Lessons in Loyalty

April 30, 2006  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on May 2006 Every consumer wants to feel wanted, to feel as if they’re valued. And just coincidentally, most retailers, who want to stay in business for the long term, cross their fingers that their customers want to return to spend a few more bucks.

Combine the two desires together, and you get a loyal customer base who returns time and again to the same retailer for all their needs.

But the intermittence of shoppers returning to a furniture store on a more frequent basis remains an obstacle the retailing side of the home furnishings business continues to face. Purchases are usually of the variety of which replacement is years away from occurring.

Creating an atmosphere of furniture as fashion, a lifestyle choice rather than an item of necessity, may pull a few customers on the shopping fringe into the store more often than they once did, but not nearly as frequently as other industries—such as consumer electronics—have managed to lure in their customers in the last few years.

Replacing even a high-priced item, such as the last version of an iPod for the newest edition of the portable digital music player, happens much more frequently than someone opting to purchase the newest sofa collection to replace last season’s.

Loyalty programs have been used more frequently in recent years in other fields of retailing and services to pull customers into the store. Most have succeeded in producing a loyal clientele, who use a credit card-sized indicator of who they are and what they purchased. With the acceptance of a reduced price or other perk, consumers would have to offer up their buying history with that retailer—from Hallmark to OfficeMax to CVS Pharmacy to American Airlines—to obtain an acknowledgment of their continued patronage.



A Trade Off

A retailer issues a card to a regular customer who signs up for it by supplying personal information. They then use it as a form of identification when making transactions. The purchaser is usually entitled to either a discount on the current purchase, or an allotment of points for a future purchase. Customers walk out with a deal and the desire to return again, while the retailer builds loyalty and gains pertinent customer information to add to its data base to adjust its advertising and stocking.

Thanks to a chain’s loyalty card program at most supermarkets he works with, consultant David Livingston, the principal of DJL Research, said customers walk out with discounted product, while the retailer builds loyalty and gains pertinent information—including names and addresses—to help ensure measures are made to get the consumer to come back.

Livingston, who helps medium-sized regional supermarket chains facilitate these programs, says the information provided helps provide a company with valuable data to better identify and retain their best customers, who without the card would be anonymous.

“You make sure the store manager knows the Top 100 customers by name,” he said. “These are really good customers. It’s no different then if you’ve got a client and he’s a good client. Whether you’re in the supermarket business or the furniture business, you’ve got your best customers, and you don’t want them to be somebody else’s customer.”

The knowledge of who is shopping for what helps, he says.

“We’ll take the sales information about each customer and code by neighborhood,” Livingston said. “Then we’re able to see how much sales each store is getting by neighborhood. It seems like a win-win for all. But building a loyal customer by rewarding them for their faithfulness, with this type of loyalty program may have helped in other retail industries, but not so far in the realm of furniture.

Why Not Home Furnishings?

C. Britt Beemer, chairman and founder of America’s Research Group, says studies conducted by his company show the demand in furniture for such loyalty programs is currently low among those polled.

“Only about 14 percent of shoppers feel a loyalty card would have any impact on their furniture shopping because it’s just an infrequent process,” he said. “For a concept to be viable, at least 25 percent of America has to want it.”

The cash-and-carry, destination-purchase nature of the business, combined with the lack of high instance of repeat and multiple purchases in home furnishings creates a tough situation that would make the use of a loyalty card an expensive proposition.

“When it comes to furniture, we have not found anyone who has made it successful,” he said.

Despite the lack of interest so far in furniture, research in other retail industries shows someone who is being rewarded for their continued patronage is not only coming back again, but offering up that information freely.

Retail consultant Bob Amster, the principal of Retail Technology Group, has been involved in retail systems design and management since 1971. He says obtaining customer information is the most valuable reason to initiate a loyalty program. The cost for obtaining and using the information could cancel out the expense put into launching the program.

“It’s the only way a brick-and-mortar retailer has of getting information about a specific customer and what they’re buying and some of the demographics,” Amster said. “You’re not allowed to ask otherwise for name and address. You can no longer cross reference a credit card with a customer’s name and address. That’s out. An e-retailer on the Web automatically gets information about a customer because a customer has to fill in their name and their address to receive the product.”



How Would It Work for Furniture?

Forth & Towne, the Gap’s newest clothing store brand aimed at women 35 and up, offers its shoppers the Indulge Membership. Sign up while shopping, and you reap the benefits, including advance notice of special savings, invitations to private events, and special offers for shoppers and their friends. Once a customer spends $500, they become a member and are eligible for 5 percent off all purchases, complimentary alterations and access to exclusive promotions.

A loyalty program such as Forth & Towne could lure shoppers to furniture stores more often, says consultant Don Delzell, principal of Retail Advantage. Delzell, a recognized expert in merchandising, product development and integrated planning who has had direct experience with leading mass market, department store, specialty store and grocery accounts for more than 20 years, said research has shown the perception of value, good delivery and adequate financing for products creating the highest satisfaction in customers buying furniture are the leading factors in what brings them back again. According to Delzell, a loyalty program that could work for furniture retailers would be a long-term program, one in which a customer could re-decorate their home piece-by-piece, get deals for the next piece of furniture and have design assistance along the way.

“The challenge of a loyalty program (for home furnishings) is sustaining and motivating customers’ behavior over time and rewarding them,” he said. “Each time they successfully complete payment on a set of furniture, they have the opportunity to go in and buy the next thing they need. Each new increment there is an incentive to add it. It would be coupled with a decorating plan where the retailer works with a customer to say what do you need to start with first.” HFB