Quality Service, Not Prices, Creates Loyalty

Gallup report says people, not deals and lower prices, are the real differentiators for retailers.

June 25, 2014

WASHINGTON – Faced with declining foot traffic, many big chains have lowered prices, increased advertising and overhauled their store layouts. But according to a new report from Gallup, “The State of the American Consumer,” all too often retailers are overlooking what really matters to their customers — service.

As described in a report from CNBC, Gallup warns that price cannot be the only thing that differentiates a store from the competition, because it is not the only factor customers consider when making a purchase.

"Gallup research has shown that customers only shop based on price when price is the only thing that separates competing offerings. In other words, customers shop based on price when there is no emotional connection to a particular retailer — when they are not engaged," says the research firm.

Engaged customers, those who care about the brand, are the most profitable customers — Gallup's research shows that these loyal customers care less about price, so they typically spend more.

Ed O'Boyle, global practice leader at Gallup, told CNBC there needs to be a corporate culture shift. Management needs to understand the value of having the right salespeople on the floor.

"If you have things in stock that people want and your salespeople are really helpful and deliver good service, that's when you hone in on driving engagement," O'Boyle told CNBC.

Today's consumers want the best value for their money and the Internet has made it quick and easy to compare prices. That has created showrooming — where someone goes to the store to "test drive" a product, knowing they'll buy it online for less from a competitor's website.

While retailers often blame showrooming for a drop in their in-store sales, based on its latest survey information, Gallup says the threat of showrooming has been "greatly exaggerated."

When U.S. consumers were polled last year, 40 percent claimed to have showroomed in the past, but just 6 percent said they had done so on their most recent trip to the store. The vast majority of those surveyed said they either planned to make their purchase in the retail store (77 percent) or intended to return to the same retailer to make the purchase (6 percent). Another 7 percent said they no longer planned to buy the item.

"People are powerful, and they outweigh the combined effects of products, advertising, layout, technology, and — all of the various components that brick-and-mortar retailers often think define their competitive advantage," the Gallup report concludes. "While there may be various drivers of satisfaction in retail, customer engagement comes down to the human encounter."

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