Are retailers understanding customers as much as they should?

Retailers are expected to have both an on and offline presence to deepen their understanding of their customers. Are they offering what their customers want, when they want it, where they want it and how they want it? Most importantly, are they understanding customers' changing behaviours and preferences?

1073
Customer data retailers consumer behaviour

There’s an ongoing debate as to whether retailers who understand their customer base have an advantage when it comes to generating sales and gaining customer loyalty.

The real question lies in how retailers can recognise the patterns in their customers’ behaviours, especially as those behaviours are increasingly diverse.

When a retailer is able to deliver an experience that meets their customers’ expectations, it results in a joyful transaction – which in turn results in customers spending more and becoming more loyal to the business.

“The customer is and should be at the centre of everything a retailer does”

“Shoppers are far more promiscuous than they used to be, thanks to such a huge proliferation of choice available to them,” Nicky Guest, head of in-store excellence at global operator TCC Global, told Retail Gazette.

“Yet, ultimately, a retailer’s main goal remains to win customer loyalty.

“The only way to achieve this is to gain a deep level of customer understanding.”

Guest blamed the “current state of the high street” on retailers being “too slow to catch up with what their customers want”.

“Customer expectations for products, services, store environments and experiences constantly evolve and are more demanding than ever before,” she said.

“Not understanding this leaves retailers open to failure.”

Freddie Sheridan, director at retail design agency Sheridan & Co, agreed.

“The customer is and should be at the centre of everything a retailer does,” he said.

“Amazon isn’t the largest online retailer for no reason”

James Calvert, chief data officer at customer agency Lida, said: “The better you understand your customers, the more likely you are to be able to offer a product, proposition, merchandising and marketing campaign fit for their needs.

“The greater your product-market fit, the more potential you have for revenue growth.”

Guest highlighted tech giant Amazon as an example of a retailer that’s listened to its customers, thanks to features like the personalised homepage with items based on previous shopper behaviour, to its suggested additional items based on like-minded shopper behaviour.

“Amazon Prime provides the seamless and speedy delivery that today’s demanding customers want,” she said.

“It has cleverly replicated this sense of ease in its physical retail stores, Amazon Go.

“Amazon has shaken up the retail world, and set the benchmark for others to follow, by providing excellent experience based in deep understanding.”

Calvert agreed: “Growing retailers have a greater understanding of their customers’ needs, wants and preferences than less successful retailers.

“Selfridges understands its customers intimately and builds strategies around how often they come into the store”

“You only have to look at Amazon to see how those who understand their customers and get their propositions right have a competitive advantage.

“Most retailers are likely to know where their customers live, and perhaps their interests and reasons for returning product.

“This can easily be worked out from transaction and fulfilment data.

“Some also uncover what people like about the brand, and what they don’t like, along with who’s likely to be the most valuable.”

Sheridan, on the other hand, said luxury department store Selfridges was “an example of a brand who understands their customers’ wants and needs”.

“Selfridges understands its customers intimately and builds strategies around how often they come into the store, which brands they want to interact with and ensure their expectations are met or exceeded,” he said.

“Ikea is brilliant at listening to what its customers want”

“They are also not afraid to bet big on initiatives and their customer is happy to show them their appreciation when they do.”

Calvert added that furniture retailer Ikea was “brilliant at listening to what its customers want”.

“Just look at their ‘Life at Home’ report,” he said.

“As a brand, Ikea wants to create a better everyday life for the many, which starts with a better life at home.

“As a result, they continually explore how life at home is changing, by meeting people in and around their homes, all over the world.

“In the UK, they have been exploring how people can live more sustainably at home.

“Live Lagom is a three-year-long collaboration with Ikea and its customers to explore how the power of community can inspire people to live more sustainably at home.

“Today it continues to have a big impact on the lives of Lagomers who have taken part in the initiative and has inspired a range of everyday products at Ikea.”

“The retail landscape is so competitive and customers are less loyal than ever”

Meanwhile, Laura Morroll, senior manager at consulting company BearingPoint, said customers can give feedback in numerous different ways, especially on social media.

“[Feefo, Facebook, Instagram and YouTube] provide really rich insights into what customers like or dislike about products or service experiences – the challenge as I see it amongst the retailers is how to harness that feedback and turn it into actionable insights,” she told Retail Gazette.

“The retail landscape is so competitive and customers are less loyal than ever.

“The worst thing that a retailer can do is come across as not listening to customer feedback and not understanding their customers.

“The expectation of customers is also more and more that the dialogue should be through the medium of their choosing and so retailers have no choice but to tune in to social channels to keep their customers engaged and show they are listening, or they risk losing them to the competition.”

Guest said retailers can avoid the risk of losing their customers to competition by offering personalisation.

“The feeling that a retailer ‘gets’ you and caters for your needs is a powerful one”

“There is a true sense of a one-on-one relationship built when a level of personalisation is undertaken,” she said.

“The feeling that a retailer ‘gets’ you and caters for your needs is a powerful one.

“Because if you’re getting the service you desire, why would you go anywhere else?”

Scott Logie, customer engagement director at data insight and marketing company Read Group, told Retail Gazette that consumers “expect some level of personal service”.

“To provide that personal service, the retailer needs to know the customer,” he said.

“Knowing some basics like date of birth and family make-up could make a huge difference to many of them.

“Whether we like it or not, retailers like Sainsbury’s and Tesco have definitely used their customer knowledge well.

“The provision of bespoke offers based on activity and previous purchase revolutionised retail.”

Logie added that if personalisation is used well as part of the marketing mix then it could enhance value.

“Personalisation on its own is not enough to transform a retailer”

“It’s often more noticeable by its absence – why do I get emails with summer skirts as the headline?

“Why do I see every size on a website when I have always been size 8? Why do I get offered the product I bought last week?

“Being personal isn’t about knowing the person’s name and dropping it onto an email, it is ensuring the whole journey is tailored and data drives the possibility to do this.”

However, Sheridan said personalisation on its own is not enough to transform a retailer.

“Personalisation can play a role in customer relationship,” he said.

“Really, personalisation it is just one way of addressing the understanding that the customer wants to be treated as an individual.”

Click here to sign up to Retail Gazette‘s free daily email newsletter