As changeable as the world of retail is, transaction frequency – the rate at which an individual customer spends at a specific retailer – is a reliable indicator of customer loyalty and engagement. The higher the frequency, the more active and devoted a customer base you have, while a lower one raises concerns about decline and changing consumer behaviour. So, what impacts transaction frequency, and how can you as a retailer effectively track and measure it?
One of the primary drivers of transaction frequency is the overall appeal and relevance of a brand. Customers are naturally drawn to brands that reflect their values and preferences, so a strong brand identity plays a crucial role in keeping your customers engaged. And targeted, well-timed messages will stand you in good stead to drive repeat purchases.
The key products that act as drivers of transaction frequency may not necessarily be the most high-value or high-margin items, but they draw customers in and encourage additional purchases. By identifying these products and ensuring their availability and visibility, retailers can increase the likelihood of customers coming back for more.
The cost-of-living crisis and the resulting shift in consumer spending patterns also influences transaction frequency. Non-discretionary spending on essential household items forms the foundation of customers’ shopping needs. However, discretionary spending, driven by wants and desires, will be the first to go when budgets are squeezed.
Retailers must adapt by offering competitive pricing and compelling promotions to maintain their appeal and prevent customers from seeking cheaper alternatives.
How to level up
To boost transaction frequency, you must first understand the customer. By harnessing the power of data, you can gain valuable insights into customer segments, product preferences, and purchase patterns. Product clustering and segmentation allows you to categorise customers into distinct groups based on their buying behaviour, which enables targeted marketing strategies that cater to each group’s core preferences while also enticing them with peripheral products of interest.
Being able to predict when a customer is likely to purchase next is another way to boost transaction frequency. Using retention forecasting you can get critical information about customer behaviour at a granular level, and proactively intervene and offer personalised incentives to prevent churn. So when a customer deviates from their usual purchasing pattern, you are in place to trigger targeted promotions or offers to re-engage them and encourage a return to their previous buying habits.
Watch the temperature
Considering the current economic climate, retailers must also emphasise the value proposition of their brand to counterbalance price sensitivity. Premium brands appeal to customers who prioritise factors beyond cost, so reinforcing brand values, quality, customer service, and trustworthiness can help justify the premium prices and differentiate them from lower-priced alternatives. Other considerations like sustainability, additional services, and added unique selling points can further enhance the appeal of a product and foster customer loyalty.
Transaction frequency is the perfect barometer of customer loyalty and engagement. To increase transaction frequency, you need to tighten your brand appeal, offer convenience through product availability and competitive pricing.
Using data and analytics you can decipher customer behaviour, preferences and needs to determine which offers, promotions and communication strategies to put into play. Staying attuned to customer expectations and leveraging insights derived from data will enable you to foster lasting loyalty, drive transaction frequency, and thrive in this ever-evolving retail landscape.
Sunny Paddan is campaign manager at Go Inspire Group