Lululemon has spent years building loyalty, community and an extraordinary amount of first party customer data, yet this retailer has gone from market leader to sales being down 12% while losing market share to upstart competitors.
So what did this retailer miss?
Back in 2018, I wrote an article about the characteristics of successful loyalty programs and used Lululemon as one of my examples.
At the time, I highlighted how they were using gamification to progressively enrich customer profile data and learn more about their customers.
On top of this, Lululemon has built a business with an unusually close relationship with its customers. Community events, ambassadors, yoga classes, stores, ecommerce, membership and purchasing behaviour all create opportunities to learn.
This is precisely what most retailers have spent years trying to achieve.
More first party data. More customer engagement. More direct relationships. More opportunities to understand the people buying from them.
And yet competitors have gained ground and Lululemon's executive team is now talking about the need to strengthen its product offering.
I don't know what happened inside Lululemon.
But the situation raises a much more interesting question for every retailer investing heavily in loyalty and customer data:
Are you collecting customer data, or are you actually listening to your customers?
I wrote about this eight years ago
In that 2018 article I made this observation:
Successful retailers harness customer data they are gathering and apply it throughout the business.
That distinction matters.
The commercial value of customer data does not come from possessing it. The value comes from what the business learns from it and what it subsequently does differently.
Retailers understandably measure loyalty activity through outcomes such as repeat purchase. If customers return and buy again, the loyalty investment appears to be working.
But there is another return from these investments that is much easier to overlook.
The business should be getting smarter.
Every interaction with an existing customer creates another opportunity to understand what that customer values, what is changing, what is frustrating them and what they may want next.
That knowledge should influence more than the next marketing message.
It should influence the business.
Product decisions. Customer experience. Service. Merchandising. Communication. Priorities.
Otherwise, the retailer may have built an increasingly sophisticated mechanism for collecting customer information without building an equally sophisticated mechanism for responding to it.
Listening is a commercial process
The process should be continuous:
Listen → learn → act → create more customer value → generate commercial return → listen again
The last step is important...
- Customer expectations change
- Markets change
- Competitors change
- Products change
What customers valued three years ago may not be what they value today.
Listening therefore isn't a research project that gets completed. It is a continuous commercial capability.
And the more a retailer invests in loyalty, membership and first party data, the stronger that capability should become.
LLMs make this even more important
There is another reason this matters now.
LLMs are giving consumers increasingly enriched and contextual interactions. They can remember context, respond to questions and progressively understand what someone is trying to achieve.
That changes expectations.
Retailers already possess something potentially more valuable: information created through a genuine commercial relationship with the customer.
- Purchase history
- Preferences
- Behaviours, engagement, objections, questions, feedback
The opportunity is not simply to use that information to target the customer more effectively.
It is to use it to understand them better and improve the relationship.
That makes first party customer knowledge more valuable, not less.
Loyalty programs don't create loyalty
A loyalty program can create incentives to return.
It can encourage repeat purchases.
It can create engagement and generate enormous amounts of customer data.
But none of those things automatically create loyalty.
Customers want to feel heard.
And if a retailer asks customers to provide increasing amounts of information about themselves, there is an implicit value exchange taking place.
The customer provides knowledge.
The retailer should become better at serving them.
That is where the commercial return from customer listening begins.
Having customer data is one thing.
Using it to listen to your customers is a very different thing.
Lesson of the day? Listen first. Act second.
This article was as tagged as AI eCommerce , Digital Strategy , Digital Transformation , eCommerce Consulting