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Are customer experiences at your stores risking billions in retail losses?

6/2/2015

CHICAGO — Attention retailers. It’s the mistreated customer who walks out the door in a silent huff who places the most revenue at risk, according to a collaborative study conducted by LoyaltyOne and Verde Group with professor of marketing and psychology, Deborah Small at the Wharton School of the University of Pennsylvania.




The March 2015 survey shows that approximately half of 2,500 U.S. consumers polled reported experiencing a problem on their last shopping trip. Of those customers, 81% decided not to contact the retailer about the issue. Among these silent shoppers, 32% said they were unlikely to recommend the retailer to friends and family, putting these shoppers at-risk of decreasing their spend with the retailer.




By comparison, the study shows that shoppers who did notify retailers of their poor experience and had their problem completely resolved were 84% less likely than silent shoppers to be at risk of decreasing their spend.




“The results are a resounding confirmation that poor customer experiences have a considerable negative impact on shopper spend and attrition which can run into the billions,” stated Dennis Armbruster, LoyaltyOne consulting VP and managing partner. “We’re ushering in a new era of customer experience measurement vital to retailers looking to make even more informed decisions.”




Building on its behavioral analytics solution, LoyaltyOne Consulting has partnered with Verde Group, a customer experience research consultancy. Verde's proprietary Revenue@Risk analysis will use experience impact modeling to identify the specific customer experiences most damaging to customer loyalty behaviors and prioritize them according to impact on revenue and market share.




According to the study, retailers should take note of the importance in identifying specific customer experiences most damaging to customer loyalty as billions of dollars are at risk. Below is the ranking per category:

•    Mass merchandisers are putting 25% of potential revenue at risk;

•    Apparel retailers are putting 16% of potential revenue at risk;

•    Department stores are putting 15% of potential revenue at risk

•    Drug stores are putting 12% of potential revenue at risk; and

•    Grocers are putting 11% of potential revenue at risk.



“Our methodology precisely measures the impact of ineffective customer touch points. Insight around the effects of poor customer touch points can help retailers reduce the risk of negative customer experiences, while also enabling them to proactively design experiences that positively influence spend, visit frequency and basket size,” stated Paula Courtney, president of Verde Group.




The survey also revealed that big spenders within a category disproportionately experience certain problems:




  • Mass Retail “Check Out” Risk: Shoppers frustrated by check out wait times reported spending 23% more than the average mass retail customer ($545 versus $446 a quarter)


  • Department Stores “Not-My-Department” Staff Attitude: Shoppers troubled by an associate’s not-my-department attitude reported spending twice as much as the average department store customer ($543 versus $261 a quarter)


  • Apparel Retailers “Ship Date”: Particularly in their online channel, customers who cited their inability to obtain a specific date or time to receive an online order reported spending 66% more in the category ($416 versus $250 a quarter).


 
The results are based on an online survey of 2,500 American respondents.


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