Bursting Retail Customer Loyalty Myth

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Retail Viewpoint - Churn rates should turn grocers' stomachs

Despite all the talk of customer loyalty among the global
grocers some pretty shocking statistics were dished out the other day
that rubbish the claims made by many supermarkets that they are having
a meaningful relationship with their customers.

by Glynn Davis

A
report by Pitney Bowes Group 1 Software on customer churn found that
the supermarkets had experienced the highest growth in customer
defection rates between 2005 and 2007, compared with other sectors,
with an increase from 19.8 per cent to 27.4 per cent - a massive 38 per
cent jump.

The main reasons it cites for churn are - not being
recognised as a valuable customer, unhelpful staff, and ineffective
call centres. It's my guess that all the UK supermarkets would lay
claim to being good in all these areas but these numbers suggest
otherwise.

And guess which country has the greatest churn rates -
Britain. With 22 per cent churn per annum it has the most promiscuous
shoppers in the West. This is put down to things like its crowded
geography and national wealth per capita. But whichever way you cut it
the report is pretty damning of the UK grocers and their inability to
hang on to their customers.

What makes matters worse is that 2008
will possibly show even higher churn rates because we are in the midst
of a great movement of shoppers between the major grocers. Many are
returning to Morrisons after previously losing them to Tesco following
the troubled acquisition of Safeway, Asda has been shouting about its
continued attraction to more upmarket customers, and Waitrose seems to
be tempting people from a broader demographic as it continues to expand
its estate around the UK.

We await with interest next year's
survey but in the meantime try showing a little bit more loyalty to
your friendly local supermarket - as painful as that might be.

Brand value is increasingly about own-brand

Interbrand
published its first 'Top Performing European Retail Brands' report last
week, which ranked the top 25 companies based on various criteria
defined by the branding specialists. In addition to the surprise of
finding that H&M had topped the table was the fact that own-brand
products play a large part in the businesses of many of the
constituents in the list.

A sizeable 60 per cent of the top 25
have own-brand accounting for over 30 per cent of their total revenues
and even more amazing is that three of the top five brands sell only
private label goods - these being H&M, IKEA (in third place) and
M&S in fifth spot. And the other two retailers in the top five -
Carrefour and Tesco - both continue to develop their own-brand offers
with the latter pushing the Tesco name ever-further into non-food
products and services too.

This indicates just how significant a
contribution own-brand product makes to a retailers' overall brand
value and how they are now regarded as a brand weapon. They are also
able to help a merchant create a much clearer value proposition to
customers.

It will be no surprise whatsoever to find that this
trend continues as own label not only makes its presence increasingly
felt within the European retail market but also spreads further into
the US and Asia where it is much less developed.