At the tail end of last week, I received a mailing from the folks at Total Wine. It’s one that comes along each week and contains what Total calls my “weekend recommendations.” It shows me some highly-rated wines that are supposed to fit my tastes. The problem is that they don’t. There are several bottles of white wine listed and I don’t drink white wine. There is some expensive champagne and I prefer prosecco. I don’t believe I’ve ever bought pinot noir in the store and yet there is a pinot recommendation as well.
I’m not surprised. Although I shop fairly regularly at Total and love the store, there is no system in place to associate customer purchases with customers. There is no loyalty card, as I have with a supermarket or two, to record what I’m buying, how often etc. Without that information, recommendations can’t be personalized. It’s the difference between me walking in the store and having them greet me by name as opposed to a generic hello.
I think we’ve all become spoiled by personalization, so much so that I think the ability to personalize the customer experience is table stakes for any retailer. Notice I’m not limiting that to online retailers either. My supermarket personalizes every trip as soon as I use their scanner to shop by delivering instant coupons and savings on products I buy or might like based on past buying. We’ve all used Amazon and seen their recommendations. In fact, their algorithm is so good that it’s worth examining what they’re using to determine your personalized selections and deleting things that you don’t want to include (maybe you bought something as a gift that should not be included, for example). Netflix famously paid a lot of money to scientists that improved their recommendations by 8.5%.
Any business needs to think about how to incorporate personalization, even those of us that are not in B2C businesses. Still showing generic decks to potential customers? Still have a standard rate card that you send out when people ask for price quotes? Still think you’re in tune with customer expectations?
One of the ongoing discussions I have with clients is the need to balance acquiring new customers with servicing exiting ones.
(Photo credit: stavos)
Many of the businesses with which I’ve been fortunate to have worked over the last few years place a far greater emphasis on acquisition than they do on showing the love to those who are already in the fold. One of my mantras has been that it’s almost always more cost-effective and profitable to retain a customer than to find a new one and I tend to work with my clients on finding good ways to service their existing bases while helping along new customer acquisition as a lesser emphasis.
That’s why I was happy to read a recent study of small business owners from the Manta folks. In conjunction with BIA/Kelsey, they found..well, I’ll let them tell you:
In 2012, BIA/Kelsey reported that small business owners prioritized customer acquisition over customer retention at a 7-1 ratio. Recently, a new trend is developing as 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers rather than new customers and that a repeat customer spends 67 percent more than a new customer (emphasis mine!). In line with this, small business owners are spending less time and money on customer acquisition; only 14 percent are spending the majority of their annual marketing budget to acquire new customers, and only 20 percent are investing most of their time and effort to acquire new customers. This is a significant shift in behavior as small business owners have realized that existing customers play a more influential role in business success than new customers.
In other words, existing customers bring in more dough than new customers. The question then becomes identifying and segmenting existing customers into group that you can address in a manner appropriate to their buying habits. You need to be having different conversations with the person who hasn’t ordered in 3 months than the one who orders once every 10 days. Maybe you handle the top 10% of your customers differently or maybe you look at spending levels, purchase cycle, or even those folks with an affinity for a specific product you’re wanting to emphasize.
No matter whether it’s loyalty programs, special customer service agents or insider news and information, customer retention needs to be a focus of every business, something I think needs to be placed ahead of new customer acquisition. You?