In Australia, retailers continue to struggle. A two speed economy and continuing frugality amongst consumers looks like being around for some time into the future. Data released by the Reserve Bank at the beginning of this week indicates that credit and debit card transactions shows the average credit card limit grew only 0.7 % over the past year, the slowest growth on record over the past 17 years. The Age on March 13 also reported Commsec’s Economist Craig James as stating ‘…the new age of consumer conservatism shows no signs of ending. Consumers are likely to maintain their preference for value shopping, keeping the pressure on margins.’
As a result the re-occurring question we are having posed to us by retailers, is how do they beat the promotional trap their businesses are being lured into. Many of the conversations we are having are seeking answers to how to sustain their retail business but not erode their market positioning, and certainly not condition their customers to come shopping only when there is a sale. There is no doubt that there is a need for all brand owners to rethink the value equation they offering to the market. Even world brand leaders such as Apple are keeping a keen eye on their value proposition with the 16 gigabyte version of the new iPad being offered at a 7% discount over the previous model in Australia. Apple’s gesture reinforcing the other enduring pressure on many retailers – price deflationary markets.
But clearly the answer for retailers has to encompass something more than price discounts. Retailers have to create some other layers of meaning around their brands. Seeking to build a stronger emotional connection is a strong starting point. Web publisher TechCrunch reports recent data from Motista that illustrated the top emotional drivers behind retail purchases in 2011 Q4 were more motivated by “fun” and “comfort in life,”. The data also compared satisfied consumers to emotionally connected consumers, and forty-six percent of emotionally connected shoppers indicated they always shop a particular retailer first compared to only 13 percent of “satisfied” shoppers. In other words, emotionally connected shoppers are four times more likely to shop a particular retailer first.
As they suggest the economics of emotion are so powerful in driving consumers to buy, pay more and spread the word that leading companies are already replacing customer satisfaction with “emotional connection” as a KPI. There is nothing new here – emotional connection has forever been a major driver of brand equity, but in a market place where a frugal consumer mindset prevails, it goes up a notch. So the question is how are you going about building that emotional connection? We suggest you start by reviewing what you stand for – social capital has an important role to play. Secondly, when all things are equal in a functional sense, then an attractive personality is critical. Finally, call us old fashioned if you like, but the quality of your personal service offering matters – staff with knowledge, empathy and an overwhelming desire to please can make a huge difference in connecting emotionally with your brand. At the very least we suggest you start by conducting an audit of your brand contacts and assess why your consumers would be more likely to emotionally connect with your brand versus your number one competitor. If you struggle unearthing any strong reasons, there is no doubt your customers will be in the same boat, and simply looking for the biggest discount.