Aberdeen Research: Lifetime Customer Value Identified as a Key Motivator for Customer Loyalty in Retail
by Deepak Sharma on Sunday, August 10, 2008
Aberdeen data reveals that the top business pressure impacting loyalty-related decisions of 58% of Best-in-Class companies in retail is the need to develop lifetime customer value, which is defined as the present value of future cash flows through long-term customer relationships.
“In times of stagnant growth, retailers need to develop lifetime customer value through improved customer retention, re-activation, and acquisition strategies. This will improve long-term stakeholder value and ensure an assured revenue stream for the retailer through customers who are expected to spend for several years,” says Sahir Anand, senior analyst and chief author of the customer loyalty benchmark report.
Aberdeen data reveals that 93% of retailers execute loyalty programs as a standard offering for their web, store, or catalog channel customers. Such campaigns include, but are not limited to, point perks, rewards, coalition marketing, frequent buyer offers, or private label credit cards. The reports also indicated that lifetime customer value in retail is being overshadowed by the tactical nature of loyalty campaigns that target short-term demand. “Loyalty campaigns are executed without due consideration to ideal customer segments, tools, coordinated cross-channel marketing needs, and long-term customer relationships,” says Anand.
The measurement of ROI on customer loyalty programs is a continuous action at retail headquarters. Moreover, determining such an ROI is a much simpler process compared to other retail solutions such as POS, merchandising or pricing. There are substantial and recurring cost factors associated with loyalty in retail. Survey results show that cost-benefit issues surrounding loyalty scenarios are top-of-mind for retail marketers. Repeat visit (61%), incremental sales (58%), and overall satisfaction (57%) have emerged as the three most significant factors used by retailers for justifying spend on loyalty elements, operational costs, and upgrade / deployment of loyalty software applications. All three ROI criteria can lead to sales uplift, retention improvement, and reduced attrition for retailers.