consumer spending


If you had to guess, where would you think more people bought clothing — in department stores like Macy’s, specialty apparel stores like Chico’s, or mass-merchant stores like Target? We recently took a measure of this and Checkout Tracking found that 92 percent of buyers shop for apparel in mass-merchant stores, while only 43 percent shop for apparel in department stores.

Our analysis of receipt data shows that a full two-thirds of consumers now shop at off-price stores such as Marshalls and TJ Maxx. But it also indicates that off-price buyers aren’t loyal to the segment, giving only 9 percent of their wallet to off-price retailers.

In fact, people who bought apparel at an off-price retailer in the past year gave a full 22 percent of their apparel spend to specialty stores.

How does a retailer build loyalty among apparel shoppers in such an environment?

It isn’t easy. But nor is it impossible. The key is to understand two factors that drive loyalty, and numerous other behaviors, in people.

First, human psychology is such that we respond to reinforcement. If you want your child to do something — wash the dishes after dinner, for example — they’ll be far more likely to do so if you reward them for such behavior. It doesn’t need to be a bribe. A simple “thanks,” or an extra half-hour of TV time will get the job done.

And the trick to getting such a stimulus-response sequence correct, as any behavioral psychologist can tell you, is to reinforce the behavior in a timely fashion with a reward that appeals to the individual.

If there’s no reward, the behavior tends not to be repeated. No “thanks” when the dishes are done? Those dishes are unlikely to get washed tomorrow. Or if the reward comes late and/or is not a suitable reinforcement — i.e. if on Friday morning you shake your child’s hand and says “thanks for washing the dishes last Tuesday” — it’s very unlikely they’ll be eager to wash any more dishes any time soon.

Second, human psychology is such that we crave group identification. We may be modern in countless ways, but most of us remain tribal in nature.

We recognize ourselves in others. We’re Democrats or Republicans. We’re Red Sox fans, or quilters, or foodies or smokers. We’re Android-carrying runners, or Nascar-watching parents, or vegan swimmers, or some such combination.

You can see these two behavior drivers, reinforcement and community, at play when retailers and manufacturers seek to win the loyalty of shoppers. Loyalty is thought of and approached by companies in a couple of basic ways and with many derivatives. The basics are either a rewards program, that often amounts to incenting/paying customers for their loyalty (e.g., points junkies find it hard to switch brands once into the program) and at the other end of the spectrum there are brand loyalists e.g., Apple or Costco fans, or my wife who wants a bumper sticker that says “I stop for Home Goods stores!”

But driving loyalty among consumers isn’t an either/or proposition. This isn’t a choice between having a rewards program and having fanboys.

Rather, the best and most effective approaches are often a blend of incentives and strong brand value (think mixing points with a superior customer experience).

Long before I joined NPD Group’s Checkout Tracking, I spent nearly 15 years with American Express, a company that’s particularly skilled at building loyalty through reinforcement and community. The membership rewards had a very flexible program combined with great service and unique card member experiences. More and more retailers are headed that way (e.g., Sephora, REI and others).

To put it another way — Amex lets customers choose a reinforcement (points for merchandise, travel, entertainment, whatever) that works for them individually, while simultaneously celebrating the community itself. Or, as Amex itself has put it so succinctly: “Membership has its privileges.”

One fundamental element to the Amex approach that retailers and manufactures should mimic is that the charge-card giant works hard at understanding customer behavior…not just when someone becomes a customer, but over the years.

People change over time. Everything from simply aging to many life events drive different needs. Companies that can match their programs, products and services to their customers over time build the most lifetime loyalty. That’s critical, because it is often expensive to add a new customer. Maximizing a customer’s value over time is paramount.

Analyzing purchase behavior across retailers and consumer baskets can make that task easier. Want to ensure a customer is happy and thus has a large basket size? Look for brand affinities (and carry the right items), understand attach rates (and position the appropriate items in the right place), know who your true competitors are (find out what your customers buy when they don’t buy from you and look to expand your offering), and track the effectiveness of one-time offers, sales, coupons, etc. and see if they brought in new customers, added to existing customers’ baskets, or just cannibalized existing sales.

So remember: that ath-leisure-wearing Millennial single you’re hoping to sell to today by offering free in-store yoga classes will someday be a Mom with two kids who wants nothing more than to save a few bucks on back-to-school clothes.

Let her select new reinforcements as she changes her lifestyle, and work to ensure that she feels connected over time to your brand, and she’ll be loyal, today, tomorrow and always, to you.

Andy Mantis is executive vice president of NPD Group’s Checkout Tracking, a service that analyzes receipt data to understand consumer purchase behavior across retailers and channels.

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