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Pessimistic customers lacking loyalty in tough economy - study

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21st May 2013
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Wider consumer pessimism around the UK’s economic state is severely impacting customer’s loyalty to brands.

According to Epsilon’s 2013 Consumer Loyalty Study, the current tough economic climate and state of the British high street – which has seen many established retailers such as Blockbusters and Woolworths go to the wall in recent times – is having an effect on consumers’ shopping behaviour.

Unlike their European counterparts, few Brits are feeling optimistic about their finances with 77% claiming they experience low savings rates. And as a result, UK consumers are currently extremely cautious with their disposable income, with more than half (57%) choosing to shop around for the best bargains and just 15% willing to spend extra to purchase luxury branded items.

Additionally, traditional retail outlets simply cannot make ends meet any more, leading to a growing trend for consumers to switch their shopping preferences to online stores and participate in showrooming, said the report. Epsilon highlighted recent research claiming UK consumers are leading the online purchasing revolution with the highest average e-commerce spend per shopper in the world, reaching $3,878 in 2013.

These frugal spending habits and embedded pessimism appears to be severely impacting customers’ loyalty to brands, suggests the report, with just 15% of Brits believing strongly that it pays to be loyal to their favourite brands.

The study, which examined the sources of influence on consumers’ spending, dispelled the myth that price trumps other factors. When asked what caused them to switch from shopping at their usual retailers, less than a quarter said price – with returns policies, customer service and brand response being more of concern to consumers.  

So what drives consumers to be loyal? The findings showed that consistently good quality products/services scored highest with 52%, followed by value for money (50%), being treated like a valued customer (33%), first-time good shopping experience (30%) and good after sales support (29%).

Phil Singh, VP of sales EMEA at Epsilon, said: “Loyalty appears then to be the new frontline of competition in retailing. If brands can offer what consumers want — which half of respondents identified as being value and quality in the products or services they are offered — they have a good chance of encouraging customers to remain loyal.”

However, brands must be careful how they target customers in the search for loyalty, said the report. More than half of respondents said they would welcome targeted and useful marketing communications from brands with irrelevant messaging shown to be ignored by the majority of consumers (64%).

“In this complicated, crowded market, brands cannot afford to be anything but approachable, informative, and targeted in both their marketing and communications. Get it right and there is an enormous retail opportunity in the UK; get it wrong and brands risk losing everything,” Epsilon advised. 

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