Shifting Loyalties -A Challenge For US Retailers

Shifting Loyalties -A Challenge For US Retailers - IBM Study January 12, 2009: 12:16 AM ET

DOW JONES NEWSWIRES

The global recession has empowered a new, more discerning type of U.S. consumer to seek out the best deals and keep retailers on their toes, according to a new study by IBM's Institute for Business Value.

The rise of this class - dubbed the "Shifters" by IBM - comes against a backdrop of falling consumer confidence and discretionary spending that has retailers scrambling to drum up sales. Big-ticket items are collecting the most dust on shelves as a result of tighter credit markets, with more than 60% of consumers cutting back on electronics, vacations, home improvements and home decor.

The survey also showed that the average consumer will drop allegiance to a retailer after about three negative experiences.Market conditions and high expectations have made consumers more impatient, the study said, so retailers must focus on delivering a "superior shopping experience" in order to keep them shopping.

Shifters, who IBM said represent about 30% of shoppers, are motivated to seek out new relationships with new retailers, especially for a good deal, it said. IBM said they are more valuable than other consumer segments because they spend 37% more a month and 32% more during each shopping trip than non-Shifters.

The study found the top reasons Shifters brought products from new retailers were price and promotions, convenience, and product availability and assortment, but they ultimately spend more money when they become loyal shoppers.

IBM also said the growth of another category of consumers, the "Advocate," was a bright spot for retailers, as advocacy rates nearly doubled in 2008 from 2007. Advocates are loyal to their primary retailers and recommend the stores to friends and family. The study showed 31% of Advocates increased spending at their primary retailer in the last year.

"For retailers to succeed in the new economy, organizations must nurture Advocates and Shifters," IBM global retail industry leader Fred Balboni said. " Shoppers are calling the shots."

He added that retailers can use the new economic environment to "drive revenue, margin growth and customer trust" and strengthen relationships with customers.

IBM said retailers who deliver on expectations and build trust to court new segments of consumers, like Shifters, will be best-positioned to increase loyalty and market share.

IBM conducted the study of 30,000 U.S. consumers in September and November. The results have a margin of error of plus or minus 1.8%.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; kerry.grace@ dowjones.com

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 01-12-09 0016ET
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