The importance of prioritizing high(er)-value customers
Josh Meyer, LoyaltyOne Global Solutions
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.
As with most industries, the 80-20 rule applies to the world of retail; high-value customers make up a large percentage of most brands’ sales.
Your customer base should be analyzed for not only your best customers but those with potential to become a best customer in the future. As you look to shift your investments to better serve your current and potential best customers, here are a few best practices to keep in mind:
- Solve pain points that have the highest impact: Pairing analytical techniques such as potential value models with customer experience solutions will allow you reach future best customers and not just the ones spending the most today. For example, if your data shows a pain point affecting only 20 percent of customers, you would need to look at the composition of this customer group (with specific attention to best and potential best customers) to understand the impact of solving this pain point.
- Foster loyalty of your best and next-best customers through personalization: LoyaltyOne’s new “CX: Intention vs. Impact” report found that 76 percent of customers felt that receiving personalized discount offers based on their purchase history was important. Unfortunately, just 38 percent of companies said they currently give customers personalized offers or promotions via their mobile app, and less than half (48 percent) engage with customers via e-mail during the pre-purchase phase.
- Continue the relationship post-purchase: Customer listening is crucial to improving the shopper experience, but just 42 percent of retailers reported that they collect customer feedback based on the shopper experience. Loyalty programs offer an excellent chance to solicit feedback and gain insight on the areas that can benefit most from improvements.
- Don’t forget to measure: Your survey data and other metrics from your loyalty program should be used to measure the impact of your personalized offers. Introduce personalization into your post-purchase interactions with your highest potential customers for the best results and maximum ROI.
- The Importance Of Prioritizing High(Er)-Value Customers – COLLOQUY
- CX Intention Vs Impact: Making Sense Of The Ever-Evolving Retail Shopper Journey – COLLOQUY
DISCUSSION QUESTIONS: What advice do you have for retailers targeting current and potential best customers? Are there aspects of the customer prioritization process that retailers continually shortchange?
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16 Comments on "The importance of prioritizing high(er)-value customers"
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Strategy Architect – Digital Place-based Media
All customers are not created equal and these points are excellent for providing that special attention. Frequent shoppers can easily become known to staff who should be encouraged to foster the relationship. Digital is not always the answer.
Vice President of Marketing, OrderDynamics
By a retailer’s definition, lets say that “best” customers are those that spend the most with them. Loyalty card programs have worked well, but many retailer are already doing this. Most seem to focus on discounting, or dollars back. Good but … your “BEST” customers deserve an experience.
More retailers need to create an experience that customers want to earn. In DSW’s case with a new loyalty program — perhaps earning points to a pedicure (they sell shoes after all), or to an exclusive champagne cocktail – with a discussion about how well their shoes are made — by a well known shoe designer.
To truly engage the higher value shopper, you want to focus on brand intimacy. That comes from creating an experience with your brand that they truly cherish, and that associates your retail name with that exceptional experience.
Principal, Retailing In Focus LLC
There is a sea of data out there that retailers can use to understand their most loyal customers’ preferences and shopping habits. Use it! Without an action-oriented approach to data science, stores may identify “best customers” but may not customize product offerings or targeted marketing to appeal to them.
As far as customer priorities are concerned, part of the point of customization is to recognize that one shopper may be more focused on personalized service, another on new product offerings, and so on. One size doesn’t fit all — making it all the more critical to put data to good use.
Founder, Whereabout Studio
Agree with your point here.
On the data front, retailers have to stop using their own data to identify “potential” high value customers based on past purchase behavior alone. Machine learning and artificial intelligence can now predict with more than 90% certainty who is willing to buy more from you using a combination of rich mobile data (i.e. social habits, apps, purchasing behavior).
Retailers should also consider basic logic in their approach. For instance, college students will never be your highest value customers based on spending behavior, but by nurturing them early on (via lower priced products / targeted experiences), brands are making a critical investment for the future.
Chief Executive Officer, The TSi Company
President, The Ian Percy Corporation
My thoughts are much in keeping with yours, Art. I’d add “Listen to ALL your customers.” The tendency is to assume the occasional customer isn’t worth listening to while we drool over the frequent customer. Both deserve a “wow.”
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
Professor of Marketing, The Wharton School of the Univ. of Pennsylvania
Yes, yes, yes! This is the key to sustainable growth in today’s highly competitive (and data-driven) era.
Let’s all celebrate CLV day next Monday. (Get it? CLV=155 in Roman numerals, and Monday is the 15th day of the 5th month….)
All the other stuff we chatter about (e.g., customer experience, in-store technology, personalization, and branding) follows after you get good at customer valuation. But too many retailers are getting the cart before the horse by jumping into those tactics without a clear understanding of how their customers differ and which ones are likely to be the best in the future.
President, The Ian Percy Corporation
Retail and Customer Experience Expert
The best customer is also different by retail category. For mass/discount, the best customer can be the largest total revenue or largest number of purchases per visit. In luxury segments it maybe different depending on the product line and also other context like cross sell, personal networking to bring in other clients etc. Retailers need to define that well and then apply the right rewards. For some it is discount, but for others it is experience. Not all rewards are created equal….
Managing Partner Cambridge Retail Advisors
President, Global Collaborations, Inc.
Not all customers are created equal and “best customer” does not mean the same thing to all retailers. Are best customers the ones who purchase the most per year? Or the most per shopping trip? Or the ones who purchase the highest number of items? Or the ones who return the last number of items? Or the ones who purchase at full price? Or the ones who influence the most other customers to purchase a particular item?
Define what “best” means for your company. Monitor what the best customers as well as what other customers buy. Listen to what all customers are saying, find the patterns, and associate the patterns with different groups of customers. This all boils down to knowing your customers and listening to them. Listening needs to occur all the time because customers change their preferences, interests, and tastes.
Contributing Editor, RetailWire; Founder and CEO, Vision First
My advice is to first make sure you define what constitutes your “best” customer before designing your programs and measurements.
Chief Data Officer, CaringBridge
Josh’s piece is a wonderful, clear description of an approach to identifying and understanding best and potentially best customers in a retail customer base. He is also correct that a retailer must evaluate and prioritize initiatives by how they impact those two customer segments in particular.
Modeling customers on potential value can provide lists of qualifying customers; however, you must break down those groups through thoughtful analysis to better understand who they are and how they interact with your retail or ecommerce environment. What products do they prefer? Which of those products tend to skew to those valuable customers? Analysis such as this will provide the insight to ensure that you build your marketing, as well as product assortment, merchandising and promotions, to benefit those customers in particular.
Global Retail & CPG Sales Strategist, IBM
Yet another topic that has plagued the industry since I started in it in 1976. In the supermarket biz, we’ve had low-tech “Express Lanes” forever, yet those customers are small average transactions and often low-margin, “cherry pickers.” I remember when my store implemented a large order, premium customer lane with three associates staffed on each terminal to move the large orders faster.
Fast forward to 2018 … we now have technologies that can capture the meaningful insights from all the data, and most often, “dark” data that systems don’t even “see,” to identify those most profitable customers. I am seeing only a few examples of retailers truly leveraging these capabilities, both in-store and online. I believe the opportunity is virtually limitless. Retailers must take a new look at the tools available today to start taking better care of their best shoppers.
CEO & Co-Founder, Metric Digital
Great article and discussion. Here are my ideas:
No matter which business you’re in, it’s important to understand the total value a customer brings you in perpetuity. While marketers may be focused on the revenue brought in immediately after customer acquisition, the finance teams should be able to paint a fuller picture of the customer’s true value. For example, if the average customer makes 10 purchases in their lifetime, then a new customer acquisition would be 10x more valuable than a marketer may see. Being on the same page here allows the team to build a more robust and accurate ROI model.