We’ve all seen the stats from various sources on how the cost of acquiring a new customer is 4-5 times higher than the cost of retaining an existing one. This makes your database of existing customers a gold mine of revenue opportunities and insights, so what can you do about unlocking this potential? Here are my Top Five Questions when speaking with clients looking for solutions.
Who are your Top Tier customers?
Our critical first step is to identify your best consumers based on lifetime spend or a value score. Then we can work out what to do with each group. Ask yourself - who are my customer segments? What do I know about them? What is their purchase frequency or product affinity? Who are in the Top Tiers and critical to retain? Who are in lower tiers but offer the most opportunity to scale?
How can you treat these Tiers differently?
Now you know your tiers, develop a strategy for each. What is important to the tiers? How can you personalize experiences to their needs? What exclusives, experiences, and offers can you realistically execute at scale, and how? Is there a small group of VIPs who should receive the White Glove treatment? Go beyond discounts and sales – especially for your top tiers, where you may just be giving away margin. A simple strategy will be to keep Top Tiers happy and purchasing, migrating mid-tier groups up the value chain, encouraging one-time buyers to buy again, and more.
How do you proactively manage the relationship?
Think about the consumer journey for the tiers and how you can impact it. This will vary by your type of business, but at the very least you can use email with more intent, such as smart use of data for personalization or for a growth model that balances tips and content with focused ways to drive more sales. Personal shoppers can ensure concierge service to your best customers in the top tiers. Face-to-face events or in-store experiences provide opportunities for deeper relationships and ways to gain insights directly. Work out what is best for you and your situation.
What’s this worth to you?
Adding the above into your marketing mix can have measurable value, but it also requires more effort, so align back to your business goals, and North Star metrics and assess impacts. Model out scenarios and create tests and hypotheses. What is the value to you if a consumer bought just one more purchase in a given period? How does your P&L look if the time between purchases shrinks? Or what is the impact if churn is reduced by 5-10%? Run the numbers.
How can you make this happen?
The key here is to focus on retention and growth with consistency. These initiatives work best when not run off the side of a desk. Do you have a person on your team that has a passion for consumer-centricity? Assigning an owner to rally the areas of the business to operationalize the above, own the impact, and report on the results is a critical step. I’ve seen small teams gain big results, which then makes the case for more resources, right through to setting the foundations for fully-fledged loyalty programs. Start small and lock down the fundamentals for a solid foundation.
This process is a high-level set of sequential steps for growth. Consider these questions a starting point – every business has its exact needs and requirements, so reach out to me if you want to get into the specifics of your own business.
Mike Ridgewell is a consultant who has specialized in direct-to-consumer marketing for over 30 years, including leading loyalty and retention teams for top companies such as The Franklin Mint, Disney, and Fandango. Mike leads Denmark Street Marketing, a collective of D2C subject matter experts that serve clients from Series A to Fortune 500 companies.
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