Revitalizing Retail Customer Loyalty

There are many ways to maintain customer loyalty, but experts say consistent and clear pricing may be the most important. Moreover, getting the price right across all products all the time is a key ingredient in strengthening shopper loyalty. The trick is to do so profitably. “Today’s retailers have a unique opportunity to leverage price management and optimization tools to make the most profitable decisions,” explains Cindy Kim, vice-president of global marketing for Revionics, a Texas-based provider of price optimization solutions. “But the advantage is being able to tap into the vast amounts of market, competitive, and customer data to effectively manage and execute those pricing decisions without killing their margins.”

According to Kim, intelligent data can provide a lot of value in terms of the types of assortments by stores, demand, sensitivity to price, and shopper purchasing behavior and pref­erences, as well as understanding how competitors are pricing, which can affect the shopper at the product level.

Jim Sills, president and CEO of software and services pro­vider Clear Demand, agrees, adding that customer loyalty is driven by price and experience. “It’s a service equation that has to be informed by using pricing intelligence, which ensures an interconnected and consistent shopping experience. You must have rational line structures automated with a rules engine, which ensures products are priced rationally—that is, not in a way that forces shoppers to trade down because the gap between brands is too large. If loyalty really matters to a retailer, consis­tent, rational pricing strategies must be maintained.”

Also necessary is a better understanding of shopper behav­ior than that of the competition, asserts Guru Hariharan, CEO of Boomerang Commerce, which advises retailers on how to make smart pricing decisions to boost profits. What’s more, retailers need recommendations based on knowing where to hold prices, even when a rival drops its prices. “It’s vital—the balance of knowing what price differential your customer will allow before making a decision that takes them elsewhere. If a competitor changes prices at lunchtime, you know the recom­mendation and act on it—not just for individual products, but across interrelated products.”

Todd Michaud, vice-president of NCR global enterprise, merchandising, and supply chain solutions, focuses on the link between pricing and the ability of retailers to give customers personalized offers based on shopping history and preferences, which he believes is key to effective loyalty programs. He says firms must understand, interpret, and act on shopping data to offer the right price or promotion to drive behavior.

Michaud adds that price management systems also must integrate into loyalty systems to consume special pricing and offers, managing the related complexities, to ensure proper price execution. Increasingly important in an omnichannel world is “that a customer’s purchase history considers purchases across all channels, not just online or in store,” he states.

Experts point to shoppers’ desire for value as another link between pricing and customer loyalty. This is important regardless of the price sensitivity of various customer seg­ments. “All customers are cognizant of value,” explains Alan Lipson, global retail marketing manager at SAS, a provider of business analytics software and services. “Pricing plays a role in communicating a firm’s value proposition. It is vital to understand which products need to be priced appropriately to communicate their value to customer segments. Customers will not be loyal to a firm that does not provide value, however value is defined.”

Mark Kelso, president of consultancy Price Revolution, says, “Price management is the glue that merges each compo­nent of the retail mix—product assortment, promotion, and the merchandising message—into one cohesive offering, improving the overall value as perceived by the retailer’s customers.”

Source: Barry Berman, Joel R Evans, Patrali Chatterjee (2017), Retail Management: A Strategic Approach, Pearson; 13th edition.