This Magic Number Is the Tipping Point for Long-Term Loyalty
Lessons from analyzing the shopper data of more than 400 million grocery baskets in the U.S. and Europe, including how many times a customer needs to shop online to become engaged long-term.
As retailers finesse their omnichannel retail strategy, there’s a magic number of online purchases they should aim for a shopper to reach.
Anything good is worth pursuing for the long term. Personal health, business growth and relationships, when invested in properly, can be enduring and rewarding experiences. The same could be said about building long-term shopper loyalty. It takes a thoughtful strategy for a grocery retailer to nurture a long-term engaged customer, and it’s an ongoing, evolving process. But when done right, it can pay off in beneficial ways.
In analyzing shopper data from more than 400 million grocery baskets in the U.S. and Europe, we’ve come to learn that customers who join an online channel to complement their in-store shop become increasingly loyal. What’s more, “long-term engaged” (i.e., loyal) customers represent more than half of the revenue from online grocery shopping and are nearly four times more valuable to a retailer than those who are not considered long-term engaged. Therefore, it pays to invest in achieving engaged omnichannel shoppers.
As retailers finesse their omnichannel retail strategy, there’s a magic number of online purchases they should aim for a shopper to reach. But first, it’s important to understand the correlation between online habits and increased loyalty.
Shopper Engagement Has an Obvious Impact on Sales
Identifying your most loyal customers can be accomplished by looking at how broadly and frequently they shop across store categories, and how much they spend during each trip. That assessment provides valuable perspective into the degree to which a shopper is engaged. From there, you can identify a shopper as falling into a primary, secondary, or tertiary segment, based on that level of engagement.
When we looked across basket data from Q1 2021, we found that while primary households (the most loyal) only made up 20% of the average customer base, they contributed 60% of total sales. By comparison, the largest segment – infrequent, less-loyal tertiary shoppers who make up 51% of the customer base – only account for 10% of sales.
If you think of these customer segments as stair steps from least to most engaged, it’s clear that the more engaged shoppers are, the more valuable they are to the business’ bottom line. Once they’ve landed in that primary, more loyal group, it’s in a retailer’s best interest to keep them engaged.
When Customers Shop Online, Engagement and Retention Get a Boost
Looking again at the three key shopper segments, we wanted to understand the role of online shopping habits in building more engaged customers. What we found was that across all three groups, shoppers who were omnichannel – shopping online in addition to in-store trips – were more loyal than in-store-only shoppers. Occasional, or tertiary, shoppers who were omnichannel were 2.3 times more likely to upgrade in their engagement and spending compared to the tertiary shopper who only shops in store.
Another observation made from omnichannel shopping habits is that incremental spending can reach up to 20% when customers join the online channel. Additionally, in the first quarter of this year, omnichannel shoppers increased their shopping frequency by 6% and their basket size by 9%. This is a pretty surprising discovery – not only are omnichannel shoppers more likely to be retained, but they’re shopping more and spending more. In Q2 2020, 50% of online customers were making repeat purchases. Fast forward to 2021, and 67% of online customers in Q1 were buying repeatedly. Prior to COVID-19, online grocery shopping wasn't expected to make large improvements this quickly, but we can see now that this shopping habit is here to stay. As more shoppers turn to online grocery as a result of the ongoing pandemic, we expect online to drive increased loyalty from omnichannel shoppers.
The First Three Months of a New Online Shopper’s Journey Are the Most Critical
To put in perspective how valuable an engaged omnichannel shopper can be, let’s discuss an example group of 10 customers who are new to the online channel. Based on our insights, four of those customers will continue to make repeat online purchases. The remaining six will abandon the channel after just one visit, for any number of reasons. But let’s say that half of that group – three shoppers in this example – made just one repeat purchase online: by our estimations, this could generate up to 3.5% of additional online sales.
So, beyond the impact on sales, how many online trips do omnichannel shoppers need to hit before they cross over that loyalty threshold?
The more a customer shops online in the first three months of joining, the more likely it is they will become engaged longer-term. In fact, if a customer returns to the e-commerce channel 6 to 8 times in the first three months of joining, they are three times more likely to become long-term engaged. Furthermore, our insights indicate that 50% of new customers who make seven visits in their first quarter reach that hoped-for long-term engaged status; thus, seven is the magic number. That may sound like a lot at first, but over the course of 12 weeks’ time, that’s just one online visit every 10 to 12 days.
Long-Term Loyalty Is Built by Incentivizing Shoppers To Go Omnichannel
In encouraging repeat online visits in quick succession, retailers can promote familiarity and confidence in the channel, which leads to more frequent shopping trips, and therefore increased spending and long-term engagement. In other words, by harnessing the power of your online channel, increased grocery sales and customer loyalty are yours to behold.
-Laetitia Berthier, Head of Customer Success, Symphony RetailAI
Berthier is a consulting professional with more than 20 years of experience in customer-centric strategies in Europe and North America.