With the cost-of-living crisis continuing in 2023, consumer behaviour is changing, with an emphasis being placed on value. Now that the post-holiday spending season is over, Australians will be looking to tighten their belts in the coming months. Less spending power means a greater emphasis on quality over quantity.
Similarly, when the pandemic impacted how consumers shopped, inflation is now shifting customer behaviour, too. As seen in the Emarsys Customer Loyalty Index, consumer behaviour has already started to shift with 61 per cent of Australians having switched from a brand they were previously loyal to because of cost consideration. An additional7 in 10 Aussie shoppers will switch products if a cheaper option is available.
With the price-tag weighing heavily on consumer behaviour, retailers must look to new ways of retaining customers and enhancing the customer experience. In fact, 56 per cent of Aussies are ‘more loyal’ to retailers that offer greater customer service followed by high quality products – proving that quality has the potential to reign in favour of the retailer during an economic downturn.
Customer retention requires customer obsession
Inflation pressures require retailers to think beyond the traditional funnel to entice loyalty and retention amongst consumers. Thinking beyond the transactional brand-customer relations means retailers need to move beyond being customer centric and become truly “customer obsessed” – putting consumers at the heart of all they do.
According to Emarsys’ commissioned Forrester whitepaper, customer obsession is a business strategy used to enable business growth in any market climate. In theory, a retailer’s ‘customer obsessed’ approach places the customer at the centre of leadership, strategy, and operations.
Putting this into practice relies on brands placing quality over quantity for the customer experience. The Australian Bureau of Statistics recently reported that rising cost-of-living pressures have caused retail sales to decline by 3.9 per cent in December 2022. Despite many retailers having slashed their prices during this time to ramp of purchases, in the long run, excessive discounting is not impactful for the business, nor enticing to consumers.
The Customer Loyalty Index found brands that offer excellent customer service, a good return policy, frequent communication, and a personalised shopping experience to be amongst the top ten reasons consumers develop brand loyalty.
Meaningful connections are built on data collection
Consumer data is the most sought-after asset that brands want. With the demise of ‘cookies’ or third-party data, retailers must shift toward a customer-first data mindset and leverage first and zero-party data to drive personalised experiences across all channels.
To do this successfully, retailers must show customers the value they will get by sharing their data. Incrementally building out comprehensive customer profiles with data allows retailers to create more positive customer experiences.
Retailers should centre their data program around connecting the front and back offices to get a complete view of the customer. This will allow the brand to deliver a seamless shopping experience, with accurate product information on inventory, availability, and fulfilment. Leveraging on these insights, will drive desired promotions and recommendations to the customer.
Successful brands have learned to pivot and adopt the right strategies for the moment. Today is no different. Leveraging technology by using personalised communication, for example, will give greater first party data insights to consumer behaviours, allowing retailers to develop stronger customer relationships despite the current economic downturn.
As the complexity of the retail sector grows, it will be important for marketing teams to optimise how they attract, retain and build customer relations. While growth is always a business goal, only profitable growth will be impactful during inflationary pressures. Retailers will be required, if they have not already, to refocus on strategies that drive profitability.
Kristyn Wallace is regional vice president for Asia Pacific & Japan at SAP Emarsys.