Kevin Hillstrom: MineThatData

Then You Finally Get There!

The customer works really hard ... buying stuff at 40% off, earning rewards, doing the hard work.

I mean, you keep giving the customer points and the customer redeems the points and the machine keeps rolling along. Shouldn't there be an end and a new beginning? Remember Elaine on Seinfeld and her sub card ... each 23 subs and you get a ...

... and then you start over.

One of the things I learned back in the 2005ish timeframe at Nordstrom was the power of having a "Super Bowl" for the loyal customer. The customer did all this hard work during the year, and if the customer spent $750 the customer was invited to the Anniversary Pre-Sale. It was our Super Bowl, and the customer got to pre-select merchandise, waltz into the store on day one of the event while the commoners were fighting for whatever we had on the sale floor, pick up her order, and walk out of the store while the commoners were shopping.

I remember quantifying something like a $20,000,000 lift that came from this tactic. Just a stupid amount of sales and profit, and it cost us nothing. It probably cost us less than the free subs that Elaine's sub brand had to pay for.

Your loyal customers deserve an annual Super Bowl, an event that "rewards" the customer for having a great year.

You are a smart marketer ... you aren't some wonky Lemonhead giving double and triple points that can be redeemed for 50% off instead of 40% off. Be creative. What is your Super Bowl at your brand? Please don't say it is Cyber Monday.

Culture

Spend a few minutes on LinkedIn and you'll read plenty of thought leadership pieces about corporate culture ... often from individuals who never played a role in creating corporate culture.

Enough about that.

The marketer sets the culture with the customer. The marketer is the one who speaks with the customer or prospect. You'll hear the term "relationship", but it isn't really a relationship, is it? One side has a megaphone and merchandise, the other side is silent, purchasing every 200 days if you are lucky.

What you do between purchase events is "set the culture".

Want an example?

Here is the discount level that one company communicated to me last week Monday - Friday.

40% Off
40% Off
40% Off
40% Off
50% Off
40% Off
40% Off
40% Off
40% Off
40% Off
40% Off
40% Off
40% Off
40% Off
40% Off
40% Off

That's sixteen communications in five days. They've set the culture. They have NOTHING to say. NOTHING. You're given this gift of setting the culture, and you squander it.

Do you love what you sell? The answer should be an enthusiastic YES! You'd think you couldn't help but scream about your best-selling products or your new creations.

Your customer notices. Your customer knows the culture you promote.

There are professionals who might suggest that this is your "brand". I'm not sold on that. "Brand" is bigger than culture. Culture leads to brand, yes. Amazon can have a ruthless culture and be a brand you purchase from daily.

You likely have hundreds / thousands of employees, but fewer than a dozen actually get to have a relationship with the customer ... get to set the culture with the customer. Be wise about who you assign this precious task to. And if the answer is "C-Level Executives constantly make changes and tell us what to do, that's why we are 40% off three or four times a day", then you work for a company with an intolerably poor culture.

Not The Right Offer

Sometimes we're not aligned with our customer.

I have no idea why AI added the text "Mt. Loyalty" to ... Mt. Loyalty.

Our poor friend, the Lemonhead, he's experiencing what we do. He's exhausted, and we offer him 30% off a tent with a port-a-potty when he needs a Buc-ee's.

Now, if you work at Starbucks, you know exactly what the customer wants ... a sugary and addictive drink to somehow make it through another day. Because the customer purchases something 200 times a year at $7 a pop, yeah, your loyalty efforts are going to work. You can easily make the "right offer" and the "right time". The job is ... too easy.

Your job?

Endlessly hard.

You're forced to sell that stupid tent (above) or a port-a-potty. The customer doesn't want a stupid tent or a port-a-potty.

I recently analyzed a business where the average purchase frequency interval was about 200 days. Might it be a better idea to wait for the customer and find another customer actively interested in buying a tent right now?

Let the customer recharge before forcing the customer back up Mt. Loyalty.

Mt. Loyalty

Oh, it's quite a climb.

I don't know what you've learned about Mt. Loyalty, but that mountain is full of challenges. Did you know that most climbers never even make it to the base camp at 1,000 feet on fictional Mt. Loyalty?

A few years ago I was connected somehow to an EVP of Marketing. This guy was fascinating. He believed he could do the entire marketing function by himself ... no employees. He said his goal was to outsource every function of marketing. His job? Create the discounts and promotions that would be used. He told me that is the only aspect of marketing that adds value. He then said something interesting (paraphrased below).

"I can sell anything. It does not matter what my company sells a customer. All I need to know is where in the customer lifecycle the customer is and then I create an appropriate promotion to convert the buyer. Merchandise is meaningless."

As you might expect, I believe in the exact opposite thesis.

It is not easy to climb Mt. Loyalty. What the customer previously purchased and is likely to purchase again in the future, coupled with key inflection points, dictate whether the customer ever becomes loyal.

It's January. You'd think those Cyber Monday customers would be busting down the door to buy from you right now. They're not. That's a timing issue, it's an issue of what the customer previously purchased and is likely to purchase again in the future. The Cyber Monday customer is an out-of-shape customer unable to make the climb up Mt. Loyalty.

Customer Loyalty

Customer Retention and Customer Loyalty are cousins.

You can have low retention rates and high loyalty ... if you buy a product that you only need every 3-4 years, you might come back and buy from the company every 3-4 years but you'll come back to the company immediately because you love/trust their products (the iPhone comes to mind).
You can have high retention rates and low loyalty ... you might get gas at the local Chevron but also get gas at three other area gas stations.

Most of the ecommerce brands you support have customers with a +/- 25% to 35% annual retention rate. For you, it's terribly hard to generate loyal buyers, and worse, creating a silly loyalty program doesn't move the needle because your merchandise assortment is too limited (small) to foster the number of purchases required to harvest loyal buyers.

If you had the data to graph the relationship, you'd see that loyal buyers grow exponentially as rebuy/retention rates increase linearly. By having an assortment that fosters multiple purchases per year, you accelerate the number of customers who become "loyal".

For my clients, I use a predicted 60% rebuy rate as my level for a customer being "loyal". At that point, the customer prints money for your brand ... the customer is very profitable!

On average, it takes about five (5) purchases before a customer becomes "loyal" across my e-commerce clients. Generate 100 new customers and after 2-3 years you might be lucky to have five of the cohort become loyal ... and most of 'em won't stay loyal.

As I've previously stated, if you want loyal customers, acquire a lot of customers. After you acquire a lot of customers, develop the customers in the first three months following a first purchase. The three-month window after a first purchase is far more important at generating loyal buyers than trying to get a 60% loyal rebuy-rate buyer to increase to 65%.

Money is wasted on loyalty efforts (at low rebuy rate brands) when the money could easily be spent on acquisition and the first three months following a first purchase. But you already knew that.