If retailers think customer engagement was easier in 1992, it’s because they didn’t know what they didn’t know.
Back then, Amazon was just a twinkle in Jeff Bezos’s eye. People happily fill the indoor malls. Nobody had a smartphone. And most retailers had to guess what their customers were doing outside their stores.
Then came data technology. Over 30 years, online and “mail order” retail grew to $870 billion from $35 billion. Mobile shopping is predicted to control nearly 43% of all e-commerce by 2024. And the retail industry has boomed, tripling to nearly $6 trillion from $2 trillion.
Of course, the consumer population has also flourished, along with the many places where they shop.
Technology has changed the buyer, but only up to a point
However, the fundamentals that shape consumer behavior today are not much different than they were decades ago; technology has just altered the way people figure out fundamentals. These seven behavioral lessons, as true today as they were decades ago, confirm me. This is what history has shown us.
- Consumers often break rational molds. Shoppers’ purchases are often unpredictable, no matter how sophisticated a retailer’s artificial intelligence (AI) model may be. Case in point: Years ago, my associates and I learned that grocery shoppers who bought coconuts also tended to buy prepaid phone cards. Why? Because many of these buyers emigrated from tropical places and coconuts made them nostalgic. The lesson: Creativity and insight are required not only to observe customer activity, but (more importantly) to understand why that behavior occurs Why phone cards?? Consumer data is highly informative and highly predictive of future behavior, but understanding what motivates behavior: the why behind the actions, you can demand a grade A consumer investigation.
- The definition of consumer relevance is fluid. What makes a brand or organization important to a customer today could be dissolved in an instant if that person moves, changes jobs or welcomes a baby into the home. Then there are external conditions: recessions, the pandemic, and now record inflation. Altered spending behaviors can serve as predictors of change in terms of what a consumer will find practically relevant, but retailers must also discover what shoppers find emotionally relevant, especially in tough times. Certain experiential indulgences, like a weekend getaway, it can become more relevant in the face of change.
- Buyers will give the best price to a good experience. That good time doesn’t have to be dazzling, though it often is. Drink DSW store in Las Vegas, which in 2018 introduced a vending machine-like delivery system called a “shoevator.” This level of dynamism is tailor-made for an overly submerged market, underlining the secret to a good shopping experience: knowing your audience. There’s nothing flashy about Costco’s free samples or the store’s methodical layouts, but both contribute to why the average paying Costco member visit its giant warehouses biweekly.
- If the relationship is not invested in being dynamic, it will die. Sustained customer engagement requires ongoing investments by retailers in technologies, staff, and other resources. The more advanced a retailer’s reach and personalization, the more refined customer expectations become, making the next financial outlay to support a more enjoyable and rewarding customer journey more crucial. As retailers advance their abilities to understand and then target individual consumers through greater relevancy, they must ensure that their communication channels speak with one “voice” and adjust to continually meet the needs of those customers. . The best retailers are constantly evolving and investing in experiences that deliver on their brand promise and stay ahead of the competition. In 2017, Macy’s, Staples and others invested in IBM’s Watson supercomputer to better predict customer preferences. By 2021, it was clear the computer was not up to par. Still, other forms of AI are profitably fine-tuning customer relationships. The AI probably informed the merchants on how reopen physical locations after Covid-19 lockdown a crucially sensitive period for reviving in-store customer engagement was lifted, for example.
- Consumer demand for privacy should not be underestimated. Consumers know when the information they share is being misused due to poor customization efforts. Only 47% feel they are in control of their data, and only 5% rank retailers in their top three most trusted industries, according to deloitte research. These sentiments are reinforcing regulatory efforts, such as California Consumer Privacy Act, to give people greater control of their information. Some retailers are formalizing consumer privacy practices, but they are in the minority: Only 22% of retailers have integrated their data privacy plans into their corporate strategic planning, reports Deloitte. That number should be higher.
- Each generation is the “it” generation. In 2010, retailers were advised to invest their resources in capturing the Millennial market of 80 million. In 2018, it was generation z, the first digital natives. And in 2022, it’s Gen Alpha, who are maturing along with advancing technologies. You get the picture. Each generation has defining characteristics that distinguish it from the others, but they are everybody consumers, regardless of their age. In 2022, we are seeing the rise of mature influencer consumers – 50 years and older – demonstrating that traditional market patterns rooted in demographic constructs are no longer reliable. Consumers must be understood by their actions, not their ages, because 70-year-olds can behave like 35-year-olds and vice versa.
- They always recover. In difficult times, consumers show their resilience by redirecting spending, but not always in the way expected. Drink $299 Home Depot 12-Foot Halloween Decorative Skeleton. Introduced in 2020, the monstrous lawn ornament sold out, contributing to Home Depot’s most successful Halloween on record. (It sold out again in 2021.) The success of “Skelly” was a product of resilience. Introduced during the lockdown imposed by the pandemic, it allowed many emotionally drained people to convey their control over the situation. It revealed that consumers will fight unpredictability with the unpredictable, a factor worth including in retail predictive models.
Consumers don’t always know what they want
It is true; Retailers may lead the way for consumers from time to time, but their customers are often right enough to demand that companies always follow closely. Retailers and marketers know a lot more than they did in 1992, and the good guys continue to build on those historical lessons. However, I bet there’s still a lot you don’t know, and won’t know, until your customers show you the way.
Bryan Pearson is a Featured Contributor to The Wise Marketer and currently serves as a director and strategic advisor to several loyalty-related organizations. He is the former CEO of LoyaltyOne.