We recently wrote about customer frustrations with online shopping experiences and the related opportunity for businesses to foster delight. In a survey-based study titled “The New Reality: Understanding the Retail Consumer Experience During a Pandemic,” Wharton Marketing Professor Thomas Robertson finds “about a 10% increase in problems from before the pandemic to the middle of May, with some decrease in loyalty. As the percentage of online sales was going up, many retailers weren’t ready for the onslaught and had trouble coping with it.”
Actually Rewarding Rewards Programs
Specifically, Robertson identifies poorly executed customer loyalty programs as a source of annoyance. In another article titled “Why Personalization Matters for Consumer Privacy,” McKinsey partners Phyllis Rothschild, Julien Boudet, and Gadi BenMark take a deep look at customer attitudes towards data use and personalized reward programs. (That article is part of a compilation from MITSloan Management Review called Creating Great Online Customer Experience.)
Their main takeaway: “By understanding what people value, companies can do more to create trust.”
While privacy concerns are different than service concerns, there are instructive parallels for understanding how customers decide what is or isn’t worth their time and money. To find out, Rothschild, Boudet, and BenMark conducted a survey of 1,012 U.S. consumers between the ages of 18 and 70 who had made an online purchase in the last six months.
Levels of concern diminish as the benefits of personalization go up, the McKinsey researchers find. That might sound obvious, but personalization is hard to get right. You need to actually understand something about the person you’re rewarding. To deliver meaningful benefits, businesses need to make sure the advantages they’re offering are important to their customers.
What do online shoppers want?
“Not surprisingly, receiving individualized pricing in the form of discounts for a product or service that consumers really wanted was among the most favored benefits for data use, with 57% expressing excitement,” according to Rothschild, Boudet, and BenMark, “Coming in second, with 55% expressing excitement, was receiving a free product or service that consumers wanted but felt was too indulgent or not high enough in priority to purchase themselves. Interestingly, receiving dedicated concierge services and personalized advice came in at the bottom of the list of customer delights (less than 25% excitement each).”
Furthermore, younger shoppers, shoppers who live in urban areas, and shoppers who spend more time on social media were more comfortable with online purchasing and rewards programs. Depending on your business’ demographics, you may need a closer look to really know what your customers will appreciate in a loyalty program.
Understanding and Communication are Key
Rothschild, Boudet, and BenMark conclude with two pieces of advice:
- 1.Understand your consumers’ preferences “Companies need to analyze consumer preferences to develop a clear understanding of what benefits each demographic values the most. By delivering on those benefits through personalized offers, companies can mitigate some consumer concerns. This requires companies to invest in deep consumer research, ongoing testing of the effectiveness of offers, and advanced analytics to provide deeper levels of insight.”
- 2. Communicate and educate “Companies that do this best focus on communicating in simple terms, clearly defining the benefits, and being transparent about the types of data collected and how it is secured. They often communicate this information within the typical user’s onboarding or sign-up experience.”