Poor CX Puts Retail Revenue Gains at Risk

Because negative customer sentiment often goes unreported, retailers must look for behavioral patterns that reveal opportunities for improved loyalty and retention efforts.
Customer Experience

Back-to-school season marks the unofficial start of the holiday rush. Retailers are eager to launch promotions and expand sales. But without an effective customer experience strategy at the heart of these endeavors, retailers stand to lose both loyalty and revenue.

LoyaltyOne's recent "2015 Customer Experience Risk Study" report explores the financial impact associated with poor CX to demonstrate an approach for more profitable investments. Conducted in partnership with The Verde Group and Deborah Small, associate professor of marketing and psychology at The Wharton School of The University of Pennsylvania, the study invited 2,500 American shoppers to evaluate their most recent purchase experience. Researchers discovered that at-risk customers are unlikely to recommend retailers after encountering problems during their most recent brand interaction, and subsequent word-of-mouth influences consumers when making future purchases.

Retailers, however, struggle with three fundamental questions:

  • How much revenue is at stake?
  • Which problems are driving the financial risk?
  • Which customers are most affected?

Ultimately, efficient service outweighs price and product availability when it comes to loyalty and retention, indicating that retailers must identify lackluster customer touchpoint to proactively design profitable brand experiences.

The following statistics demonstrate the level of risk currently within the retail space and factors that threaten customer retention and revenue growth:

  • Overall, customer experience problems place an average of 16 percent of revenue at risk for the typical retailer, with mass retail brands (25 percent) facing the highest potential revenue at risk and grocery (11 percent) facing the least. The average $1B merchant and $1B grocer risk losing $250M and $100M+ respectively in word-of-mouth referrals, as these percentages represent shoppers unlikely to recommend.
  • Eighty-one percent of shoppers with customer experience problems don't contact the retailer because they think it's not worth the trouble (60 percent) or that it wouldn't do them any good (40 percent). Of those respondents, 32 percent are unlikely to recommend the retailer and are at higher risk for attrition.
  • Frequent issues for each of the retail categories evaluated include:
    • Consumers say in-store items are rearranged too often, making goods difficult to find. (Grocery)
    • Loyalty program points and rewards take too long to earn. (Drugstore)
    • Staff members told them where to find an item, but failed to guide them directly. (Department)
    • Customers wait too long in the check-out line. (Mass)
    • Preferred items are frequently out of stock. (Apparel)
  • Households shopping for children under 18 are 19 percent more likely than the general population to say that not having enough information available near displayed items detracted from the shopping experience while 65 percent were more likely to say that waiting too long at checkout clouded their perception.
  • While households shopping for children under 18 are 39 percent more likely to say their shopping experience was compromised when sales associates had a 'not my department' attitude, they're also 26 percent less likely to claim that staff not appreciating their business damaged their entire brand experience.

Key takeaway: Despite voluntary feedback, much negative sentiment goes unreported, as shoppers allow their actions to speak louder than words. Thus, retailers must look to both structured and unstructured data in their attempt to establish an ideal, holistic view of the customer experience. Retailers often find issues that are reported don't impact the bottom line as much as unspoken problems. Brands must remove friction wherever and whenever possible to ensure that all CX initiatives have the opportunity to succeed. Communication and outreach are essential to curbing issues before they arise, but retailers cannot implement proactive measures if they aren't familiar with the problems to start. As it stands, customers who have their issues completely resolved are 86 percent less likely to be at risk, making such initiatives well worth the effort from both a loyalty and revenue perspective. Moving forward, an investment in data analytics to better understand and respond to customer sentiment and behavior translates into an investment in the future of CX success.