The holiday shopping season is already underway, as evidenced by holiday displays and holiday music playing in different stores.
During retailers’ most important time of the year, their loyalty programs may not be enough to keep consumers making the holiday purchases with them rather than a competitor, according to Jim Taschetta, CMO of FreeMonee.
The company today released the results of its research into the pending patterns of more than one million U.S. cardholders over two years, totaling more than 200 million transactions and $8 billion.
Among the findings:
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Even the most loyal shoppers cheat: A retailer’s most loyal customers (those visiting at least nine times a year), spend $1.44 with competitors for every $1.00 spent with them.
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The most loyal aren’t necessarily the most valuable: Low frequency visitors (those coming 2-3 times per year) make up on average 26 percent of revenue, higher than the contribution from the most loyal (24 percent). Just one more visit from these less frequent shoppers would fundamentally change revenue numbers.
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Retailers fight for same slice of the wallet: On average, customers spend the same amount per visit at each retailer, regardless of how frequently they shop there. Across a nationally-representative competitive set of department store retailers, the average spend per visit was the same—whether they shopped at a particular store once or more than nine times each year.
“This is the most competitive environment I’ve ever seen in retail,” Taschetta said. “People have some many different ways to shop and compare, it’s difficult for retailers to capture their fair share of visits.”
Despite more consumers shopping online every year and the influx of mobile purchases the last couple of years, the brick-and-mortar stores still capture the lion’s share of the holiday shopping dollars, according to Taschetta. He argues that the critical factor is not so much a company’s loyalty program, but rather its ability to get a customer in the door is the most critical factor in grabbing the maximum share of customer wallet during the holiday season or at any other time of the year.
“The one that gets you in the door will be the one who will be the most competitive,” Taschetta said. “Retailers need to think differently about attracting visitors. They have to think about new and cool ways to modify the coupon to incent people to come in the door.”
He recommends gift cards as a primary way to bring in the customer.
Yet companies need to make sure they offer gift cards to the right customers. Companies have more access to more data to ever before, but they have to be able to analyze that data to generate offers that will bring a customer in, Taschetta said, explaining that a $20 offer to someone who typically spends only $30 in a store is likely a money-losing offer. A better offer is $20 to someone who typically will spend $100 or more every time he or she is in the store. Bringing the consumer in is also the first step in driving cross-sales and upsales.
“Companies need to think of ways to make the customer experience better,” Taschetta added.