The COVID era has offered the unique opportunity to reflect on what motivates consumers every-day decisions. Whether we’re creatures of habit or hungry for novelty, the pandemic has been a foil to some of our most staunch consumer behaviours - and companies like The Verde Group have been keeping a close watch. We’re no longer discussing “if” but rather “how” the pandemic ha influenced the consumer-retailer relationship.
Welcome to the The Voice of Retail , I’m your host Michael LeBlanc, and this podcast is brought to you in conjunction with Retail Council of Canada.
The COVID era has offered the unique opportunity to reflect on what motivates consumers every-day decisions. Whether we’re creatures of habit or hungry for novelty, the pandemic has been a foil to some of our most staunch consumer behaviours - and companies like The Verde Group have been keeping a close watch.
We’re no longer discussing “if” but rather “how” the pandemic ha influenced the consumer-retailer relationship.
Paula Courtney, President and CEO of The Verde Group, untangles some of the shifts and trends that we’ve seen in the retail space during the pandemic. In outlining the latest data collected by the company, Paula sheds a surprising light on changing consumer behaviour, friction, loyalty and the boomerang effect.
Be sure and check out Paul's latest collaboration with Wharton's Baker School of Retail, Understanding the Boomerang Effect of Loyalty Programs and discover valuable research findings and insights that will help you optimize that critically important relationship between your loyalty program and your CX results.
Thanks for tuning into today’s episode of The Voice of Retail. Be sure to subscribe to the podcast so you don’t miss out on the latest episodes, industry news, and insights. If you enjoyed this episode please consider leaving a rating and review, as it really helps us grow so that we can continue getting amazing guests on the show.
I’m your host Michael LeBlanc, President of M.E. LeBlanc & Company, and if you’re looking for more content, or want to chat follow me on LinkedIn, or visit my website meleblanc.co!
Until next time, stay safe and have a great week!
Michael LeBlanc
Welcome to The Voice of Retail. I'm your host, Michael LeBlanc. This podcast is brought to you in conjunction with Retail Council of Canada.
The COVID era has offered the unique opportunity to reflect on what motivates consumers' everyday decisions. Whether we're creatures of habit or hungry for novelty, the pandemic has been a foil to some of our most staunch consumer behaviors. Companies like the Verde Group have been keeping a close watch.
We're no longer discussing if but rather how the pandemic has influenced the consumer retailer relationship.
Paula Courtney, President and CEO of the Verde Group, untangles some of the shifts and trends that we've seen in the retail space during the pandemic. In outlining the latest data collected by the company, Paula sheds a surprising light on changing consumer behavior, friction, loyalty, and that boomerang effect.
Paula Courtney
But I can tell you the single biggest area of pain and need is retailers need to figure out the returns process. That, because people are buying things, and they're getting stuff delivered to their home that, you know, maybe 50% is going to have to be returned. That process of returning an item, the payment of having to pay for shipping.
Michael LeBlanc
Let's listen in now.
Paula, welcome to The Voice of Retail podcast, my friend, how are you?
Paula Courtney
I'm great. Thanks, Michael. Great to be here.
Michael LeBlanc
Well, it's great to hear your voice. We haven't seen each other in a while. And we go back a few years for sure. So, it's such a treat to, to get you on your podcast. It's actually not your first time on a podcast. But, it's been a while and, and it's long overdue that we catch up, you got some great work you've been doing pre and during the COVID era, and I'm so interested to get your perspective about how customers are changing and how retailers can change. And anyway, so, listen, it's great.
Now, we've kind of jump right in. But, tell me, let's start at the beginning for the listeners who may not have heard our first podcast, or may not know of you, there might be a few who knows still don't haven't heard of you. But, tell us about yourself, your, your personal, professional journey, what you do and all about the Verde Group.
Paula Courtney
Excellent, sure. So, um, so, I run the Verde Group. We are a global market research consultancy, and we work with organizations to help them measure and manage and ultimately improve the customer experience for greater profitability, and financial return. So, we've been doing this for 23 years. We work in about 28 countries, globally. Most of our clients are headquartered in North America with global field or offices, sort of in Asia, and Europe and South America, etc. So, that's how we have our global footprint. So yeah, so, we work in a variety of industries from retail through to pharma, manufacturing, agriculture, and telecommunications. So, broad range of experience in a variety of industries, which is beneficial to our some of our clients.
Michael LeBlanc
And how did you how did you get into this business? What what's your personal journey? I'm not sure I know exactly. Like, were you always interested in research, when, like when you were growing up around the school yard, were you taking polls of what people flavors of gummies people like? Like, were you always curious about understanding people's motivations? Or how did that develop for you?
Paula Courtney
Interesting question. Well, I've always been fascinated by human behavior and studied, you know, did a science degree at university in psychology, specifically cognitive psych and with a specialty in psychometrics, which is the business of measuring. Measuring people's attitudes, personality testing, intelligence testing, when it was kind of controversial at the time.
And joined, you know, a large corporation, North America like joined the railroad and started engaging in research. So, did a lot of research with a lot of our business units, and really recognize that this is a growing industry that, that the ultimate way to understand what drives and motivates your customers is by interrogating them.
So, I truly believe that customer surveys are still an incredible tool, not the only tool, certainly not the only listening post, but an incredible tool to be deliberate and purposeful in understanding what drives their behavior.
So, yeah, so that's sort of my interest. And, so much of what we do is really understanding human motivation. You know, what makes people make the decisions that they make? What experiences drive those behaviors? And I've always been fascinated by it, and now I get to build a business that does just that.
Michael LeBlanc
You know what I've always liked about your approach. And you and I first started working together way back at the Shopping Center, The Shopping Channel I was going to say, the Shopping Center. We, we started working together a long time ago at The Shopping Channel with Ted Starkman.
And your perspectives around, and, I thought was unique in terms of here's, here's the breakpoints of the experience, but then you would index them as in, if you can win and fix this breakpoint versus that breakpoint, you can really increase loyalty. And that was a whole new perspective in some ways, right? It was, you know, don't worry about that you're, well worry about that you're that you're causing some grief with your customers, but understand which ones you can address, ranked order that will really turn it around. Like everything from returns to, you know, interactions on the phone. So, for me, I really appreciated your, your approach. And, and, and your tradecraft.
Now, this is the first time we've had a chance, as I said to chat, I think since the dawn of the COVID era, and I want to get to your Wharton Baker,
Paula Courtney
Yeah.
Michael LeBlanc
Retailing study, to understand the boomerang effect of loyalty programs a little bit later. You know, as you've, you know, as a keen observer of human behavior, as a retail expert, what have you, what are your thoughts around this COVID era? Like, I've talked to people who said, there's, and I've said, there's never been a circuit breaker of consumer behavior like this before. You know, Roger Martin has said, you know, you got to look at consumer behaviors as decaying assets on the balance sheet. What they do today is not what they've done before. I've heard acceleration. I've also heard the other, other side is like, you know, maybe it's just going to be a big regression to the mean, and there won't be much change. Where do you sit on that spectrum? What's your, what's your perspective?
Paula Courtney
It's a fabulous question. And one that we have researched, actually, we've done all throughout the pandemic. We did some large-scale studies in, in the US, with consumers to understand their experiences when shopping. So, we did a pre pandemic study, literally, like a month or two before, you know, countries went into lockdown. And then we did a massive study in the heat of the second wave of the lockdown. And then we did a third study. So, we've sort of been researching customer experiences, their expectations, specifically around retail. And we continue to do work in a broad range of industries, whether it's agriculture or financial services, through some of our clients throughout the pandemic.
And, you know, there's some startling observations. So, the first one is that not much has changed. So, the thing that we thought was going to happen didn't happen. And what is that thing? Well, we expected that consumers, people, us folk, who are suffering, who are, you know, we're either at home with kids, we might have lost our jobs, you know, everyone has taken a hit of some sort. And we've all, you know, climatized, to this new reality. So, what we thought was going to happen is that consumers would be forgiving of businesses that they would give them a hall pass and say, you know, what, we get it, we're suffering, you're suffering, too. You've had to shut your doors, you've had to lay off staff. So, we don't expect that you're going to be at your all-time great performance, that is what we expected to see. And that is not what we saw. In fact, customers are even more demanding. So, it could be that they have all this frustration, and they are, their sensitivity to problems and friction is heightened.
What we noticed is loyalty around the board, like across a variety of industries, including and especially retail just went in the toilet. And consumers reported more problems. And we think we know why for retail. And the reasons are various for other sectors. But for the retail sector in particular, we noticed that the people are changing how they do business. So, customers who weren't used to, you know, online shopping, are now, they have no choice. They're forced to do digital, you know, interfaces with organizations,
Michael LeBlanc
Yeah.
Paula Courtney
That normally they'd walk into a store, get their goods and you know, people are, you had first time consumers who are using groceries,
Michael LeBlanc
Millions,
Paula Courtney
and having them delivered. And that was new for them, even though it's not new in the industry it was new to them. So, that was happening at the same time, as retailers were reeling with the changes to their business. That they had to shut their doors and they had to provide a digital experience that was at least palatable. And they weren't doing well, you know, there were growing pains for the retailer in terms of providing an exceptional digital experience, because the demands were so great.
I mean, I was just speaking today to CEO of a specialty retailer this morning, and she was saying that, you know, digital, or online, represented less than 5% of their commerce. And now it's 50%. And we weren't ready is what she said. We weren't ready. So, that's what, so you've got two things sort of coming together. You've got a consumer who's learning how to do most of their shopping online, and you've got a retailer that's learning how to provide, you know, good service or Ace, a level of service, you know, online, and then you've got the behemoth Amazon who's been excelling, and keeps getting better and better. And so, the gap between them and other retailers has just grown exponentially.
So, so what does this mean? Our observation is that there was pain everywhere. Pain by the retailer, and pain in particular for the consumer. So, no hall passes, no, you know, no breaks were given to any retailer. Loyalty is down. Friction is at an all-time high. And I think this poses even greater challenges for retailers as they try to get back on their feet, dealing with other economic issues that they have. So,
Michael LeBlanc
It's a fascinating series of observations, because I think the conventional wisdom and because so many retailers, as you said, had to do things, you know, the stores are locked, unprecedented. They had to stand up curbside, real fast, because it wasn't, you know, you might have doddle on it for years. But yeah, you've got to do it real fast. And, and the conventional wisdom is that there was some, some degree of forgiveness by consumers. Maybe, maybe that, maybe that forgiveness waned. Maybe it was never there. Maybe it was a phantom. Your research says, you, seems to say, seem to point to at least 18 months into the COVID era, that forgiveness is, is passed. That's interesting.
And you know, it's interesting in the fact that different retailers, like even the best retailers, the best efficient retailers, let me be precise, they struggled with supply chain challenges like everyone else. Like, you know, think about, you mentioned Amazon, they had to push off Prime Day, their promise, you know, they've had warehouses closed from COVID infections. They, their delivery promises changed. So, it did impact everybody. And you don't think, as you're right, that they, a consumer often looks the best in class to balance and set expectations, that's the gnarly challenge of competing, certainly in Canada against global players, is they have the resources to set a very high bar. It, is, is that though an accommodation for a period of time, and there's the next magic question is, you know, we've we as consumers, retailers have adjusted to the period, but what structurally, in your mind as changed? Maybe, maybe that is covered in your report. But any thoughts on that just before we get to the report?
Paula Courtney
Sorry, so the question is what is structurally changed with respect to,
Michael LeBlanc
Consumer behavior, so of consumer behavior, you know, we all made different, we all did different things. We chose different retailers, we couldn't find product. You know, we bought from channels we'd never bought before. What's going to stick? What are these behaviors has actually changed? And what is an accommodation? What's a structural change or a behavioral change? Cause it feels to me like getting consumers to change their behavior is a big, big deal. Like it's hard to do, but we're seeing big changes.
Paula Courtney
Yeah, I will. I absolutely think that people who had a positive experience with specific retailers shopping online, I think that behavior will continue. But, I do believe there is an incredible hunger and appetite to get back in the store. So, I think bricks and mortar is not dead by any means. And I think that human interaction is so, even for entertainment purposes, I think people want to get back in a store and touch product. So, I think there's gonna be that.
But let's face it, the efficiency of certain retailers of call, you know, ordering something in the morning and having it delivered that same day or the next day. That convenience is, is pretty remarkable. And, I think people will enjoy that for select purchases and for select goods. So, I think there's going to be a bit of stickiness and staying power with respect to channel choice. And, that will be retailer and goods specific. But, I believe there will be a resurgence of, an, a, you know, a desire to go back into the store and interact with product try things on you know what I mean? That, the whole experience of ordering 10 pairs of pants and two fit and then having to physically, you know, deal with the returns process. I think that's become tiresome for sure.
Michael LeBlanc
Yeah, yeah. Does the research that you've done lend any insight to the idea of speed to the curb? So, you mentioned that, you know, there are some retailers, there are some products, not a lot, that you can get same day, for example, right? You know, a premium service like Instacart can get it same day, you're gonna pay for that, though, right? You're, as a consumer, you're gonna pay for that. Versus kind of, you know, expectations if I get it tomorrow, two days from today, three days is fine. Like, any changes in the behavior of how important it is to be same day? Or is that a frill and a niche? Or is it becoming mainstream?
Paula Courtney
Yeah, I don't, we didn't see a lot of that being either a pain point or a requirement. But, I can tell you the single biggest area of pain and need is retailers need to figure out the returns process. That, because people are buying things, and they're getting stuff delivered to their home that, you know, maybe 50% is going to have to be returned, that process of returning an item, the payment of having to pay for shipping to return an item that you don't like, not because it's defective, not because it's the wrong size, or they shipped you the wrong product. But because I don't like it anymore. We're paying for that. And, and that is creating tremendous pain. So, all of the economics and ease of fulfillment with respect to returns process is a huge area of opportunity for retailers.
Michael LeBlanc
Okay, I got, I got a question for you. So, you've got, you run a retail eCommerce business, and you've got $1 to spend, but you can only spend $1. And you've got to make a choice between getting products to the doorstep faster, or improving the returns process, where would you put your dollar?
Paula Courtney
Oh, no question returns process, 100%. People manage their expectations on the delivery. It's like, oh, I'm gonna get it tomorrow, fine. But, if I have to pay to return it, if it comes and I don't like it, if, if there's something wrong with that product, and I've got a now, you know, goes through the pain and suffering of printing off the shipping label, the return label, going onto the website, clicking return.
So, like, I was just on a website doing a return today, with Sephora, and this is awful. You had to enter the order number. But in order to get the order number, you have to exit three screens, go find the order number, cut and paste and then go back into the return screen to enter it to return. Print the label. And, I have to physically go to a, you know, Canada Post outlet to return a $39 product because it was defective. And, and I cannot tell you how annoyed I was. How annoyed I am. And it made me think I'm not doing this again, for this retailer. Like I'm just gonna physically go look at the product, make sure it's intact, because it's a too low cost of an item. And my time is worth more than that. So,
Michael LeBlanc
So, at what, at what point though, do you, you say I'm going to choose another retailer because that component? It didn't sound in that example, just to pull that thread a little bit. It didn't sound, you said, well, I'm just not going to shop online, but I'm still going to shop with them. So, is it still where you want to put your dollar?
Paula Courtney
I might not. That's an excellent question, which is one we tested. So, I was disappointed in the retailer for creating a sort of cumbersome complex return process. So, it sort of made me think, you know what, this kind of is how they are anyways, you go in there's always this massive lineup. It's kind of disorganized, hard to find what you're looking for. Maybe I'll just go to my regular department store. I know exactly what I want, pick up the product and out I go. So yeah, I think this is a sample of one. It's not something that we've tested. However, we have research that if you have significant pain in a process with a retailer, it makes you consider, especially a multi brand retailer, which Sephora is, in my case, it might make you switch, especially if you know you can get that product elsewhere. So yeah, it is a real threat. It's a real risk and it's happened to me this morning. So, there you go.
Michael LeBlanc
Well, let's, let's turn our minds now to the, this Boomerang study you did with Wharton. And I'll put a link into the show notes where folks can, can find, it's a great study. It's on the Verde site for example, right. You can, you can download it there. I'll put that link in.
What struck me, and I really wanted to talk about this is, is you, because you and I've been working together for a long time, you've, you've been publishing insights for a long time along the same veins, I was looking at loyalty damaging rankings, one through ten. And just for the, for the listeners, you know, number one, you purchase on item online, had to pay shipping to return it. There's picking up the website app was difficult to navigate. Number ten was the sales associate did not treat you with courtesy and respect. What struck me, as I looked down all of these elements was how if I looked at those elements ten years ago, they would have been ranked differently, right? That the intersection between online and the stores is now the breakpoint more often than a gnarly associate. Is, am I reading that correctly? That is really interesting.
Paula Courtney
You are, and that is exactly what I would have said, when you, if you were to ask the question five years ago. You know, what, what would have, have I seen differently, and I would have seen the role of store associate, because people were shopping more clearly in brick and mortar than, than they are now. Plus, we measured and we did the study during the pandemic, where for sure, you know, online shopping was, you know, was, has grown significantly, not necessarily by choice, but there's no other way to shop.
So, yeah, this, the role of the sales associate is, is dissipated. It's, it's not as important. It doesn't mean that it will disappear. I think it is very important. And, we're going to see that come to fruition when brick and mortar opens again. So, I think that's really critical. But that is true. All of the top damaging issues that we saw in this last study, were related to the online experience and the return experience being problematic.
Michael LeBlanc
Interesting, is anything, did you see anything in the study that surprised you? Did anything jump out and go, wow, I didn't expect to see that?
Paula Courtney
The biggest surprise was in the presence of a loyalty program. And that was the whole essence of the study. It was really to understand, you know, we know that friction occurs in retail, that's a, that's a fact. Every experience that, you know, every retailer does create some friction for their customers. So, no news there.
Michael LeBlanc
And it's also no news that retailers can't fix every single problem. And this,
Paula Courtney
Right,
Michael LeBlanc
Is what I love about your work is say, listen, I’ve got ten problems, but I got $1, I gotta pick, I gotta make a choice.
Paula Courtney
Not only that, but the most frequent problems are not necessarily the ones that you need to focus on the most. And so, retailers are usually really good at understanding their most frequent problems, because they have multiple listening posts, either social media posts, their store associates, or, you know, other online channels or call centers, which give them an abundance of information about where is the noise coming from. And I call it noise, because noise is different from signal. And signal is, does this matter? Does this problem matter?
And what we set out to do is we set out to I, understand the role of a loyalty reward program in the sea of friction. In other words, can a loyalty reward program inoculate a retailer from the economic damage that comes from friction that they're creating for their customers on a regular basis? So, can you, can you sort of sustain that hit to you know, your business if you have a loyalty reward program? And the answer is yes and no. So,
Michael LeBlanc
Love that.
Paula Courtney
It's, you know, there are some loyalty reward benefits,
Michael LeBlanc
Yeah,
Paula Courtney
That do have some inoculation. And then there are others that what we termed, create a boomerang effect. In other words, the customer's enjoying this loyalty reward program, and then they experience a particular problem. And the fact that they have a loyalty reward program actually makes the economic damage of that problem even worse.
Michael LeBlanc
Wow, wow, interesting.
Paula Courtney
And, so you can actually create more harm than good. And most of the reason why that is, is because when organizations build these fabulous loyalty reward programs, you know, the marketing department gets together, they meet with the analytics folks, and they meet with some agency to say, you know, what do we need to do? How do we build a loyalty reward program that, you know, gives us the data that we need to push the right products and the right messaging, but also gets customers to come back, etc, etc? They never, they never necessarily talked to the operations folks, the people who are executing on policy and procedure to say, how do these two things intersect?
Or could it be that, that if we have a return policy that is cumbersome, you require a receipt in order to return a product, and then we have this loyalty perk, that is, hey, you get, you know, free shipping, and we're going to make sure that your front of the line and that your return process is easy. But you need the receipt. It's kind of like we're stealing from Paul and,
Michael LeBlanc
Right.
Paula Courtney
Paying Peter. It's like, wait a second. So, here's this loyalty rewarded member, who's typically a very valuable customer, right? They're spending lots with you, they've joined, they've opted into the program, they're taking advantage of the benefits. And, then they have this thing that happens to them, that it's in direct violation of that benefit of that program. Now, they're more irked than that customer who didn't have or doesn't belong to the quality of reward program. So, we've got that boomerang effect, what you know, what you give out, you're cutting back, and it's not a good thing. So,
Michael LeBlanc
Like it's an amplifier, it's so interesting. It's like the loyalty program can be an amplifier of trouble,
Paula Courtney
And be an amplifier accelerant. That's what we call it. So, it either accelerates the damage or inoculates against it. Yeah, it does both. And, it depends on the problem. And it depends on the loyalty, reward benefit.
Michael LeBlanc
Well, since we're, since you're talking about inoculation, I have to ask you, your advice to retailers, couple last thoughts around your advice to the listeners and retailers to help them vaccinate against trouble and make sure in their processes where to put their emphasis, what would your one or two or even three pieces of top line advice be for, for retailers listening today? Other than of course, than to download this great study. And to hire you to have, to help them figure stuff out, because you're wonderful at it. But you know, top line it for me,
Paula Courtney
So, there are two big things. The first is that the fundamentals of great service have not changed pre, post, during pandemic, whatever, whatever crisis is going out in the market, customers still have expectations, and they're on the basics and the fundamentals of your service delivery promise. So, good products, you know, easy to do business with a seamless return policy and basically, hassle free service. So, customers want you know, it to be easy to buy from you, whatever that means, and they want good customer support, when problems do arise. So, keeping it simple. And you know, always going back to the basics will never, never lead you astray. I mean, I think that's always a very important thing to remember.
The second thing is, if you are going to build a loyalty reward program, really think about the totality of that customer experience. And that is, what are your operational procedures, you know, policies on, you know, returns or, you know, checkout experience, what, what is that like for the customer? And, what are the loyalty perks? And how do those two interact? And, you know, do they collide in any way? So, it's really working with the operations folks, marketing folks, having everyone at the table, and recognizing that there is a boomerang effect to loyalty reward programs.
Michael LeBlanc
All right, so listen, great points. Let's, let's end it off with one super last question. You, one, two starts and one stop, that retailers today should undertake. They should start doing these two things, if they are not today. And they should probably stop doing this one thing if they are doing it.
Paula Courtney
Yeah, so I think the, the start, if they're not doing it today is to truly measure the impact, the economic impact of friction on their business. In absence or presence of loyalty reward program, there is a real economic downside to friction. And really understand it. It enables you to prioritize where you need to invest, and what you need to do differently. So that's the number one.
And if you are going to have a loyalty reward program, like we said earlier, it's really the integration of operational procedures as well as you know, marketing, you know, offers those must integrate seamlessly, because there is that boomerang effect that we've seen from this last study. So, those are the two starts, integrate into, integrate and measure friction.
And I think the stop is, stop thinking that bricks and mortars is dead for retailers. Like really, I think that people are hungry to go back into a store, and you need to be ready. So, don't think that, that whatever we saw this digital upswing, even the CEO that I was speaking with today said, 'Listen, you know, our online sales are up 50%. But we know that's going to go down. As soon as our stores open up again, people want to come back in the store, and we need to be ready'. So, I think that that's my advice. Like be ready, you know.
Michael LeBlanc
All right. Well, well this is great. Let's, let's leave it there once again, the latest study, but it's not the only study understanding the boomerang effect of loyalty programs available, done in participation with the Baker retailing site available on the Verde Group site. It's out there. It's a great read. It's really a nice, a nice perspective. And thank you for joining me and sharing perspectives. It's been way too long, we'll have to get you back on and get, get an update as things start to open up and whatever the new normal life looks like. Take the pulse, help you, help us take the pulse. So, Paula, thanks again for joining me on The Voice of Retail podcast.
Paula Courtney
Thank you Michael, was a pleasure as always.
Michael LeBlanc
Thanks for tuning into today's episode of The Voice of Retail. Be sure and follow the podcast on Apple, Spotify or wherever you enjoy podcasts so you don't miss out on the latest episodes, industry news and insights. If you enjoyed this episode, please consider leaving a rating and review as it really helps us grow so that we continue to get amazing guests onto the show. I'm your host Michael LeBlanc, President of M.E. Leblanc & Company Inc. And if you're looking for more content or want to chat, follow me on LinkedIn or visit my website at meleblanc.co.
Michael LeBlanc
Until next time, stay safe. Have a great week.