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Lagging Loyalty Presents Opportunity for SMBs

[ 0 ] Aug. 12, 2013 | SBO Editor

By Zachary Hyman

According to the customer centricity report from market research firm, dunnhumby, fast food retailers are neglecting the wants and needs of their customers. The survey ranks the performance of restaurant chains on what it calls the 7 Pillars of Customer Centricity — the attributes that are most heavily tied to a business’ health, customer loyalty and long term growth, including: product assortment, price, experience, feedback, promotions, loyalty and communications.

When it comes to customer loyalty, the analysis found that fast food chain are suffering. Compared to fast casual and casual dining counterparts, fast food retailers scored significantly lower across all categories, indicating minimal differentiation among businesses in the sector, high customer switching and lackluster loyalty.

It’s not hard to understand why fast food chains have encountered challenges. By nature, the franchise model makes it difficult for chains to deliver a consistent customer experience across locations, and the critical decisions that impact dunnhumby’s 7 Pillars are made and implemented at the corporate level, leaving brands reliant on operators to carry out customer centricity initiatives.

We’ve also seen the recent economic downturn impact cost expectations in the sector. Many fast food retailers bought into the belief that the lowest price will win, and implemented dollar menus to draw customers. Dunnhumby’s analysis, however, found that while cost is important, customers are more concerned with perceived value and the impersonal interactions and poor service they received at chains did not go unnoticed.

SMBs have the edge

Compared to large chains, small businesses have an easier time delivering a consistent, customer-centric experience. Merchants are keener to the wants and needs of their customers. When things slow down at the counter, they can chat and collect important feedback. Chains, on the other hand, are focused on a speedy customer visit, thus reliant on online surveys to get true customer sentiment data in the hands of decision makers.

Small businesses can also be more agile and flexible to the feedback they receive. Decisions about product assortment and price can be made and implemented on the fly, while chains have to work through the corporate approval ranks.

Finally, if the marketing budget of large chains sometimes created competitive challenges for small businesses, we’re entering a new era in which merchants have access to affordable technology that allow them to step up their data and marketing game. Business owners today are becoming increasingly savvy, experimenting with tools that enable them to engage with customers beyond the doors of the business and via the social platforms and mobile devices in which consumers spend their time most.

Embracing customer centricity in your business

With very little differentiation across retailers and high customer switching, small businesses have an immense opportunity to set themselves apart and achieve customer loyalty. Start with these tips:

Give customers a seat at the table. Learn what is driving their behavior and make customers part of the decision-making process. Ask them to vote on your new menu items or services. Use Facebook or email surveys to distribute polls. Reward customers that participate and provide thoughtful feedback.

Be employee-centric. Your staff deserves rewards, too. Train them to be customer-focused and recognize them for going the extra mile to create personal interactions that make customers feel special and appreciated.

Cater to varying motivators. People are motivated by different things. Customers of fast casual leader Panera Bread explicitly indicated an appreciation for the personalized rewards in their loyalty program. Give customers options when it comes to the rewards that keep them loyal.

Make customers feel at home. At Outback and Panera–both dunnhumby category leaders–it wasn’t the bill that made a lasting impression with customers; it was the comfortable settings and unique things that servers did to make customers feel as if they were a guest in someone’s home. Think about what your business can do to create a comfortable environment that leaves a lasting impression with customers.

Get personal. One key finding in dunnhumby’s report was that highest scoring companies provide customers with tailored messages that were relevant to individual needs. The way, you can market to your most loyal customers’ needs to differ from the way you market to those you haven’t seen in a while.

The next generation of loyalty is about connecting with customers on a more personal level and catering to their individual needs.

About the Author

Zachary Hyman is co-founder and chairman of SpotOn, a digital loyalty network for local merchants and consumers. As a serial entrepreneur, Hyman has dedicated his career to developing tools that help small businesses grow and prosper.

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Category: Features