Top 5 retail-specific customer engagement strategies

Customer engagement strategies

 Did you know your profits come from your TOP 20% customers?

It’s no secret for retailers that loyal customers are vastly preferable to casual ones. To cultivate those all-important connected relations with customers, companies need data process and training to deliver consistently strong results.

But how lucrative is customer engagement for retail businesses exactly? And what can retailers do to further attract and engage the most profitable customers?

Let’s dive into this interesting questions.

Top customers are ultra-valuable, so it would make sense that every retailer makes every effort to engage customers in meaningful ways, beyond a product-centric transactional relationship.

Still, many retail leaders undercut the value of emotional connection as a lever for customer loyalty. Some see emotion as the opposite of data. They think “data-driven” is always the best approach. But research shows that emotional connection is essential for building relationships.

Although loyal customers are a small subset of retailers’ overall customer base, their value vastly exceeds their numbers. Loyalty is lucrative and customer engagement is the holy grail of retail profitability.

Engaging with customers

In this article, you will learn:

  • The Pareto Principle applied to retail
  • Strategy #1: Find high-impact moments
  • Strategy #2: Recognize and celebrate your customers
  • Strategy #3: Use data to amplify customer value
  • Strategy #4: Use personalization
  • Strategy #5: Offer ease in the shopping experience with the ultimate omnichannel capabilities
  • Conclusion

The Pareto Principle applied to retail

For many year, companies have applied the Pareto Principle to sales revenue.

The Pareto Principle, also known as the 80/20 Rule, says 20% of a company’s customers generate 80% of its revenue. That’s a tall order. Does the rule stand up to scrutiny?

Let’s see. A 2017 study examined customer behavior at CPGs companies. On average, the companies in the study generated 73% of the revenue form the top 20% of their customers.

In this case, the 80/20 Rule wasn’t fully realized, but it was close.

In another study, Dan McCarthy, a professor at Emory University, and Russell Winer, from NYU, looked at product and service companies in a variety of industries that generated a combined 4.3$ trillion in revenue. The top 20% of theses companies’ customers delivered an average of 67% of their revenue.

While the 80/20 Rule might not precisely hold true, the findings are clear and consistent: top customers deliver a hefty percentage of a company’s revenue.

Here’s where it gets interesting: TOP customers deliver PROFITS

McCarthy and Winer also researched the profitability of their top customer segments. They found the top 20% of customers generated 105 to 113% of net income.

You might wonder how a small group of customers could be worth more that 100% of net income.

This is possible because not every customer is profitable. The customers who are highly profitable compensate for the customers who are served at a loss.

The power of customer retention through loyalty programs is amplified when considering research from Bain & Co., which showed that when companies improve their customer retention rate by as little as 5%, they see an increase in profit of 25 to 95%.

In other words, if you motivate just 5% more of your customers to stick with you, your profits can jump considerably.

Let’s look at 5 specific customer engagement strategies that can help you grow your results:

Strategy #1: Find high-impact moments in the customer journey

We are talking about those “moments that matter”, the specific interactions that trigger a customers’ feelings and leave lasting impressions.

To identify high-impact moments, a retailer needs to map out the full customer journey with the various touchpoints, and only then highlight those that really matter most. In reality, not every touchpoint and every experience is as impactful as others in creating healthy and long-lasting relationships.

High impacts in the customer journey

Consider the Peak-End Rule, which states the following:

The typical consumer’s memory of a customer experience is not the average of all moments but the feelings they experienced at the peak moment and at the end of the interaction.

Examples / ideas

High-impact moments often include:

  • Delighting an unsatisfied customer with top level customer service. More often than not, servicing an angry or frustrated customer will turn dissatisfaction into an experience that well exceeds his or her expectations and will multiply the LTV manyfold.
  • Finding the product they are looking for with speed and easy.
  • Experiencing a moment of surprise and delight.
  • Involving the senses. Starbucks began a new effort called the Starbucks Reserve Roastery and Tasting Room which lets customers chat with coffee specialists, watch coffee brew from fresh beans, and try a variety of rare coffees.

What we like about Starbucks’ multi-sensory experience:

This is a multi-sensory experience that takes customers to the next level. They feel like an active part of the Starbucks journey and are getting an inside look into the company’s product development process. It’s something exciting and unique that further engages customers and gives them a new appreciation for the brand beyond the same coffee every morning.

How to start

Once your company has a well established customer data platform with unified and cleansed customer data, you will be able to integrate your CDP with tools that monitor NPS, online reviews, customer feedback etc. This allows you to engage your customers consistently across their customer journey, and specifically in those high impact moments we referred to earlier in this segment.

As and example, Loyal Guru allows your company to automatically send out a personalized offer to a customer after he or she had an issue resolved by your call center. In this way, you can wow your customers with great customer service, and quickly see a ROI because of engaging him or her with a new offer that is tailored to his or her personal interests.

Strategy #2: Recognize and celebrate your loyal customers

Everyone likes to feel appreciated and recognized. Your customers play an essential role in the success of your business, and they want to know that you appreciate them.

Examples / ideas

  • A simple “Thank you” goes a long way! Many shops on Amazon and Etsy deliver heartfelt notes of gratitude after every purchase. This is a way to reach across the impersonal eCommerce barrier and remind them that there’s a grateful human on the other side.
  • In our last webinar, Forrester VP and Principal Analyst shared the amazing example of, the online pet shop. has lifelong customers because they take customer appreciation seriously. They’re known for sending holiday cards, housewarming gifts and even handmade paintings of customers’ pets!
  • Show what you stand for. Shoppers are looking to connect with society by supporting businesses that campaign for mutual causes. In fact, Google reports that 46% of shoppers say that they make a conscious effort to shop at businesses that align with their values. With this in mind, retailers should take the opportunity to engage their customers with messages that promote a good cause. Because people want to support good causes, they’ll seek out retailers that can fulfill that mission. Be sure to communicate on your website, social media, email, and in-store signage about your commitment to the cause—and pick one that resonates with both you and your target customer

Want to see this and other examples in the limited-time recording of the webinar?

How to start

Your most loyal customers love your products, but they probably also love what your brand represents. Whether you are pushing forward values like coolness, health, aspiration, luxury, comfort, diversity or others, those are ideas your top customers will connect with.

Recognize your customers’ expression of those values in different ways.

As an example, you can let your customers support a chosen cause and donate their loyalty points or send his or her unused coupons to their favorite charity. This helps your customers do good and feel good and encourages positive word-of-mouth for your loyalty program.

Strategy #3: Use data to amplify customer value

Customer data includes info about each interaction with your brand, shops and products. As you know, not all customers are the same, and some are more valuable to your business than others.

The way to understand the value of your current customer base and predict the value of new customers inevitably includes crunching your data. This is not info you can take from industry benchmarks, competitors or companies in your same space.

A customer data infrastructure is mandatory to enable business across multiple departments. By using a CDP tailored for retailers you will be able to collect, cleanse, enrich, store and activate data from all online and offline sources and create a single, automated and updated Source of Truth that empower your marketing, product, IT, sales and operations.

As a result of optimizing their data strategy, one of our clients increased 22% the average ticket spend, and another client identified 40% of their customers 3 weeks after launching their Loyalty program.

How to start

If you’re a retailer and you’d like to say goodbye data silos and use a Single Customer View to unlock better customer insights and effective omnichannel campaigns, then get in touch with one of our team – we’ll be happy to show you examples or talk through your company’s unique challenges.

Strategy #4: Use personalization to boost customer loyalty


Personalization requires you to segment your customer lists to avoid sending generic spam-like messages, offering irrelevant deals or advertising a product a customer already purchased.

A marketing automation platform can help you easily segment your customers into relevant categories based on demographics, purchase history, interests and other factors.

These segments allow you to follow up with communication and offers that are compelling and relevant.


  • Give personalized product recommendations
  • If a preferred product is out of stock, show similar products
  • Upsell a more premium version of the product
  • Cross-sell an accessory related to the product
  • Show popular items available on your shop now
  • Send out reminders to regular shoppers.

As and example, Thread sends personalized emails, signed by it’s Lead Stylist, suggestion fashion items that will most certainly appeal to specific clients:


What results can you expect?

Using marketing automation, one of our retail clients launched millions of 1:1 personalized campaigns in minutes (not weeks) and multiplied coupon redemption rates times 5 in only 2 months.

How to start

Start by collecting the right data, analyzing that data to determine preferences, taking an omnichannel approach to your data ecosystem and customizing your promotions, discounts and coupons.

Sounds like a lot of work?

Don’t sweat. Technology helps you get this done with barely any resources from your team.

Talk to one of our CDP and personalization consultants to see how simple implementation can be, and how much flexibility and control you will have over your future marketing campaigns.

Strategy #5: Offer ease in the shopping experience with the ultimate omnichannel capabilities

Imagine your client is trying to buy 2 blue shirts on your online store and he gets a message that his selected size is out of stock. At the same time, he is prompted to go to the physical store where he can purchase these items immediately.

That doesn’t make sense in today’s day and age, and it doesn’t make your customer happy!

The concept of omnichannel implies that customers can access your products and services on any platform, device, or channel. So as new channels are introduced, and customers begin using those channels, there’s an expectation that brands integrate accordingly.

Today, technology allows leading retailers to make all product stock available to clients, with no distinction of the channel he is using.

Why is so significant?

Omnichannel capabilities

Data shows that reducing the number of steps in your customers’ shopping journey increases the average spend. Shifting the orientation toward decision simplicity and helping consumers easily and confidently complete the purchase journey has a profound impact on customer experience, and also in revenue.

Once your business starts to harness the power of data, communication will play a large role in leveraging growth opportunities. Having a Customer Data Platform with integrated marketing features will allow you to reach out to your customers via email, push notifications or SMS to let them know of the promotions that will best convert.

Examples / ideas

  • Sephora Beauty Insiders can tap into the Beauty Bag on their phone or desktop and have access to a truckload of data. Consumers can shop, see their favorites list, view past purchases and rewards points, scan items in-store to see other options available online, watch tutorial videos, and locate stores near them.This extremely successful application of omnichannel retail strategy has nurtured 11 million members, who spend 15 times more money on than the average user.

How to start

Make it easy for your customers to weigh options and take decisions.

To help consumers evaluate choices, most brands describe their differentiating features and benefits. Some go a step further, offering buying guides containing side-by-side brand or product comparisons. Reduce the overwhelm of too much information or too many options.


Top customers are ultra-valuable, so it would make sense that retailers makes every effort to engage customers in meaningful ways, beyond a product-centric transactional relationship.

Still, many retail leaders undercut the value of emotional connection as a lever for customer loyalty. Some see emotion as the opposite of data. They think “data-driven” is always the best approach. But research shows that emotional connection is essential for building relationships.

These days, it’s just not enough to generate affinity, either it is not enough to sell great products, and it is not enough to deliver good customer experience.

Retailers need consistent systems to cultivate long-term customer loyalty. These systems include:

  • Crafting authentic experiences that make customers feel appreciated by the company (beyond the purchase)
  • Quantifying customers’ lifetime value and identifying groups of customers who are most profitable
  • Expanding the relationship beyond the physical store so customers could also engage (and feel appreciated) when they are not there
  • Training the team consistently so they are on board with the company’s loyalty initiatives.
  • Analyzing key metrics to track initiatives for continuous long-term improvement

These techniques make a difference. The value of the average customer will shoot up. Customer referral rates will skyrocket. Although loyal customers are a small subset of retailers’ overall customer base, their value vastly exceeds their numbers. Customer engagement is the holy grail of retail profitability.

If you’re a retailer and you’d like to talk about any of the customer engagement strategies outlined in this article in more detail, then get in touch with one of our team – we’ll be happy to show you examples or talk through your brand’s unique challenges.


This article has been written by Loyal Guru’s content team, together with Guillermo Corominas.

Guillermo Corominas has over 15 years of experience in the fashion industry, having worked as Chief Customer and Marketing Officer at MANGO, and he is currently Europe Sales VP at Loyal Guru.