The U.S. Consumer Confidence Index (CCI) has revealed a continued rise in economic perceptions over the past few months. This is of course a positive indication for the health of the retail industry, but having consumers who are willing to loosen their purse strings is just the first step towards generating additional revenues as an industry. In order to capitalize on this macro trend and encourage sales and ongoing loyalty, retailers need to concentrate on developing strategies that engage customers and provide a unique experience.
Consumer Confidence Impact on Retail
First off, let’s clarify what consumer confidence actually means. Consumer confidence, as measured by the CCI, is defined as “the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending”. It is a 5,000-household survey of economic opinion – so while it is not a precise science, it is considered a reliable indicator of economic potential with the power to influence the stock market and even Federal Reserve policy.
When it reflects high levels of consumer confidence, it means people are more apt to spend their money instead of saving it. In these instances, as is currently the case, retailers stand to be one of the primary beneficiaries. Subsequently, as we noted in a previous blog, retail sales in July 2017 increased 4.1% in the first quarter of 2017 compared to 2016. Although consumers are spending in a greater capacity now, younger generations are shifting spending away from retail and towards experiences, and so we need to explore whether retailers are truly ready to earn their share of th
The U.S. Consumer Confidence Index (CCI) has revealed a continued rise in economic perceptions over the past few months. This is of course a positive indication for the health of the retail industry, but having consumers who are willing to loosen their purse strings is just the first step towards generating additional revenues as an industry. In order to capitalize on this macro trend and encourage sales and ongoing loyalty, retailers need to concentrate on developing strategies that engage customers and provide a unique experience.
Consumer Confidence Impact on Retail
First off, let’s clarify what consumer confidence actually means. Consumer confidence, as measured by the CCI, is defined as “the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending”. It is a 5,000-household survey of economic opinion – so while it is not a precise science, it is considered a reliable indicator of economic potential with the power to influence the stock market and even Federal Reserve policy.
When it reflects high levels of consumer confidence, it means people are more apt to spend their money instead of saving it. In these instances, as is currently the case, retailers stand to be one of the primary beneficiaries. Subsequently, as we noted in a previous blog, retail sales in July 2017 increased 4.1% in the first quarter of 2017 compared to 2016. Although consumers are spending in a greater capacity now, younger generations are shifting spending away from retail and towards experiences, and so we need to explore whether retailers are truly ready to earn their share of that spending pie.
The Role of Marketing
If consumers don’t see ownership of consumer goods, or the shopping journey, as providing an experience as rewarding as a 2-week vacation abroad, or even a trip to the local bar, that extra confidence won’t do retailers much good. Consumers need some motivation to buy, and that requires a lot more than a shelf full of cool toys and some extra cash in their pocket.
The power of marketing can’t be overlooked here. However, we’ve seen decreased levels of brand loyalty across retail. Even in verticals like grocery with high rates of regular purchase frequency, 39% of shoppers say it wouldn’t matter to them if their usual grocery store closed.
With an increased reliance on social media and peer reviews to guide purchasing decisions, traditional marketing methods won’t cut it. It takes a new level of marketing creativity to earn the business of today’s consumers, and even more to earn their loyalty. But how can a retailer create an experience beyond having flashy in-store entertainment or hiring lots of support staff – both expensive propositions that will raise prices?
Earn Consumer Loyalty
60% of the CCI is calculated based on consumer confidence in their future economic condition and spending capacity. Laying the groundwork for their business down the road is a major part of what retailers must focus on.
Generally, this has been the domain of loyalty programs, which have been a reliable way to build a long-term customer base and revenue stream. But loyalty today comes from more than just good deals or customers who just love your brand alone. Even loyalty programs that reward consumers for their continued business by offering certain discount tiers and special offers don’t cut it anymore. In fact, in our recent loyalty report, half of respondents (49%) felt the rewards they received for their loyalty weren’t good enough to secure their commitment to the brand.
We all know that other retailers are always looking for new ways to undercut the other’s prices or offer faster delivery. But a more sustainable approach is needed.
What’s needed is the development of a targeted and experience-led rewards program that builds brand engagement while also enhancing long-term customer loyalty. The loyalty study proves this to be a wise choice: two out of three consumers are more attracted to loyalty programs which offered “exclusive access, services or products”.
Personalization Required
The key takeaway here is that exclusive means unique – an offer designed just for that customer. This personalization requirement is backed up by our research, which reveals that almost half of the youngest consumers “strongly agreed” that personalization of rewards would influence where they spent their money, more than double of other age groups.
Retailers must identify and implement technologies and strategies that allow them to develop unique shopper insights and deliver personal messages and offers to shoppers. By integrating their marketing, CRM, point of sale and loyalty programs, retailers will be able to create personalized profiles on each shopper, and ultimately provide a personal experience that creates a connection between the shopper and the retail brand.
Make consumer confidence work for you
Although some of their financial priorities are shifting away from material consumption and towards experiences, smart retailers will leverage personalized loyalty to turn the traditional sales process into a unique experience. With consumer confidence in the United States on the rise, retail is well positioned to continue its seven-year 4% growth rate. All it takes is strategic dedication to create rewarding, personalized experiences.
Contact me to find out how Ecrebo can help your business create rewarding, personalized experiences.
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