Forrester Report Finds Retail Leads Loyalty Pack, But Channel Connections Still Missing

Retail was the clear winner in last week’s Forrester customer experience report, but its author sees a lot of room for improvement. Although the retail industry performed the highest out of 12 categories in using customer experience to stimulate loyalty, Forrester Senior Analyst Bruce Temkin said cross-channel touch points could make retailers better at loyalty marketing, if the customer experience was made a higher priority.

“Retailers have been operating with customer needs in mind for longer than any other business,” says Temkin. “But no one is really doing well across channels. Retailers still tend to set their web operations up in complete isolation from the other business units.”

The Forrester report “Customer Experience and Loyalty” examined the correlation between customer experience and loyalty across 12 industries: airlines, banks, cell phone service providers, credit card providers, hotels, insurance firms, Internet service providers, investment firms, medical insurance companies, PC manufacturers, retailers, and TV service providers. It looked at how three elements of customer experience (meeting needs, being easy to work with, and enjoyability) correlate with three components of loyalty (repurchase plans, reluctance to switch, and likelihood to recommend).

The report found the most direct connections between repurchasing and enjoyability as well as a clear link the most with the likelihood to recommend. It also turns out that industries have different loyalty profiles. For instance, retailers and health insurers can influence loyalty the most by meeting customer needs while banks and hotels can affect customer repurchase plans from all elements of customer experience.

Retailers scored the highest correlation between customer experience and loyalty in almost every category. The retail industry’s overall score was 81, with useful at 86, easy to use at 85 end enjoyable at 75.

Meeting customer needs were found to be the strongest link to repurchasing. For every industry except airlines, meeting needs had the highest (or was tied for the highest) correlation with consumers’ plans to make another purchase. The “easy to work with” category also has a strong link to repurchasing and recommendations.

“One of the things retail as a category has always done well is set customer expectations,” says Temkin, “and expectations have a lot to do with customer experience and loyalty. When you go to Costco you know you’re not going to run into a Rainforest Café or take a latte break. But you expect a huge parking lot, pounds of beef and pallets of soap products. It doesn’t disappoint.”

Temkin’s report urges retailers to continue to tie experience to loyalty. “In this environment where companies need to cherish every dollar from
their customers, it’s critical that they develop customer experience strategies for increasing (or minimizing the decrease in) loyalty,” he states. “How? It all starts with a better understanding of key customers. Companies should develop a robust voice of the customer program. Use this platform to target improvements in the experiences you deliver to your most important customer segments — eliminating barriers to meeting their needs, making it easier for them to do business with you, and injecting enjoyability into some interactions.”