Customer loyalty - an investment in trust

Author:
Anna Meller
Published:
21.11.2022
I

n our previous article on building customer loyalty, we discussed this topic in the context of an optimised e-commerce implementation that provides a positive shopping experience. This part will continue this topic, emphasizing the importance of trust and customer relations.

Customer loyalty - potential in times of recession

Investing in customer loyalty is important because of the looming recession that companies and consumers will face in the coming years. With clients being forced to buy less due to a more difficult financial situation, they want to spend their money wisely.

The trend of 'smart shopping' does not only involve consumers minimising their spending and choosing the lowest possible prices; an equally important aspect is a comfortable shopping path, brand transparency, and the feeling that the company is trustworthy. Another factor that influences the building of loyalty in the market is the brand's approach to ecology. At a time of growing awareness of sustainability, more and more customers are choosing companies that care about the environment and are keen to return to them, feeling that their actions make a difference. 

When building customer loyalty, it is therefore worth remembering that price is only one aspect influencing the decision-making process. For the satisfaction of emotional needs, such as comfort, safety, and being in tune with their values, the consumer is willing to pay a higher price and make repeat purchases in trusted shops (Rzeczpospolita, 2022).

A convenient return policy makes customers coming back

Despite the many tools that are supposed to provide online customers with an experience comparable to that in a stationary shop, there is always the risk that the goods will not match the description or that the customer's expecations of them won't be reflected in reality. The moment of unpacking the parcel, therefore, creates uncertainty: Will the new shoes fit? Will the lipstick be the right colour? Will the phone fit well in the hand? Online shopping is always in some way a surprise, which may or may not be pleasant. The consumer's experience is also affected by the transport of the parcel itself, which is always fraught with the risk of damage. According to a Gemius report from 2020, as many as 15% of e-consumers have encountered the problem of a damaged parcel. Online shopping - although convenient and fast - therefore raises the fear of additional procedures, such as returns or complaints when the product does not meet expectations. 

According to InPost, up to 40% of shoppers expect a convenient option to return goods." While customer has become accustomed to the nature of online shopping in recent years, this need continues to grow. Looking at historical data, in 2016, for 36% of online shoppers, the ability to return goods quickly and easily was one of the key factors in choosing a particular shop.

A clear and consumer-friendly return policy in an e-shop is an important factor in building customer loyalty and increasing the chance of completing a transaction. Many consumers check the policy even before they decide to place an order. Customers check the terms and conditions for returns or complaints, especially when they make a purchase from a shop for the first time and are reluctant to return to companies where the process has been lengthy and tedious. A friendly returns policy is therefore a source of good experiences that customers will be eager to return for.

Friendly return policy in practice

More than half (52%) of online shoppers declare that the form of return most encouraging for online shopping is the possibility to send the product back free of charge by courier (door-to-door), and 45% of respondents indicate the possibility of shipping via parcel machine. [4] More and more big players are looking out for the customer's convenience by taking on the shipping costs. Some shops allow free returns only to logged-in customers, which, by the way, allows them to build their contact base and analyse their customers' shopping behaviour.

An extended period for returning products is also attractive to consumers. More and more shops are offering more than 14 days to return purchased goods. The most common is 30 days, but some even guarantee 90 or 120. 

Market segmentation strengthens loyalty

The consumer in the third decade of the 21st century likes to get content tailored to his needs. The days of brands sending the same message to different audiences are long gone, and customer segmentation is now a must-have for modern communication. If done well, it pays off with loyal and engaged customers who know they will find what they are looking for from you. In addition, the chance that they will make a purchase increases when the message is profiled to their needs. According to research, organisations with properly executed segmentation have seen a 10% increase in profits over a five-year period compared to companies that have not opted for such a marketing strategy (Harvard Business Review).

The segmentation criteria used by companies are evolving. Segmentation based on demographics such as gender, age, or household data, which do not translate into brand perception, is becoming less and less important. [6] In modern CRM systems using Marketing Automation, companies introduce segmentation in terms of customer loyalty and the identification of VIP customers, measured by indicators such as repeat and frequent purchases, their total value, or average basket. 

Identifying the loyal customer

When segmenting a market, marketing professionals must first 'know' the people who buy online and are or are likely to become, customers of a brand. This creates archetypal models that contain information about the behavioural motivations, aspirations, and purchasing needs of specific customer groups. These are known as buyer personas or profiles of people who may be interested in a brand. They provide insights into what consumers are looking for in the market, what subjective needs they fulfill with the products they purchase, what information guides their purchase decisions, and what motivates them to purchase a particular brand's product. 

An in-depth reflection on target groups produces messages that reach specific audiences more effectively. In this way, a correctly created persona improves the market segmentation process, supports the creation of sales funnels, and contributes to increased sales. 

Loyalty programs to support customer retention

Loyalty programs in e-commerce are an excellent way to build a loyal customer base and can increase repeat purchases by an average of 25% (Marketer Plus, 2020). The form of loyalty programs is gradually changing - points are no longer awarded solely for sales, as was the case just a few years ago. Now brands are rewarding customer behaviour such as writing a review, making a comment on a Facebook profile, or subscribing to a newsletter. Exclusive offers, pre-sales, special offers, gift codes, or discount codes are offered as part of the programs.

Interesting examples are loyalty programs such as Allegro Smart or Empik Premium, which, in addition to fostering loyalty among customers, fulfill another important function - they counteract shopping cart abandonment due to shipping costs surprising the customer at the last stage of the transaction. In both cases, with a one-off payment, the program's customers gain access to free shipping on purchases over PLN 40. In this way, frequent buying from one shop simply pays off because, after several orders, the one-off payment simply comes back. In addition, many loyalty programs award benefits that can also be used in other non-competitive brands, for example, the takeaway food portal Pyszne.pl, which awards discount codes for Traficar rides, cinema tickets, or cosmetics.

Customers loyal to the environment

As we have already mentioned, environmental awareness is growing among an increasing number of customers, and the responsibility of businesses in this area is an important element in building loyalty. Customers want to support brands with similar values - 81% of Poles believe that their way of life has an impact on improving or degrading the environment (CBOS, 2020). Such a philosophy has been built by the Polish e-commerce company Your KAYA, which specialises in zero waste hygiene products. For customers driven by values such as respect for the environment and caring for fair relations with poorer countries, it is also important whether the product is produced and distributed according to fair trade and sustainability principles.

Transport ecology in e-commerce

Due to less transport involvement, local entrepreneurs oriented towards the home market leave a lower carbon footprint, i.e. lower total greenhouse gas emissions during the full life cycle of the product. Therefore, customers who are sensitive to the health of the planet seek to support the local nature of the business. E-commerce companies, which by definition do not meet this condition, are increasingly taking their eco-friendly initiatives in terms of transport as well.

InPost advertises its parcel machines as an eco-friendly service, arguing that its couriers drive 120-150 km less per day than other providers and that by delivering parcels to one location, there is a reduction in carbon dioxide of up to 95% (InPost, 2019). Another company known for its green approach to doing business is Answear, a fashion retailer with a wide range of products. Anwear and eobuwie.co.uk, in their concern for the environment, use only recycled paper packaging and shipping boxes for shipping orders, and Zalando has second-hand products on offer.

The human face of the company

Building customer loyalty to a brand requires businesses to take actions that show that there are specific people behind the brand. This trend is clearly visible in small businesses that expose their brand ideas and introduce customers to the people working in the company. Handwritten "This package was prepared for you by Iza", photos of employees on the contact page or small gifts of sweets are designed to warm the relationship with consumers. 

Important in building loyalty is responding to needs that are important to consumers, such as convenience and security in the product purchasing process. This is ensured by friendly returns and complaints policy, which sends a clear signal that the company can also be counted on when things do not go well for the seller. 

The above arguments show that although a well-designed customer shopping experience is an essential factor to initiate consumer loyalty, more is needed to build a lasting relationship. In this regard, emotional factors play a significant role and it is these factors that influence the attachment of customers to a brand.

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