Canadians Forgo Customer Service for Low Prices: Retail Loyalty Report

COLLOQUY Canadian Retail Loyalty Index Reveals Dramatic Shift in Consumer Behaviour

Sobeys, IGA, Jean Coutu Hold Strong in Regions, Despite Growing Walmart Juggernaut

TORONTO, July 26 /CNW/ - Customer service has been knocked off its perch by low prices as the leading factor driving shopper loyalty, according to a new study released today. The COLLOQUY Canadian Retail Loyalty Index a study of 3,500 Canadian shoppers, shows that the importance of customer service has plummeted by almost 20 percent since 2008 as discount retailers make major gains in Canada. However, the study also reveals that deep discounts are not the only way to customers' hearts and wallets.

The Loyalty Shift

When asked for the factors that most influence their loyalty to a retailer, consumers revealed a major shift in their views since 2008. The importance of customer service dropped 18 percent among the general population, falling to second place behind competitive price. By contrast, in 2008, virtually all demographic groups ranked customer service the most important factor in gaining and keeping their loyalty, with competitive price finishing a distant second.

Even among most demographic groups that still rank customer service as the top driver in shopper loyalty, its lead is narrowing. In Quebec, its importance plunged by 25 percent in 2010. Similarly, for both Seniors and Women it dropped by 20 percent in importance. The only exception is Young Adults, whose views of customer service as the top factor in loyalty are virtually unchanged since 2008.

Despite the large drop in the importance customer service plays as a loyalty driver in Canada, the Canadian experience pales in complexion to the US, where a similar study by COLLOQUY reveals that low prices have become even further entrenched since 2008, leaving little room for retailers to win on anything but price.

"While the recession played a major role in driving consumers to low-price stores, even as the economy recovers the need to deliver a good customer experience and value is the new normal for all retailers," said Kelly Hlavinka, author of COLLOQUY Canadian Retail Loyalty Index and COLLOQUY Partner. "But value doesn't just mean low prices. Stores that can identify the shoppers that contribute most to their bottom line, and how to satisfy them, stand the best chance of survival and success," she added.

The Winners

The COLLOQUY Canadian Retail Loyalty Index asked respondents a series of questions to measure how often they shop at leading retailers, as well as how loyal they feel to those retailers. The results illustrate a growing shift to discount retailers and low-price warehouse stores, though well-established retailers with strong brands and loyalty strategies continue to be well-represented.

    
    Grocery:
    --------
    

Among grocery chains, in Ontario the discounters lead the pack, with Zehrs ranking highest for customer loyalty and No Frills topping the charts in frequency. Similarly, in the West, Costco is the COLLOQUY Retail Loyalty Index leader, with Safeway winning the frequency race. On the other hand, in Quebec, IGA tops both scores as does Sobeys in Atlantic Canada. In Quebec, Loblaws (loyalty) and Metro (frequency) emerge as strong second place finishers.

    
    Pharmacy:
    ---------
    

In the pharmacy category, discounter Zellers narrowly beats Walmart Supercenter, Shoppers Drug Mart/Pharmaprix and Rexall in the loyalty race in Ontario. Shoppers Drug Mart is cited as the most frequented drugstore. In Quebec, homegrown favourite Jean Coutu topped both frequency and loyalty scores, as did Shoppers Drug Mart/Pharmaprix in Atlantic Canada. In the West, discounters reign supreme, with Costco again topping the loyalty category and Walmart attracting shoppers most frequently.

The report also examines the factors that drive loyalty among the subset of consumers most likely to recommend a retailer (a standard way of gauging loyalty). Here, the report illustrates that in the grocery category, "value for money" and "product quality" topped all other loyalty drivers, with "pleasant store environment" and "knowledgeable staff" lagging behind. On the other hand, in the Pharmacy category, "pleasant store environment" topped the list, suggesting that it's not all about price - it's about what you deliver, and how you deliver it.

"In the United States, brands built on low prices have rocketed to the top in nearly every category. In Canada, the news is much better for retailers that have built loyalty to their brands with a more diversified approach than simply promising the lowest price," said Hlavinka

Winning strategies for the new retail normal

Since there can only be one low-price "leader" and given the risks to retailers associated with continuous price cuts, the COLLOQUY Canadian Retail Loyalty Index suggests the following strategies for retailers:

    
    -  Be wise about where you can win. While retailers may not be able to
       beat Walmart on price, there are other places to win, from selection
       to in-store service. Better yet, retailers can win by knowing and
       understanding their most profitable customers and what they want.
    -  Deliver more value. While the recession hangs on, promotions aimed at
       a retailer's best customers and partnerships can augment the value
       customers receive in return for their loyalty.
    -  Collect the customer data you need to succeed. By casting the net wide
       and collecting customer data, retailers can ensure their
       communications, pricing and product selection hit the bullseye with
       their most profitable customers.
    -  Look local. Examine additional marketing opportunities within a
       tighter range of store locations to court nearby customers, and to
       attract new and previously infrequent shoppers.
    

To read the full COLLOQUY Canadian Retail Loyalty Index visit: http://www.colloquy.com/files/2010-COLLOQUY-RetailTalk-Canada.pdf

About the COLLOQUY Canadian Retail Loyalty Index:

The COLLOQUY Canadian Retail Loyalty Index asks consumers to name the brands to which they feel the strongest loyalty, and seeks to learn more about the drivers of that loyalty, regardless of the presence or structure of a formal customer loyalty program. The 2010 Index surveyed 3,500 Canadian consumers.

About COLLOQUY:

COLLOQUY comprises a collection of publishing, education and research resources devoted to the global loyalty-marketing industry. Owned by LoyaltyOne, COLLOQUY has served the loyalty-marketing industry since 1990 with over 30,000 global subscribers to its magazine and www.colloquy.com the most comprehensive loyalty web site in the world. COLLOQUY's research division develops research studies and white papers including industry-specific reports, sizing studies and insights into the drivers of consumer behavior. COLLOQUY also provides educational services through workshops, webinars and speeches at events throughout the world and is the official loyalty-marketing partner of both the Direct Marketing Association and the Canadian Marketing Association and a content provider to the American Marketing Association. COLLOQUY also operates the COLLOQUY Network, a global consortium of practitioners certified in COLLOQUY's proprietary methodology. COLLOQUY magazine subscriptions are available at no cost to qualified persons at www.colloquy.com or by calling 513.248.9184.

SOURCE COLLOQUY

For further information: For further information: or to arrange an interview: Jennifer Hills and Amy Davidson, Environics Communications, 416.920.9000


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