Sephora, trader_joes, ulta